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The first of these (#1) is a canonical location approach: simply create a portal/ directory within your Tomcat root (CATALINA_HOME) and place a file named overrides.properties within it. Use this option if this location works for you.
The second approach (#2) is more flexible. For this option, place the overrides.properties file anywhere you want, then set PORTAL_HOME as an environment variable or pass it as a JVM argument (e.g. -DPORTAL_HOME=/my/chosen/location).
In either case, you choose which properties to override. As the name suggests, values in overrides.properties will trump (override) values set elsewhere.