Evaluate the benefits and limitations of portfolio diversification
Not what you're looking for?
Evaluate the benefits and limitations of portfolio diversification. Discuss how risk is assessed and what methods are most appropriate for measuring systematic and unsystematic risks. What are the best ways to diversify a portfolio? Please provide your team's rationale for their opinions from this week's readings.
Purchase this Solution
Solution Summary
The expert evaluates the benefits and limitations of portfolio diversification are examined.
Solution Preview
Please refer to the attached file for the response.
PORTFOLIO DIVERSIFICATION
Benefits and limitations of portfolio diversification
Diversification is basically a means by which an investor reduces the overall degree of risk of his portfolio of investment. According to Mayo (2003), a diversified portfolio reduces the element of unsystematic risk (the risk that can be reduced through diversification). He further noted that by diversifying the portfolio, the investor is able to reduce the risk of loss.
The limitation of portfolio diversification is that it does not eliminate market risk or systematic risk. The justification to this is that the value of certain groups of securities tends to follow the trend in the market.
Risk Assessment
Risk may be defined as a deviation from expected outcome. ...
Education
- Bachelor of Science in Business Administration, University of the Philippines
- Master in Business Administration, Saint Mary's University
- Doctor of Philosophy in Education, University of the Philippines
- Doctor in Business Adminstration (IP), Polytechnic University of the Philippines
Recent Feedback
- "Excellent information thanks for the input"
- "Thank you"
- "Very thorough and informative. Thank you."
- "Good response. Very detailed"
- "This solution is excellent. Thank you"
Purchase this Solution
Free BrainMass Quizzes
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Motivation
This tests some key elements of major motivation theories.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Introduction to Finance
This quiz test introductory finance topics.