What Is a Portfolio

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Defined, a portfolio is a collection of projects (temporary endeavors undertaken to create a unique product, service, or result) and/or programs (a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually) and other work that are grouped together to facilitate the effective management of that work to meet strategic business objectives. The components of a portfolio are quantifiable; that is, they can be measured, ranked, and prioritized.

The projects or programs (hereinafter referred to as ''components'') may not necessarily be interdependent or directly related. At any given moment, the portfolio represents a view of its selected components that both reflect and affect the strategic goals of the organization—that is, the portfolio represents the organization's set of active programs, projects, subportfolios, and other work at a specific point in time.

It is important to understand the relationship of a portfolio and the components of the portfolio. Figure 1-1 illustrates this relationship.

Portfolio Organization
Figure 1-1. Portfolio Relationships—Example

A portfolio reflects investments made or planned by an organization, which are aligned with the organization's strategic goals and objectives. It is where priorities are identified, investment decisions are made, and resources are allocated. If a portfolio's components are not aligned to its organizational strategy, the organization can reasonably question why the work is being undertaken.

All components of a portfolio exhibit certain common features:

• They represent investments made or planned by the organization

• They are aligned with the organization's strategic goals and objectives

• They typically have some distinguishing features that permit the organization to group them for more effective management

• The components of a portfolio are quantifiable; that is, they can be measured, ranked and prioritized.

Conversely, the components of a portfolio are differentiated as identified in Table 1-1:

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