Of the diversification techniques, the one that is most likely to result in immediate diversification, but require that the investor’s funds will be tied up for a fixed period of time is: A) establishment of a completion portfolio. B) implementation of a hedge. C) use of exchange funds.
C
A ? completion portfolio adds new (ordifferent) assets to the existing portfolio which diversify the portfolio. Not sure if I am make sense.
c for sure
C
Your answer: C was correct! Of the diversification techniques, the one that is likely to result in immediate diversification, but require that the investor’s funds will be tied up for a fixed period of time is the use of exchange funds.
wow … i feel dumb …my thinking was exchange funds are highly liquid… need to work harder.
heeralm here’s how I think of it. Completion portfolio - you have to “complete” the portfolio by adding enough other assets to it to diversify out the risk of that one holding. This usually results in tying up a lot of money in investments, but it’s still your money and you can pull it out if need be. You have to be very wealthy to do this for a large holding. Exchange funds - you can “exchange” risk and return with other members of a pool by combining your on large holding with others into one huge portfolio of different assets. In order to prevent people from taking advantage of this system you usually have to agree to lock up your investment for a long period of time. Otherwise no one would want to do business with you.
heeralm@gmail.com Wrote: ------------------------------------------------------- > wow … i feel dumb …my thinking was exchange > funds are highly liquid… need to work harder. Are you thinking of ETFs?