Through my many years in the Financial Industry, I have learned there are “language barriers” with prospects and/or clients at times. Financial Advisors (Financial Planners, Investment Advisors, etc) utilize common terms within their profession that not everyone is familiar. However, clarification of terms is key to communicating with your financial professional.
One’s portfolio is key to their goal achievement in any financial plan. What is a portfolio? The term portfolio references the combined holdings of more than one investment option (stock, bond, cash equivalent, commodity, real estate, or other asset) held by an individual or institutional investor. The purpose of portfolio is to reduce investor risk through diversification. Portfolios are frequently overseen (managed) by an investment professional (i.e. financial planner, financial advisor, wealth advisor, investment advisor, etc). The investment professional receives compensation of some form to oversee and advise in investment mix and selection. The portfolio manager will schedule review meetings to analyze the investment mix/selection and adjust accordingly on regular intervals. Through the review process, the portfolio manager will assess any needed to changes to stay on course for the client’s risk tolerance, liquidity needs, and short and long term goals.
Understanding the meaning of what a portfolio is and what a manager does are key concepts in the financial planning process. There are many other terms to understand in the financial industry, but portfolio is a great beginning.