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Can Diversification reduce the weight of an investment in a portfolio compared to an undiversified portfolio?
Wiki User
∙ 12y ago
Yes; that is the definition and purpose of diversification: to spread the invested money over a number of investments so that no single investment has a high percentage of the investor's money, thus reducing risk.
Wiki User
∙ 12y ago
Yes, diversification can reduce the weight of an investment in a portfolio compared to an undiversified portfolio. When a portfolio is diversified, the investments are spread across different assets or asset classes, which helps to mitigate the risk associated with any individual investment. As a result, the weight or allocation of any single investment in the portfolio is reduced, reducing the impact of any potential losses from that investment.
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What is equity exposures?
Equity exposures refer to measurements used for investment portfolios. These explain the investment amounts in a portfolio used for different items like stocks and equity compared to a fixed income.
Which of the following is the first step in the investment planning process Identify your goals Learn about investment alternatives Estimate how much you need to accumulate evaluate risk tolerance?
For individual investors who wish to construct an investment portfolio for whatever reason, there is the prior step of ensuring that the potential investor is properly ensured and has an adequate cash reserve (6 months living expenses) before serious consideration can be made of investing in anything. Beyond that however, constructing an investment policy statement is the first step. In constructing this statement, articulating your goals and objectives is the first step. These comprise not only the amount of money you wish to raise but also your risk tolerance. the second step is to articulate your constraints. These include all things other than risk that will affect your investment decisions, such as your liquidity needs, the time horizon, the amount of time and skill you can devote to your investment portfolio, etc. At this point, one will have an investment policy statement, which is simply a document that contains the aforementioned information. From this investment policy statement, which is subject to periodic review, and investment strategy can be formulated. This investment policy will then serve to guide you and your investment manager's decisions concerning the application of funds available for use in building the portfolio. At some later stage, a review of investment performance will have to be conducted to see how well it did compared to your expectations. At this time, you may only have reasonable grounds to fire your investment manager if he unilaterally deviated from the strategy created based on the provisions of the investment policy statement. The fact that the portfolio may have underperformed expectations, even though the portfolio manager did not deviate from the investment policy statement, is not good enough grounds. This is simply a risk inherent to investment and is something the investor should be prepared for going into the investment.
How does opportunity cost enter in to the market of buy decession?
Opportunity Costs are those indirect costs which account for the benefits sacrificed for the funds utilized in a particular decision of investment. In cost analysis, when ascertaining the investment portfolio, The benefits foregone for it needs to be considered so that the relative comparison of the investment avenues in terms of return could be compared and a suitable decision could be made. Thus we see that the buy decisions are influenced by a set od direct and indirect cost considerations, of which the "opportunity cost" is one element.
How much should a conservative balanced portfolio earn yearly?
A conservatively managed balanced portfolio should earn approximately the return on the S&P 500 which is a benchmark index that many portfolios are compared against to measure yearly investment gains. While it is impossible to predict gains or losses for a specific year the annual average return on stocks over the past 50 years including dividends and capital appreciation is almost 10 percent.
What is an asset management fee?
The Asset Management Company (AMC) as the Investment Manager of the Mutual Fund charges a fee for portfolio management. The fee charged on an annual basis is calculated as a percentage of net assets under management. Reliance Mutual Fund house charges nominal charges as compared to other fund houses.
What does low risk investment mean?
Investment which contain lower level of exposure to risk as compared to other investments like Bank deposits or Treasury notes etc. With that it usually also has low level of interest as compared to other products available
Are timeshare condos really a wise investment?
Timeshare condos are not really a wise investment as the amount of utility derived from Timeshare condos is disproportionally small compared to the risk.
What is stock variation?
It determines how much of a risk you are taking, compared to the amount of return you can expect back from your investment.
Why would you choose a stock as compared to a different form of investment?
big balls in ur mouth on Sunday night =]]
What does investment to GDP ratio mean?
It is the ratio of the amount of money spent on investment in plant and capital - including stocks (inventories) over a period of time compared to the total output of the country (or region).
Why is investment trading less expensive online?
Investment trading is less expensive because the online brokers are not expensive as compared to the services they provide in return. They charge nominal annual fees for online trading account. But in return, they provide you better personalized services. They provide you with an online trading platform so that you can conveniently trade from the ease of the home. They also provide you the facility to maintain your portfolio online. They also provide you with analysis reports about the stocks you own. Getting so many services for a nominal annual fees is anytime beneficial.
What are one of the standard methods to measure the performance of investment newsletters?
A standard method for measuring the performance of investment newsletters is to compare the net return after expenses to an index fund that holds investments comparable to those recommended by the newsletter. For example, a newsletter that advises its subscribers on what oil stocks to own could be compared to an index fund such as the Energy Select Sector SPDR ETF (XLE) which invests in a portfolio of stocks engaged in the exploration and production of oil. Measuring the returns of an investment newsletter can be a complicated process and care must be taken before blindly accepting the returns published by the investment newsletter. Before subscribing to a newsletter, investors should research the historical returns of the newsletter by consulting an independent rating source.
