Question

IV. Investment Portfolio

In this section you should provide an example of an Investment Portfolio. Meaning provide ideas for developing your own investment portfolio. Your explanation should include ideas on diversity across companies and sectors, security and speculation, and stock and bonds.

Answer 1

The investment portfolio includes stocks, bonds, cash etc. Investors tried to earn maximum returns by mixing these securities which reflect risk tolerance and financial goals. Asset allocation will helps to avoid risk in the financial market. Owning of mutual funds considered as an instrument to reduce the risk which are essentially baskets of stocks. Investing in one category is dangerous for long term. The allocation of the securities was based on the returns from each of these.
One of the most important example for investment portfolio is Sweden Model. The excellent allocation of the money by David in Sweden model is domestic equities by 30%, Real estate funds by 20 %, Government bonds 15%, International equities by 15%, treasury securities was 15%, emerging market equities by 5%. The total sum will be 100%. Here is there is no single choice which represent an overwhelming part of the portfolio. Here there is a maintenance of solid return the risks will be reduced. This diversification in securities will reduce the risk of each company. In Sweden model, the government bonds are almost 15 percent. This shows that almost 15 percent of the securities from government bonds. This makes the trust of the company over government about the riskier securities.