How do you invest in the market portfolio?

CFA Level I
#1

If the market portfolio contains all risky assets, I can see how you can invest in a total stock market fund to get the majority of risky assets, but how can you invest in all other risky assets such as art, collectors items, etc?

#2

If an investor does not have access to invest in these other risky assets (ie does not have enough minimum capital to invest in them), does that imply that wealthier investors can obtain superior risk adjusted returns?

#3

nope if the market is efficient

#4

Yeah but if the efficient frontier is all risky assets, if you’re not investing in ALL risky assets, you’re on a line below the CML right?

#5

This is the theory…in practice you need to invest in such number of risky assets until all your risk is fully diversified and hence you will not have unsystematic risk. You dont really investest in all the risky assets

#6

I realize that…not really applicable to the test but if some investors have access to private equity, hedge funds, art etc, they could invest in assets that add diversification benefits with a lower correlation to the market and thereby achieve the same (or higher) expected return with lower risk correct? One example is the Goldman Sachs investment in toll roads, well those would add some diversification benefit right? But if I don’t have enough money to become a customer of Goldman Sachs I can’t invest in that asset.

#7

da0618 Wrote: ------------------------------------------------------- > I realize that…not really applicable to the test > but if some investors have access to private > equity, hedge funds, art etc, they could invest in > assets that add diversification benefits with a > lower correlation to the market and thereby > achieve the same (or higher) expected return with > lower risk correct? > > One example is the Goldman Sachs investment in > toll roads, well those would add some > diversification benefit right? But if I don’t have > enough money to become a customer of Goldman Sachs > I can’t invest in that asset. I think all the investments in porfolio follow the CAPM theory…otherwise you would just take additional risk (unsystematic)…this is why usually you buy a portafolio as investment from a bank and you dont do it by yourself (unless you have enough money)