Discuss how construction of a portfolio can lower the risk of an investor.

Business

1 answer:

Firdavs [7]2 years ago

7 0

Answer:

Simply put, the other meaning portfolio construction is diversification of risk. Portfolio construction is the one of simplest way of reducing risk without significantly affecting the returns.

Ways of diversifying risk includes Pension Funds, Mutual Fund, Equity, Stocks, Debt / Bonds, Retirement Saving, etc. If someone had made their investment in only one asset class, then there will be less returns available with high risk. while doing portfolio investment, it will give a systematic and controlled risky investment with higher return opportunities because some assets will perform well while other do poorly. but next year scenario could be changed or reversed. There are some thumb rules while doing portfolio investment, but it can be changed based on individual's personal goal.

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