The Virtual Portfolio

In this article,We are  going to discuss how to make a virtual portfolio. But first, let’s discuss what an investment portfolio is and what it’s for.

What is an investment portfolio?

An investment portfolio as a set of chosen financial assets in which we deposit our capital to get potential returns. It’s about varying our investment to limit risk without decreasing the potential return overly.

What is risk? 

When we talk about risk in investment terms, we refer to the possibility of not reaching the desired return. We must take into account the profitability risk ratio when we make an investment portfolio , if the risk is higher than the potential return, we may have a problem.The less profitability, the less risk.

Steps to create an investment portfolio:

-Objectives & Time horizon:

How to control your investment objectives? The 1st thing we must do to set our goals is to study our equity and capital situation and then set the goal. For this, it is basic that we set a time horizon to achieve them.

-Risk profile:

The risk profile of an investor can be defined as the relation between what they want to achieve, what they need to achieve it and the ability to achieve it.

By answering these questions, we will know if your profile is conservative, moderate or aggressive. Let’s look at these profiles:

    -Conservative profile: An investor with a low tolerance for risk, that is, cannot afford large losses of money. His goal is to get small returns on low-risk products, such as bonds.

    -Moderate profile: it is willing to take a higher risk than the conservative, so he usually opts for a combination of fixed income and various income assets, which raise the risk and the potential return a little.

    -Aggressive profile: it is on the seek for high returns with high risk tolerance. To do this, he opts for volatile financial assets and attempts to vary to reduce risk as much as possible.

Instruments & sectors:

Once we have established our objective and our risk profile, it is time to choose the financial tools that we will include in our investment portfolio: stocks, bonds, Forex, commodities, etc. A conservative profile will search for assets with low volatility that are stable in the long term. 

Risk & return ratio:

Once we have chosen assets formed on our risk profile, it’s time to create our investment portfolio. To do this, we must establish various combinations and calculate the risk/return ratio of each of these combinations. That is, optimize our portfolio. Read more

What is a virtual portfolio?

It’s the portfolio on your demo trading account. It’s called a virtual portfolio because you aren’t investing in real shares.

Why use a virtual portfolio?

A virtual portfolio makes it easier for the trader to establish the 4 previous steps.It allows simulations of investments without the need to risk real money. 

Virtual portfolio shares can mirror real portfolio shares. With a virtual stock exchange portfolio, you can trade in the same way with the same tools and with the same charts and other information as you would with a real account. 

It allows beginner  traders to learn to scalp without risk. This type of trading can be very useful for those who have no trading experience. 

Advantages and disadvantages of a virtual portfolio:

-Advantages:

1-It serves as an educational tool to start  in the world of trading

2-It offers real market conditions, with real-time quotes, which is very useful for making simulations as close to reality as possible.

3-It facilitates the acquisition of knowledge and habits, familiarizes ourselves with trading and market conditions, test strategies, techniques and tools.

-Disadvantages:

1-When you operate with it, your emotions aren’t the same as when you invest with real money.

3-When you operate with a virtual wallet in a virtual portfolio, you risk more of your account balance because you know that you’re not going to lose real money. 

The virtual portfolio (Diversifying):

Virtual and real portfolio investments should be diversified (it shouldn’t be composed only of correlated assets).

A variegated virtual portfolio can be made up of: ( Stocks from different geographical areas & ETF & Bonds & Raw Materials.

Another way to diversify is to use CFDs.

About Marketsbloom:

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