Maximizing return on investment
January 24th, 2007 Ogbuotobo Chuks || chuks@stockmarketnigeria.com
By Ogbuotobo Chuks
If a portfolio is diversified among stocks, bonds and money market assets, losses in one category such as stocks are offset with gains in the other categories. Studies indicate that the right combination of investment assets accounts for about 90 per cent of return on investment.Diversification is no guarantee that the value of your investment will not go down at some point. But it provides a shock absorber that tempers the effect of a decline and thus reduces your overall risk exposure. Bonds do not fall in value as rapidly as stocks do and this indicates that the value of portfolios with a mix of stocks and bonds cannot decline as fast as all-share portfolios.
Adding money market investments to stocks and bonds will enable the investor attain a greater stability of investment value still. The chance of reaching your investment goal can thus be enhanced.
In building a retirement portfolio, for instance, the mix of the investments is determined by the relationship among the various asset classes. How does the behavior of the assets over different market cycles reinforce themselves or cancel out?
The objective is to achieve a portfolio mix where the different investments are negatively correlated; that is when some decline in value, others rise to counter the negative effect of those declining on the overall portfolio value. The idea is to ensure that your investments are not structured in such a way that they can drop in value at about the same time or in response to the same economic and market developments.
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sir,
reading through the above mail message, i realise that it is economical,not putting all eggs in one basket, to spread ones investment.however,i do not how to purchase or acquire the bond and money market.
thanks
Thank you so much it will assist me in planning my retirement life.