Investment portfolio
In one sentenceThe set of investments owned by an individual or a business, such as shares, sukuk, funds, and real estate, managed together to achieve a return target at an acceptable level of risk.
Simply put
Each investment is not judged on its own, but the whole portfolio is: its return is the average weighted by its investments, and its risk falls when its components are diversified.
The portfolio is reviewed periodically to bring the weights back to plan, because a rise in one asset increases its weight and changes the portfolio's risk.
Worked example
A business with a surplus of 1,000,000 SAR allocated it with hypothetical figures for illustration: 500,000 in shares with an expected return of 10%, 300,000 in sukuk at 5%, and 200,000 in a real estate fund at 6%.
Return on shares500,000 × 10% = 50,000 SAR
Return on sukuk300,000 × 5% = 15,000 SAR
Return on the real estate fund200,000 × 6% = 12,000 SAR
Expected portfolio return = 77,000 ÷ 1,000,0007.7%
Formula: Sum of (weight of each investment × its expected return)