Question:
This assignment is concerned with your understanding of the key issues relative to portfolio analysis and investment. In completing this assingment you are to limit your scope to the US stock markets only. Write a 2-page essay which you will use with new clients of your financial planning business which addresses the following issues and/or practices:
- How individual investors make investment decisions in practice rather than in theory; and
- How investors manage their funds/savings/investments in light of current stock markets.
In your response, build upon extant portfolio theory and make sure to talk about different types of risks that investors might face and how they go about managing such risks. This means you need to consider topics such as efficient frontier and optimal portfolios; as well their relevance to investment theory. Furthermore, given the nature of the assignment, avoid bringing the brokeage industry into your discussion. In other words, assume you can invest directly in the stock market and do not need any financial intermediaries like brokerage houses.