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DIGITAL CAR MARKET – Saudi Arabia
Asset Allocation: Key Drivers
- Different assets behave differently
- Markets can be unpredictable
- The mix matters
1 | Different assets play different roles
| Stocks for building wealth | Apple Stock: AAPL |
| Bonds for income: VBTLX | Vanguard Total Bond Market Index Fund Admiral Shares: VBTLX |
| Cash for emergency reserves | Currency |
| Alternatives for risk management | Gold |
- Stocks have significant appreciation and wealth-building potential
- Bonds can generate regular investment income
- In addition to buffering a portfolio from market volatility, ready cash serves as an insurance policy against unexpected expenses
- By behaving unlike traditional asset classes, alternative investments can provide an important risk management and portfolio diversification tool
2 | Markets are unpredictable
Stay diversified: there is no telling which asset will be the best performer
3 | The mix matters
- Maximize return by investing in different areas that would each react differently to the same event. Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.
– INVESTOPEDIA
Our Options
| Mixed Portfolio | Single Security |
| VBTLX Vanguard Total Bond Market Index | AAPL Apple Inc |
| VFIAX Vanguard 500 Index |
The Mixed Portfolio
Performance compared
- AAPL is very volatile and dives deep in negative territory
- The mixed portfolio makes negligible loss, however does not provide any opportunity for exponential stretches.
Data Evidence
- This asset allocation mindset leads us to a forward-looking process whereby we seek to identify strategies that can target emerging opportunities or help solve the needs arising in our multi-asset portfolios
- It also affords us a unique perspective on how different portfolios and styles of management might behave in a broadly diversified portfolio
- Ultimately, we believe this asset allocation mindset is to the advantage of advisors and their clients, who face real-world decisions every day about how to allocate strategies within a complete financial program
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Analysis
| Mixed portfolio is less volatile and has Beta less than AAP | AAPL is more volatile has higher Beta higher than the mixed portfolio |
| Offers lower average return | Offers higher average return |
| Risk of loss is much less, less variation | Risk of loss is higer than mixed portfolio |
| Mixed portfolio consist of two diverse scripts that are negatively correlated, it is for this reason that they offer lesser risk. |
Conclusion
- Both investments offer something differnt.
- One offers(AAPL) a chance of making more return but it is more risker
- The other offers(Mixed portfolio safer option with regard to risk however offers lesser retrun
- NOTES: past returns are not a guarantee of future returns :- )
How can we help?
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