Question

1. Analysis
   1. Tell us the existing asset classes and how they performed in the last 10 years?  Include some graphs.  
   2. How has your selected crypto performed lately? Risk and return graph.
   3. Why would you include a crypto in your portfolio?  Construct a portfolio using the global equity index and 1 crypto?  How did the portfolio perform?  Include S, T, Alpha as performance measures.  Compare the portfolio with one which has no crypto.
   4. Your daily data should be set from Jan 2018-March 2020.

Answer 1

Stocks

Equities are shares of ownership issued by publicly-traded firms. They are traded on stock exchanges such as the BSE, NSE, Metropolitan Stock Exchange of India (MSEI). Stocks are known to provide the strongest potential to create returns over the long-term. In 2019, stocks, as measured by the BSE Sensex's returns, gave 16.5 per cent appreciation. That is quite a good reward for investing in stocks, which carry the risk of permanent loss of capital. After a rather quiet 2018, the year 2019 turned out to be a good one for equity investors.

Gold

Gold was the surprise package of 2019. Who would have thought gold would deliver more than 22 per cent return in 2019? Very few did. Unfortunately, holding as an asset has been recently criticized. Gold detractors have many a time argued that gold is a ‘dead’ asset.

Fixed income

Fixed income as an asset gives stability to an investment portfolio. While fixed income or debt does not generate a huge return

Foreign currencies, Infrastructure, and exotics

Foreign currencies performed well against the Indian currency. This trend is not unique to 2019

WHY TO INCLUDE CRYPTOCURRENCY IN PROFOLIO

How much digital currency should go into an investor's portfolio?

It depends on many variables, including one's tolerance for risk and their familiarity with cryptocurrencies.

An investor could put a small fraction of his portfolio into these digital assets.

Alternatively, he could commit a far larger amount, setting himself up for greater upside potential, but also more downside risk.

[Ed. note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]