Portfolio shares

Portfolio shares are shares within the capital stock of a company that were acquired by a natural or legal person. Thus, they became part of an investment portfolio.

Portfolio shares

It is worth mentioning that, unlike other financial securities, a stock is riskier. That is to say, it can register losses in the short term, but in the long term it always offers more profits than fixed income.

Another fact to take into account is that portfolio stocks can be part of an equity portfolio. In this type of portfolio it is feasible to include, in addition to stocks, a wider variety of high volatility assets such as convertible bonds and structured products.

Types of shares in portfolio according to risk

The types of shares in portfolio, according to risk, are as follows:

  • Defensive: They are those shares issued by low-risk companies that belong to sectors that are not linked to the performance of the economy. We refer, for example, to basic services. In this case, the performance of the securities will tend to be relatively stable, often paying dividends, although usually modest.
  • Offensive : They are shares of companies with volatile results. That is, they can win or lose a lot. Within this group, items such as technology or oil are considered. The latter depends on the international price of crude, which, in turn, may face strong fluctuations, for example, due to geopolitical factors.

At this point, it should be noted that the composition of the portfolio depends a lot on risk aversion. If the investor is looking for relatively stable earnings, he will prefer to buy more defensive stocks, even if this means giving up the higher returns offered by offensives in the long term.

However, it is important to note that defensive stocks are not the only protection against market volatilities. The agent can, for example, buy titles with performances that are always historically contrary. That is, if one falls, the rise of the other (or others) is expected, offsetting the loss.

Other classifications of portfolio stocks

Other classifications of portfolio stocks are:

1.For the rights they provide:

  • Preferential: These are titles that can eventually pay dividends. In addition, its owners have priority in the event of the liquidation of the company, that is, their money would be returned to them before other partners.
  • Ordinary: They are not obliged to distribute dividends, but they grant the power to vote at the General Shareholders’ Meeting.

We will explain the above in detail in this article on types of shares.

2.By its book value

  • Above par: The price of the security is higher than its nominal value, which is that assigned in the accounting records of the issuing company.
  • At par: The nominal value is equal to the market price.
  • Under par: The price is less than its nominal value

Difference between treasury shares and portfolio shares

It is important to distinguish the portfolio shares from the treasury stock. The latter is the set of shares in which a company has invested and which belong to its own capital stock.

In other words, within the stocks in the portfolio, there may be a treasury stock. In that case, the company has bought a part of the securities that it has issued itself.