It is every investor’s goal to receive high returns from his investments while keeping the risk at its minimum, but one factor that every investor is not aware of is the role played by the diversity in investment portfolio in maximization of the returns and minimization of the risk.
The success of investments does not only depend upon the extent of capital invested or the investment avenues invest in, it depends mainly upon the way the investment portfolio is maintained. It is highly important to maintain a well diversified investment portfolio in order to ensure that the investment risk is managed efficiently.
Diversified Investment Portfolio
Investors can maintain a well diversified investment portfolio by making investments in numerous investment avenues that are not related to each other. This way, a negative trend in one investment will not influence the other investment. Many experts have tried to define a perfectly diversified investment portfolio but not all of them agree with the outcome. However, there is one factor that remains the same i.e.; the investment portfolio should hold securities that belong to independent groups and are not influenced by each other. Following is a brief introduction to the types of securities that can be included in a diversified investment portfolio: Continue reading
With the exponential rise in globalization, it has become difficult for a company to thrive without a significant global presence. Most companies are considering investment in the developing economies. The three countries that have shown significant economic growth in the recent past are; India, Brazil, and China. This article would include a brief evaluation of the economic, social, and technological environment of these countries.
India is one of those economies in the world that have shown an exponential rise in economic development in a very short period of time. A number of companies with significant global presence are establishing their operations in India. There are a number of factors that have influenced the pace of economic development in India. Some of those factors include; availability of skilled labor at a reasonable price, availability of resources, and a welcoming attitude to foreign investments.
Indian economy is growing at a rapid pace therefore the economic environment of the country can help a business earn higher revenues. Indian economy is very friendly to foreign investment and there are potential tax credits available for the international businesses. The human resource available in India is skilled and easily available. Continue reading
Exchange rates hold very high importance for businesses with international operations. Any fluctuations in exchange rates can cause a major adjustment in the financial position of the foreign subsidiary of a company. It is highly important for such companies to identify the factors that influence exchange rates and to develop a risk mitigation plan.
Factors Influencing Exchange Rates
Following are the factors that influence exchange rates:
The prevailing rate of inflation in a country directly influences its exchange rate. If the rate of inflation rises, it depreciates the value of the currency making it weaker against foreign currencies. The rate of inflation is influenced by numerous economic factors such as; economic growth, fiscal policy of the country and the monetary policy of the country. Continue reading
In order to maximize the earnings from investments, it is highly important that the investment portfolio is maintained wisely. You can maximize your earnings and minimize your risk by developing a good investment portfolio. There are a number of factors that must be considered while maintaining an investment portfolio. Following are the things you must consider:
Diversity in the Portfolio
Diversification in the investment portfolio is the best tool to minimize the risk associated with investment. You can diversify your investment portfolio by including a mix of equity shares, bonds, and government securities. It is important that the portfolio reflects investments in different sectors that are independent from each other. This is because companies in a single sector are influenced by the industrial factors at the same time. For example; if a new regulatory requirement requires an industry to increase environmental clean-up costs, this will affect the financial performance of all the companies operating in that industry.
Evaluate the Financial Health of the Companies
Doing proper research from making an investment is highly important. Placing a complete reliance on the analyst reports may not prove to be a good idea at times as there are certain trends that may be overlooked in the reports. You should conduct your own research on the companies. You can use ratio analysis to evaluate the trends in profitability and EPS of the companies. Continue reading