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Investment theory and property diversification - Essay Example
Author : bashirianjesse
Pages 5 (1255 words)
This paper investigates the viability of different venture in the discourse of diversifying investment in order to reduce market risk in capital economy. It also assesses the individual portfolio towards the growth of national capital gain in order to sustain the cycle of investment via multiple number of resources.
The purpose of having all four-asset classes represented in your portfolio is to take advantage of the different strengths of each class. However, stocks are grouped together because they would, as a group, react more alike than any of the other three classes. The same thing is true for the other three classes. Many people use Real Estate Investment Trusts and other liquid investments to satisfy the real estate leg of the asset class tool. The term investment closely relates the meanings in business management, finance and economics, related to saving or deferring consumption. People usually purchase an asset or equivalently a deposit is made in a bank, in the expectation of getting a future return or interest from it. An investor distributes his investments among various classes of investment vehicles (e.g., stocks and bonds) I order to capitulate the cycle of market potentiality. When a portfolio has an active risk, then, we treat it as the annualized standard deviation of the monthly difference between portfolio return and benchmark return. Thus, an active risk of x per cent would mean that approximately 2/3rd of the portfolio's returns (one standard deviation from mean) can be expected to fall between +x and -x per cent of the mean excess return. ...