The world of investing changed radically in 1952, when Harry Markowitz developed his famous portfolio theory, which would earn him the Nobel Prize in 1990. In a nutshell, Markowitz’s revolutionary idea was to find the best combination of assets to increase expected returns. From this search, the well-known efficient frontier was born, a curve formed by a continuous series of points, each of which represents the best investment portfolio for a given risk and expected return.
Later, investment portfolios would be the protagonists of a new revolution: Artificial Intelligence (AI), long before ChatGPT. This development came about because traditional portfolio models began to become obsolete given all the possible variables and scenarios in the market. Despite this new evolution, today human supervision of investment portfolios is still not only necessary, but also represents a seal of quality.
What is an investment portfolio?
An investment portfolio is a set of financial assets that an investor (or company) owns with the aim of obtaining a return. Portfolios can contain any type of asset: variable income, fixed income, currencies or derivatives, among others.
Types of investment portfolios
To build a good stock portfolio or investment portfolio, we must be very clear about the different types that exist. Investment portfolios can be divided according to different criteria.
The risk
- Conservative investment portfolio, if more than 70% of the assets are fixed income.
- Moderate investment portfolio: fixed income fluctuates with a maximum of 40% of the assets.
- Aggressive investment portfolio: in which fixed income barely represents 15% of the total assets, leaving the remaining 85% to be variable income.
Investment strategy
- Growth portfolio: composed of assets with high growth potential.
- Passive portfolio: made up of assets that generate income on a regular basis, such as government bonds or shares of companies that pay regular dividends.
- Portfolio of undervalued assets: the investor tries to find assets whose market value is below their real value and expects them to appreciate in value.
The importance of an investment portfolio
Investment portfolios are a key element for financial markets and the economy, as evidenced by the large number of Nobel prizes awarded to economists who have made great advances in the field, such as Markowitz. But it is also a key element in the real economy and for families.
That importance for families comes mainly from the fact that they represent a very important part of the potential wealth, and also of their future goals and dreams. In fact, the key points of any investment portfolio is to serve as a tool for any individual to achieve their financial goals both in the short and long term. In addition to achieving it always depending on the profile of each investor, i.e., the profitability he/she wants to obtain and the risk he/she is willing to assume.
The value of a diversified investment portfolio
Another of the main reasons for creating an investment portfolio, and not investing in a single product, is diversification, so that we can incorporate financial assets with different profitability, risk and liquidity, or from various industries or geographical areas. This allows the investor to reduce the total risk of his portfolio, even by using products whose evolution is contrary to each other. In the end, all this allows us to not only maintain our capital, but also to grow it.
How to create a portfolio: the option of roboadvisors
When it comes to creating and managing a portfolio, you should know that there are basically three ways:
- Active management: the investor actively monitors the investments, seeking at all times to outperform the average return given by the market. This option requires the investor to dedicate not only his money, but also his time and acquire a great deal of knowledge for this purpose.
- Passive management. In this case, investments are made in products that seek to replicate a profitability similar to that of a stock market index, either a real one (for example, the Ibex) or one created for this purpose. Passive management does not involve any monitoring or intervention by the investor.
- Mixed management. Combines the two previous ones, having assets that involve the intervention of the investor and assets that do not.
Advantages of choosing a roboadvisors to build an investment portfolio
An alternative for the creation of portfolio management are the so-called roboadvisors. Simply put, this is an automated investment manager, i.e., a digital platform that offers investment portfolios to users at a reduced price. In addition, they use algorithms that are adjusted to the profile of each individual so that these are individualized.
The growth of roboadvisors has been enormous in recent years, thanks to the fact that they are useful, inexpensive tools that also have a huge variety of advantages:
- Access to the expertise of investment experts: roboadvisors not only have algorithms, but also have behind them a group of experts who help refine the algorithms so that they can always have the best portfolios.
- Advanced technology: roboadvirsors are specialized in the use of data science and knowledge for decision-making, which makes them very efficient tools to create customized portfolios.
- Investment tailored to the investor’s profile: the above technology allows each portfolio to be almost unique with the intention of adapting to the needs and preferences of each investor.
- Access to the expertise of investment experts: roboadvisors not only have algorithms, but also have behind them a group of experts who help refine the algorithms so that they can always have the best portfolios.
- Advanced technology: roboadvirsors are specialized in the use of data science and knowledge for decision-making, which makes them very efficient tools to create customized portfolios.
- Investment tailored to the investor’s profile: the above technology allows each portfolio to be almost unique with the intention of adapting to the needs and preferences of each investor.
inbestMe: the best roboadvisors for your investment portfolio
As you have seen, roboadvisors can be a crucial ally in building your portfolio. Among them, an excellent option is inbestMe, both for its experience and its features. In addition, its low costs and wide range of products stand out. The platform also has an intuitive interface that is very easy to use.
Regarding the construction and optimization of the investment portfolio, inbestMe offers a personalized process that begins when you open an account. In this case, you must first fill out a short questionnaire with which the platform will generate a profile and based on these criteria, mainly risk and return, will create a portfolio that will fit those needs and requirements, allowing you to always feel comfortable while watching your savings grow.
