Question

An investment portfolio is a group of investments. Why is it important to create an investment portfolio? (Hint: standard deviation) What is the optimal number of stocks in an investment portfolio? Is there any benefit to owning 100 individual stock positions?

Answer 1

Portfolio is a set of investment in different financial assets. A portfolio is considered as optimal when level of risk is minimum and expected rate of return is maximum. also, we can say, a optimal portfolio provide maximum return at minimum level of risk.

?Inventor construct portfolio for following reasons:

1. A Large sum of money collected so that investor can invest in various assets, or large assets that one individual investor cannot afford to invest.

2. By investing in various assets investor can reduce of risk of investment

optimal number of stocks in an investment portfolio? is considered as 30 stocks. if a portfolio is constructed with 100 stocks then risk level of investment reduces and it is approximately equal to market risk