Rank the asset classes appropriately for a diversified portfolio; Bonds Cash Property Shares Commodities

Rank the asset classes appropriately for a diversified portfolio;
Bonds
Cash
Property
Shares
Commodities

Expert Solution

The ranking of asset can differ from investor to investor depending on risk perception and his ability to take risk. Let’s say an average 30-year-old investor should construct his diversified portfolio in order of

Share: A majority of the portfolio should consist of share because in the long-term they generate high returns.

Bonds or Fixed income: The second largest portfolio should be of fixed income category.

Cash: You should keep a certain portion of your portfolio in order to protect yourself in case of emergency.

Commodities: Commodities are in the portfolio to protect against the rise in inflation of the, they act as an inflation hedging instruments.

Property or real-estate: They do normally have negative correlation with equities but in times of distress this correlation does not work out so real-estate should not be very large portion of your portfolio unless you really do not need liquidity.

jeff jeffy answered 1 year ago

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