Portfolio management, risk management and asset correlations

We have all heard about the risk-reward trade-off or risk-adjusted returns. Understanding and managing portfolio and investment risks within an investor's basket of investments is paramount in ensuring returns commensurate with the risks being undertaken. One of the crucial factors within portfolio risk management is grasping the concept of diversification, and the correlation of returns between underlying securities. Balancing risk and expected return is burdensome for any investor considering any array of investment choices and decisions. Portfolio diversification could in essence reduce risk; the lower the correlation between returns from different securities in a portfolio, the greater is the added benefit from the diversification within a portfolio. The importance of viewing a portfolio of investments in its totality rather than focusing on individual holdings is vital. Since diversification can help reduce risk without affecting the portfolio's expected return, an important consideration an investor must make is the assessment of assets and their contribution to the risk and return of the overall portfolio. An American economist most famous for his work in modern portfolio...

from timesofmalta.com http://ift.tt/2kmttpM
via IFTTT