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)

Solutions

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

Next > < Previous

Related Solutions

Illustrate how do financial institutions help individual savers diversify their portfolio risks?

Illustrate how do financial institutions help individual savers diversify their portfolio risks? Which type of financial institution is best able to achieve this goal?

The role of Insurance - Managing Risks. Explain how to diversify a portfolio. Can we eliminate...

The role of Insurance - Managing Risks. Explain how to diversify a portfolio. Can we eliminate risks?

Mountain Ski Corp. was set up to take large risks and is willing to take the...

Mountain Ski Corp. was set up to take large risks and is willing to take the greatest risk possible. Lakeway Train Co. is more typical of the average corporation and is risk-averse. Projects Returns: Expected Value Standard Deviation A $ 267,000 $ 207,000 B 732,000 406,000 C 129,000 116,000 D 164,000 258,000 a-1. Compute the coefficients of variation. (Round your answers to 3 decimal places.) a-2. Which of the following four projects should Mountain Ski Corp. choose? Project A Project...

1. How do loan portfolio risks differ from individual loan risks? What is the importance of...

1. How do loan portfolio risks differ from individual loan risks? What is the importance of concentration limits in managing the amount of NPLs (non-performing loans)? 2. Explain whether each of the statements below is True, False or Uncertain. Justify your answer. a. Compensating balances kept at the bank that has originated a loan help to reduce the adverse selection and moral hazard problems associated with lending. b. If the book value of the collateral is greater than or equal...

Now that you have learned how to diversify an investment portfolio and compute the statistics in...

Now that you have learned how to diversify an investment portfolio and compute the statistics in Excel. Discuss why we need to use risk free rate to compute CML and what excel functions/ shortcuts you liked in this module and want to share with your peers.

1) What does it mean to "Diversify" your portfolio? A. To hold more than 1 stock...

1) What does it mean to "Diversify" your portfolio? A. To hold more than 1 stock B. For your stocks to not be all in the same area of the economy C. To have a mix between stocks, mutual funds, or other securities D. A and B 2) What is Capital Preservation? A. To make sure you don't lose your initial investment B. To make sure you keep the gains you make investing C. When companies buy back stock D....

Identify an appropriate asset allocation to apply for diversification for a scenario. (40 y/o male who's...

Identify an appropriate asset allocation to apply for diversification for a scenario. (40 y/o male who's willing to take risks)

Why is it important for people who own stocks and bonds to diversify their holdings? What...

Why is it important for people who own stocks and bonds to diversify their holdings? What type of financial intermediary makes diversification easier? What is national saving? What is private saving? What is public saving? How are these three variables related?

What is the variance of the returns on a portfolio that is invested 40 percent in...

What is the variance of the returns on a portfolio that is invested 40 percent in Stock S and 60 percent in Stock T? State of Economy Probability of State of Economy Rate of Return if State Occurs Stock S Stock T Boom .06 .22 .18 Normal .92 .15 .14 Bust .02 −.26 .09 .00091 .00136 .00107 .00118 Please show work

What risks would investors who purchase pensions as financial intermediatries be taking on? What risks would...

What risks would investors who purchase pensions as financial intermediatries be taking on? What risks would retirees be taking on? How can each type of risk be avoided/ mitigated?

Subjects