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If you aim to create a complete portfolio, why is it necessary to add a certain...

If you aim to create a complete portfolio, why is it necessary to add a certain percentage (such as 10%) of money market instruments into that portfolio? What are the different types of US money market instruments and which one(s) will you select for your portfolio.
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Answer #1

Solution:

A portfolio should be balance with equity , debt, money market instruments and cash in hand.

All the securities have different level of risks and returns associated with it. Equity are risky as compared to bonds and money market instruments. Money market instruments are mostly short term in nature and returns are low but risks are also low. Money market instruments consists of treasury bills, certificate of deposit, commercial papers, repurchase agreemnt etc.

In these money market instruments I would like to invest in treasury bill as it is backed by US government and have lowest risk of default.

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