Financial markets - Coursework Example

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Financial markets

An asset manager while creating a portfolio diversifies the total investment into an optimal mix of asset class with an aim of either to increase return or reduce risk, so as to create a balanced portfolio. Traditionally asset managers allocated a structure of 45% of assets were invested in equities, 25% in bonds, 15% in property and 15% in cash, based on the client’s need of asset classes which would provide long term capital appreciation for the level of risk that the client is willing to undertake. As per the offered portfolio, 45% of assets were invested in equity which generated high return with high amount of risk, 25% in bonds which generated constant return with reduced risk, 15% in property or real estate which generated substantial amount of return with substantial risk, and 15% in cash or money market instruments which generated constant promised return with low risk. Thus it can be said that the portfolio offered by the asset manager as on one way generated return to the client with low risk as well as paved the way to earn higher return if high risk is undertaken. Thus with an aim to diversify risk and attain balanced returns this balanced portfolio could be achieved. ...
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But as the investor wants maximum return so he may choose to invest fully in Stock A which would generate a return of 15%, which is greater than 5%.
Thus, it is found that 20% return cannot be generated from the portfolio…
Author : znikolaus

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