Municipal Bond: 25%
U.S. Treasury Bond: 25%
Preferred stock in established company: 15%
Common stock in developing firm: 5%
Savings Account: 30%
Explain, using complete sentences, if this portfolio is not diverse, minimally diverse, somewhat diverse, or extremely diverse. Why?
Is this an aggressive, conservative, or moderate portfolio? How do you know?
Describe an individual who might carry this type of portfolio. Include details such as age, occupation, family situation, investment goals.
forgot to add my answers ^ so:
I think its extremely diverse?
I think its a conservative?
and lastly I think its someone much older?
To determine the diversity of this portfolio, we can look at the allocation of assets across different investment types. This portfolio consists of 5 different asset classes: municipal bonds, U.S. Treasury bonds, preferred stock in an established company, common stock in a developing firm, and a savings account.
In terms of diversity, this portfolio can be considered somewhat diverse. Although it includes a mix of different asset classes, it is not highly diversified. For instance, the allocation to municipal bonds and U.S. Treasury bonds each accounts for 25% of the portfolio. This implies that a significant portion of the portfolio is invested in fixed-income securities, which may have similar risk factors. The allocation to preferred stock and common stock is relatively lower at 15% and 5%, respectively. However, having a savings account as a significant portion (30%) of the portfolio may indicate a lack of diversification within investment vehicles.
In terms of the aggressiveness, conservatism, or moderation of this portfolio, it can be considered moderate. The allocation to fixed-income securities like municipal and U.S. Treasury bonds, as well as the savings account, suggests a conservative approach. These investments usually provide stability and lower risk compared to equities. On the other hand, the inclusion of preferred and common stocks indicates a slightly more aggressive stance, as these investments tend to carry more risk and potential for higher returns.
An individual who might carry this type of portfolio could be a middle-aged professional with a stable income and a family to support. They may have a moderate risk tolerance and a medium- to long-term investment horizon. Their investment goals could include preserving capital, generating current income from fixed-income investments, while also seeking moderate growth potential through equity investments. This individual might prioritize a balanced approach to diversify their portfolio while still maintaining some exposure to higher-risk assets for potential growth.