Likewise, a young investor may hold mainly equities.
Investor risk tolerance is another impediment to achieving asset class diversification. Investors will low risk tolerance, for example, are unlikely to hold high equity positions and even less likely to utilize more obscure securities like hedge funds. Yet, portfolios without equities may be highly susceptible to changes in the prevailing interest rates and therefore lack diversification. Indeed, for many investors a fully-diversified portfolio across asset classes is not desirable for their investment objectives, time frame and risk tolerance.
Lastly, asset class diversification can be hampered by knowledge of asset classes. Even without considering emerging asset classes, many classes require specialized knowledge - commodities, forex, real estate to name a new -- that may dissuade investors from utilizing them. Even relatively common asset classes such as preferred shares, zero coupon bonds or mutual funds can be sufficiently confusing. The degree of willingness of an investor to use an asset class is directly related to the investor's ability to understand the class.
Achieving geographic diversification also comes with its own set of impediments. There is, in particular, a domestic bias in equity holdings among investors (Rowland, 1996). Investors are more familiar with domestic firms, understand their operating environment better, and have better access to information about those companies. Moreover, domestic firms are all subject...
A common thread through these fifteen stocks is that they not only represent diversification as a group, but most of the companies chosen also have a range diversification within the company's operations. The companies are spread around the world, and include a number of sectors. For example, within technology the portfolio has access to the health care sector through Cerner; within ADRs there is exposure to the Internet, chemicals and
Stocks have considerable more risk. Equity is subordinated to debt, which means that if the company goes bankrupt the bondholders get paid out first, before shareholders get anything. There is always the risk, therefore, that a shareholder could receive nothing for their shares, and lose all of their money. Even a bondholder might receive something -- pennies on the dollar -- in the event of bankruptcy, but a stockholder receives
Qatar's Foreign Direct Investment Law Qatar's Foreign Investment Law Why is Qatar Attracting Foreign Investors? Qatar's Foreign Direct Investment Foreign Investor How to Apply Investment Laws Investment Sectors Qatar's Investment Environment Qatar's Foreign Investment Law With a population of approximately 1.7 million people, Qatar happens to be one of the tiniest states in the Arab Gulf. Although Arabic is the official state language, English remains one of the country's most widely spoken languages (CIA). The country's capital is Doha. Being
Portfolio Management In the project portfolio management context, a portfolio is an aggregation of active programs, projects and other business activities that indicate an organization's priorities, investments and allocation of resource (The standard for portfolio management, 2008). According to the editors of PM Network, "Portfolio management is the centralized management of one or more of those portfolios to achieve specific strategic business objectives" (2008, p. 75). Using project portfolio management
Business Improvements Since the two companies operate in different target markets and with substantially different product mixes the recommendations must be customized for each firm. Goldman Sachs is considered a top trade recommendation for 2012 by many accounts as the firm is largely financially successful and the institutional client services dominate the businesses revenue stream (Craig, 2013). The most pressing recommendation for Goldman Sachs would be to integrate a more robust
Commodity Investing Are there potential risk reduction and diversification opportunities in adding commodities to a Norwegian investor's asset portfolio? Recent global economic turmoil has inspired investors all over the globe to look for ways to protect their portfolios and to continue to make them grow despite a weak economy. Investments in commodities have been suggested as a solid hedge against future turmoil in the markets. The question is whether this is good
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