Recommendation for Mr.Stone

Posted: September 9th, 2013

Dear customer:

Please provide what else should be added in the portfolio because the format used has fulfilled the purpose of a portfolio, which is to indicate the possible returns from investments in stocks, bonds and trusts. Additional information would be helpful to ensure satisfaction of your needs from the portfolio.

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Diversification in a portfolio is of essence. This is good business sense in that it aims at diversification of risks of the investors between the various investments available in the market. A balanced portfolio is essential to ensure that there is a longer and lasting impact in terms of the returns accrued to the investor. Hence, an investor aims at ensuring the presence of balance in the portfolio. Essentially all investments undertaken by an organization are based on undertaking risk by the investor. This is because blue-chip entities, which are seemingly safe investments, usually harbor unseen risks in terms of accruable losses in the markets.

An investment portfolio is usually required to take up five asset categories to ensure the diversification of possible losses, profits and incomes. This are outlined as liquid assets, which consists of elements such as the cash and the cash equivalents. Additionally fixed income asset such as bonds are usually preferred because of their predictability and assurance of the presence of stable returns irrespective of the market conditions.

Investments in a portfolio are usually held as means of reinvesting existing funds and the need to ensure the generation of incomes in the future or into perpetuity for an investor. Additionally diversification enables the ability of spreading the possible risks associated in a portfolio with a single line of investment. Major concerns of investments for the investor usually revolve around the rate of growth and the effects of inflation of the investments, which could result in either loss or profits on the investment. Hence, stability of the investment is a major issue for the investor in choosing a specific investment to ensure maximization of growth of the investment either on a long-term or short-term basis. Other issues such as taxation on the investment and safety of the investment are also vital considerations in choosing an appropriate type of investment for a portfolio.