Essay About Best Thing And Portfolio Of Stocks

Investments Diversification
Diversification for a portfolio of stocks is becoming less profitable and hedge consistent compared to the past. The main reason for this is due to the globalization of markets which have started to raise the correlation coefficient between stocks. The coefficient actually reached almost 1 during the crisi where one crisis in one country dragged the whole world economy.therefore now different investors form different countries have different diversification opportunities due to different inerest rates. as if an american diverisifies buying stocks in china it will have higher interest returns at the same risk of some stocks. instead if a chinnese wants to diversify and buys stocks from the states then it will have the opposite effect because they will find lower interest rates at the same home country risk making it not as profitable for them as it is for the americans. we also have to rememebet that a well diversified portfolio must have a minimu of 30 randomeluy selected stocks to be definied well diversified because if the stocks are not to be selected randomely the selection might bring to an investment more in one sector of the market than another and will not eliminate the unsystimatic risk but will keep it at a high rate. the best thing to add to portfolios is a good share usually around 30% of etfs to better improve diversification of stocks and sectors and help out the higher interest rate keeping the level of beta as needed for the objcetive of each individual portofolio