Problem: In planning for your retirement, you came across two potential blue-chip stocks i.e. DBS Ltd and Singtel Ltd which you are considering accumulating in your retirement fund. From your research, you noted the historical returns were as follows:
Year ABC Return (%) Mango Return (%)
2008 -18.0 21.8
2009 33.0 -14.5
2010 15.0 30.5
2011 -0.5 -7.6
2012 27.0 26.3
Calculate the average historical return and standard deviation of returns for (i) DBS, (ii) Singtel and (iii) a portfolio consisting of 50% of DBS and 50% of Singtel.
If you are a risk-averse investor, would you prefer to hold DBS, Singtel or the portfolio and why?