Describe the primary objective of an investment portfolio-02169

The objective of investment portfolio is to minimize the company risk. It include diversification of stocks.

Portfolio objectives are always going to center on return and risk, because these are the two aspects of most interest to investors. Indeed, return and risk are the basis of all financial decisions in general and investing decisions in particular. Investors seek returns, but must assume risk in order to have an opportunity to earn the returns. Furthermore, an individual can be a composite of these stages at the same time. The four stages are:

1. Accumulation Phase: In the early stage of the life cycle, net worth is typically small, but the time horizon is long. Investors can afford to assume large risks.
2. Consolidation Phase: In this phase, involving the mid-to-late career stage of the life cycle when income exceeds expenses, an investment portfolio can be .accumulated. A portfolio balance is sought to provide a moderate trade-off between risk and return.
3. Spending Phase: In this phase, living expenses are covered from accumulated assets rather than earned income. Although some risk taking is still preferable, the emphasis is on safety, resulting in a relatively low position on the risk-return tradeoff.
4. Gifting Phase: In this phase, the attitudes about the purpose of investments changes. The basic position on the trade-off remains about the same as in phase 3.