How to diversify a portfolio for a 40 y/o who is willing to take risks. (What...

How to diversify a portfolio for a 40 y/o who is willing to take risks. (What percentage should be invested in what)

Expert Solution

A person who is in the age of 40 years old and is in the mid of his life cycle so in this situation he can not take much of risk because he is approaching to retirement and having less time to accumulate wealth. If a person of the age 40 want to take risk and invest into equity for higher returns in this case of diversification, it would be better to him to investment into index funds and sector based funds to get the benefits of equity investing. By direct investing into equity or stock it would be better to investment a good proportion of savings into index fund and rest into direct investing into shares and stock.

A person with the age of 40 can diversify its portfolio by mixing a blend of securities lets say 30% in debts instruments which will provide surety of return 30% in stock which will increase the returns by investing in shares of high growth companies and remaining 40% in Index fund and mutual funds which will provide a diversification in investment which will reduce the diversification risk.

jeff jeffy answered 1 year ago

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