Question

• If you had $50,000 to invest in the stock market, how would you go about reducing your risk exposure? Ex. How many different stocks of what types?
  • Explain.

Answer 1

solution cution Given that If you had $50,000 to invest in the 1 stock market. Let, you can reduce your fisk exposure by I investing in a diversified portfolio of stocks, In general, unsystematic risk, that is the gisk associated with individual companies Can be minimized by investing in stocks that are highly uncorrelated with each other. * Then , while you cannot eliminate the market disk you can certainly minimize unsystematic risk by investing in about 20 to 30 stocks from different sectors. . Another way to acheive diversification is by inversting in the market inder. & such as the s&P 500, which is a market capitalization weighted inder of the 500 largest companies in the u.s.