you have been asked to invest $10,000 for a period of 5 years. Provide a careful...

you have been asked to invest $10,000 for a period of 5 years. Provide a careful explaination of how that $10,000 should be invested. stocks, bonds, mutual funds, a combination? short term, long term, etc?

Expert Solution

After getting $10,000

The 5 years is a medium time. Even if the investor invests in the passive fund like Index fund(S&P500) on an average, depending upon the past trend, he can earn a handsome return. Although it's not a guarantee but there is a certain level of confidence.

The Investor can diversify his portfolio in different Index funds, Real estates and Gold.
So that the risk decreases.

50%-60% of the money should be invested in equity.

Remaining amount should be invested diversified portfolio for example Bond, real estate fund or Gold. Whichever is performing well at the time and depending upon the circumstances - like if positive sentiments are prevailing in the markets & about economy it's best to invest in Equity or if the future of the economy is in doubt it's better to invest in commodities like Gold, which provides a good hedge to the overall portfolio.

$10,000
Invest
$2500- Equity - mutual fund
$2500- Equity- Index fund
$3000- corporate Bond
$1000- Gold
$1000- fixed deposits with bank or US Treasury bonds.

Hold all of them for 5 years.

jeff jeffy answered 4 months ago

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