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Q6 - suggests that he would face a risk of a lack of...

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Problem Set 6 1. What are the main assets classes, and what are their important features? 2. Financial advisers usually recommend to clients that it is important that they consider diversifying investments within and across asset classes. Explain what this means and why it is important. In which other ways can one diversify? 3. Suppose Joe has the sum of $20,000 to invest. Joe considers investing $4,000 into each of five different companies listed on the stock market. His financial adviser
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Unformatted text preview: suggests that he would face a risk of a lack of diversification and recommends a managed share fund that invests in the top 100 companies on the share market. Discuss the reasons why Joe may prefer the investment into five companies instead of the managed fund. What is your opinion of Joe’s diversification preference? 4. What do you think are the main differences between active and passive investment? 5. Read Malkiel’s article – see under General information....
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