Stock investment portfolio refers to a method for investors to select and match stocks according to certain rules and principles based on the risk level, profitability and other factors of various stocks when investing in stocks to reduce investment risks.

.

The theoretical basis is that the rise and fall of various stocks in the stock market are generally not synchronous, and there are always rises and falls, one after another.

Therefore, when an investment in a stock may not be profitable due to a temporary drop in price, you can still obtain a certain amount of income from other stocks that are on the rise, thus achieving the purpose of avoiding risks.

It should be clear that this method is only suitable for investors with large capital investment.

Stock investment management is one of the important components of asset management.

The goal of stock portfolio management is to maximize utility, that is, the risk and return characteristics of the stock portfolio can bring maximum satisfaction to investors.

Therefore, there are two reasons for constructing a stock investment portfolio: first, to reduce securities investment risks; second, to maximize securities investment returns.

Portfolio management is an investment management concept that is different from individual asset management.

Portfolio management theory was first systematically proposed by Markowitz in 1952, who pioneered the overall management of investments.

Currently, about one-third of investment managers in Western countries use quantitative methods for portfolio management.

Constructing a portfolio and analyzing its characteristics are fundamental activities of professional portfolio managers.

The process of constructing an investment portfolio is to minimize the adverse effects of a small number of securities through diversification of securities.

1. Risk diversification Stocks, like any other financial product, are risky.

The so-called risk refers to the uncertainty of expected investment returns.

We often use the example of eggs in a basket to illustrate the importance of risk diversification.

If we put the eggs in a basket, if the basket accidentally falls on the ground, then all the eggs may be broken; and if we scatter the eggs in different baskets, then the fall of one basket will not affect the

Eggs in other baskets.

Asset portfolio theory shows that the risk of a security portfolio decreases as the number of securities included in the portfolio increases, and a diversified portfolio of securities with low correlation between assets can effectively reduce individual risks.

We generally use the variance of stock investment returns or the p-value of a stock to measure the risk of a stock or stock portfolio.

Usually the variance of a stock portfolio is composed of the variance of each stock in the portfolio and the covariance between stocks. The expected return of the portfolio is the weighted average of the expected returns of each stock.

Unless there is a perfect positive correlation between stocks, the standard deviation of the portfolio assets will be less than the weighted average of the standard deviations of each stock.

When the number N of stocks in the portfolio increases, the investment proportion of a single stock decreases, and the impact of the variance term on the risk of the portfolio assets decreases; when N tends to infinity, the variance term will be close to 0, and the risk of the portfolio assets is only determined by the risk of each stock.

Determined by the covariance between .

In other words, through portfolio investment, the risks arising from the characteristics of each stock (unsystematic risk) can be reduced or eliminated, and only the risks arising from factors that affect the return rate of all stocks (systemic risk) can be borne.

2. Maximize returns One of the goals of stock portfolio management is to maximize returns for investors through diversified stock investments within the investor's acceptable risk level.

Judging from market experience, a single stock is greatly affected by industry policies and fundamentals, and the corresponding earnings fluctuations are often large.

During a period of rapid growth in a company's performance, it may bring considerable returns to investors, but if the stock price drops sharply due to information not observed by investors, it may cause great losses to investors.

Therefore, at a given level of risk, excessive stock price volatility can be mitigated to a certain extent through diversified stock selection, thereby maximizing returns over a longer period of time.