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Answer the questions below and stand a chance to win a Nintendo Switch OLED worth $649!
Q1: What would usually be the most risk averse investment of the following?
A) Treasury Bonds
B) Purchasing a property
C) Stocks
Q2: When you invest a fixed amount of money into a particular investment at regular intervals, this is called:
A) Dollar Cost Averaging
B) Buying the Dip
C) Interval Investments
Q3: When the market experiences prolonged price decline, it is also known as a _ market.
A) bull
B) bee
C) bear
Q4: To take a long position on a stock is to be _ about its price.
A) optimistic
B) pessimistic
C) indifferent
Q5: Open Ended Question -
How does one build a diversified portfolio?
The winner will be chosen based on:
i. highest number of correct answers on the multiple-choice questions; and
ii. most insightful and/or informative answer in the written format.
Good luck! ✨
For more info on the prizes and terms & conditions, visit here: https://bit.ly/3fkHrXN
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Leah Chua
28 Sep 2022
Student at NUS Law
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Q1. A
Q2. A
Q3. C
Q4. A
Q5. Buy stocks from different sectors and country so you are diversified...
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Diversification is actually a huge topic and warrants a long discussion but i'll keep this brief.
Let's define diversification. Diversification is the strategy of adding different assets/instruments to your portfolio in order to reduce or eliminate risks. I won't talk about all the the types of risk but common ones are, market, credit, reinvestment, liquidity etc. Now we can start to build a portfolio
First, we need to identify the asset classes available :
a) Common financial assets - cash, stocks, bonds, comoodities
b) Popular alternatives - cryptocurrencies, real estate, derivatives
c) Exotic asset classes - high-end artwork, luxury handbags, watches, vintage cars etc.
We need to understand which of these asset classes are actually feasible for you to invest in. High-end artwork for example is not really accessible to most people.
Second, we decide the type of diversification we want:
I) Within asset class diversification
A simple example would be buying a broad ETF instead of individual stocks
II) Across asset class diversification
Buying gold, property can help to hedge the risks of a heavy stocks portfolio
Finally, we decide the weights that we want to allocate to each asset class/instrument and execute!