Question

Illustrate how do financial institutions help individual savers diversify their portfolio risks? Which type of financial institution is best able to achieve this goal?

Answer 1

Financial institution will be helping the individual savers in diversification of their portfolio is as they will be offering with these investors to invest their money into the financial Markets and they can also deposit then their money in the commercial banks and chain of Financial institutions will be offering with the various diversified strategy in which these investors can put their money into and they do not even bother managing their money and they are managed by the professionals.

Financial institutions like investment bankers will be providing the investors with the equity analysis and the equity analysis will be helpful in investors to invest their money into the market and banks will be offering them with various facilities like investing their money into the fixed deposits for the longer period of time at a lower risk or there are Mutual Funds which are available in the market and the mutual funds are professionally managed mutual funds and investor just needs to put their money into these mutual funds and they are charging commission in order to manage the money of the investors, and this money will be invested into diversified securities so that investors are already diversified into the different asset classes because these mutual funds are just not exposed into equity classes but these Mutual Funds are also investing into the debt securities so, it can be said that they are offering the investors with the diversified opportunities and these investors can maximize the rate of return by investing into the mutual fund.

Mutual Funds are the best when it will be coming to managing the money of the investor's for a longer period of time because this Mutual Funds will be offering them with customised services and diversified portfolio so investors are attracted to invest into the mutual funds for the longer period of time in order to maximize their rate of return and have a diversified exposure.