When you invest money and invest in stocks, you become the owner of a part of the company. For example, a company might decide to sell 1 million shares, and you buy 1,000 of those shares on an exchange. This means that you own one thousandth of this company. You have voting rights at the annual general meeting of the Company's shareholders, and you are also entitled to one-thousandth of the Company's distributed profit in the form of a dividend.
A stock portfolio is simply a collection of holdings or shares in several companies. When we talk about stock investments, we are basically talking about buying shares. There are other types of investments, for example, bonds, real estate, commodities such as gold, and currencies such as euros or even bitcoin. However, we will address these options in other articles and also how ETFs can be used for the stock portfolio.
Diversifying your stock portfolio is the generally recommended approach. By diversifying, you reduce your risk without necessarily sacrificing yield. If you have invested in many companies and one of the companies becomes insolvent, this hurts less as part of a diversified stock portfolio than if the insolvent company was your only investment.
You can invest in stocks in different ways and in a diversified manner: