RiskPicksWhat is a Portfolio?
Your portfolio is everything you hold in your brokerage account: stocks, ETFs, options, bonds, and cash. It is the total picture of your investments at any point in time.
Portfolio for day traders vs investors
- Day traders: portfolio changes constantly throughout the day. May start and end each day in 100% cash with no overnight positions
- Swing traders: hold a handful of positions for days or weeks. Portfolio turns over regularly but not daily
- Investors: hold positions for months or years. Portfolio changes slowly
Key portfolio concepts
- Diversification: spreading money across different stocks, sectors, or asset types to reduce risk. If one position drops, it does not wipe out your entire account
- Concentration: putting a large percentage of your portfolio into a single stock or sector. Higher risk, higher potential reward
- Portfolio heat: the total percentage of your portfolio at risk across all open positions. If you risk 2% per trade and have 5 trades open, your portfolio heat is 10%
- Cash allocation: the percentage of your portfolio sitting in cash. Higher cash means less market exposure and lower risk
Day traders often end each day with a 100% cash portfolio. This eliminates overnight risk from earnings, news, or gap downs that happen while you cannot trade.