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Portfolio Valuations

Portfolio valuations seem to give many consumers a tough time, as most of them are left rather bemused as to what exactly does a portfolio valuation mean and entail. Portfolio is a technical term that refers to the aggregate sum of the various assets that a person owns. These can include:

Property
Cash Reserves
Shares in businesses
Commodities such as stocks and shares

Valuation is the process whereby an asset will be examined and assessed by a trained professional who will make a determination as to how much that particular asset is worth in the open market.

Portfolio Valuations are the corner stone of a sound investment policy, as they help a consumer determine which of his assets are not "working" at peak capacity, i.e. which of their assets can be utilized in a more productive manner.

The nature of commodity based markets is such that they are governed by supply and demand, which means that the value of each item or asset can keep fluctuating. Thus an asset which is worth a dollar today might be worth double or just half tomorrow.

An appraisal company will also be involved with valuation of items contained within a portfolio, although this will be of a very limited nature as their primary area of expertise and focus is real estate.

It should be noted that there are a variety of methods used by appraisal companies whenever they are carrying out portfolio valuations. These include:

  • Cost approach: The cost approach entails reliance upon a hypothetical factor, i.e. the "average purchaser". With the cost approach method, the assumption used is that the average purchaser will not pay a higher sum of money to purchase a particular property, if they would be able to build a property of equivalent features and merit by themselves.
  • Sales comparison approach: With the sales comparison approach, the emphasis is placed squarely on other properties which have been sold and which are of equivalent composition as to the current property which is being valued (often referred to as the subject property.) The subject property and the calculated worth will be altered on a sliding scale basis, contingent to a number of different factors.
  • Income approach: With the income approach, the focus is fixed squarely on the potential purchasers who are deemed to be potentially interested in the subject property. Because of this, there are parallels between the income approach and the other two methods outlined earlier, and indeed it seems that the income approach is a hybrid of the two.
  • Investment/income method: With the Investment/income method, the appraisal company will rely upon the "estimated rental value" of the property. The estimated rental value simply refers to the amount of money which could be levied for the usage of the property by a tenant.

At "Appraisal California", we are aware of the fact that portfolio valuations and the algorithms used to reach them can be taxing and very difficult to follow, for an average consumer. That is why our trained staff will be there every step of the way to support you while carrying out such valuations.



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