an investor has Rs.10 lakh to invest.he decides to invest in different asset class the amount of money that he proposes to invest and the corresponding return is given below
Answers
Explanation:
Traditional wisdom says don’t put all your eggs in one basket. It restricts the damage to your financial well-being in case one asset class or instrument goes for a tailspin. For example, equities crashed by 39% during 2008-9. If you had a goal maturing that year and were depending largely on stock investments, it would have been a disaster.
However, if you had spread your investments across equity, debt, cash and gold, the portfolio would have given an average return of 0.68% (see graphic). This is because of the stellar performance by gold (up 24%) and stable returns from debt and cash during that year. The situation reversed the next year, with equities rising 94% and all other asset classes giving lacklustre returns. Even so, the diversified portfolio managed to generate 27% returns that year.