Question

Define what is meant by an investment portfolio. List and discuss key questions to answer and list asset classes and sub-asset classes that could be candidates for inclusion in a portfolio; what are those asset and sub-asset classes.what are those key determinants for all asset classes and sub-asset classes

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Answer 1

Investment portfolio is a Portfolio of Assets and sub assets which will be providing the investors with optimum diversification by minimising upon risk and maximizing upon return while making investment into the market.

There are various asset classes and sub asset classes which are to be included into the investment portfolio as asset classes will mean that primarily asset classes which derive their value direct from the underlying asset whereas sub asset classes are subdivision of the major asset classes so when we will be considering the Asset classes, these asset classes will be bonds along with stocks whereas investment trust are treated as sub asset class for stocks.

Asset classes and sub assets classes are determined by the risk appetite of the individual and the diversification benefit which he wants to have by investment into the investment portfolio for the longer period of time because investor will be trying to diversify portfolio and minimise risk and he will have appetite of maximizing his rate of return so he will be trying to invest into a large number of asset classes in order to eliminate the unsystematic risk to the large extent and maximize his return so investment portfolio will help the investor in order to maximize his rate of return.