Solution: Portfolio Return is calculated using the formula given below Rp = ∑ (wi * ri) 1. The covariance of returns between each pair of assets in the portfolio.The number of assets in the portfolio is important in diversification. For illustration purpose, let’s assume that the returns from the two assets in the portfolio are R0 and R1. If you believe investment managers, your portfolio won't be growing much during the next several years. Portfolio returns seek to meet the stated benchmarks, meaning a diversified, theoretical portfolio of stock or bond holdings, and in some cases, a mix of the two asset classes. Investors typically have one or more types of portfolios in their investments and they seek to achieve a balanced return over time. Proportion of each asset in the portfolio. Also, assume the weights of the two assets in the portfolio are w 1 and w 2. Portfolio Return = (60% * 20%) + (40% * 12%) 2. The weight of two assets are 40 percent and 20 percent, respectively. Also, note that the sum of the weights of the assets in the portfolio should be 1. You simply add together all the returns and divide by the number of them. And their respective weight of distributions are 60% and 40%. Of note, the advent of the internet age provided investors with near-real-time access to market returns, as well as easily accessible relative performance data. Its value depends on three important determinants. Many portfolios will also include international stocks, and some exclusively focus on geographic regions or emerging markets. A best practice followed by many investors is to review their portfolios at the end of every year and make adjustments to continue meeting their investment objectives. Terms & Conditions.Processing...Get Started. A portfolio comprising securities that yield a maximum return for given level of risk or minimum risk for given level of return is termed as ‘efficient portfolio’. Each investment within a portfolio carries its own risk, with higher potential return typically meaning higher risk. This difference between the portfolio return and the benchmark return is known as the active return. Portfolio variance is a measurement of risk, of how the aggregate actual returns of a set of securities making up a portfolio fluctuate over time. The Risk & Return chart maps the relative risk-adjusted performance of every tracked portfolio by whatever measures matter to you most. 3. A portfolio’s expected return is based on the rate of return of each component asset, and each asset’s weight in the portfolio. In another perspective, the frontier is the set of portfolios that minimizes the variance for any targeted expected return. Suppose you invest INR 40,000 in asset 1 that produced 10% returns and INR 20,000 in asset 2 that produced 12% returns. For example, many investment managers tend to mix both bonds and stocks, as bond prices tend to rise when stocks experience steep drawdowns. Rate of Return – An asset’s rate of return measures how much money you, as an investor, would have made or lost had you invested in this asset over a specific period of time. If we take an example, you invest $60,000 in asset 1 that produced 20% returns and $40,000 invest in asset 2 that generate 12% of returns. This helps to achieve the portfolio’s desired return over time and to smooth out volatility. It seems counter-intuitive that the difference between a 10% return and a 20% return is 6,010x as much money, but it's the nature of geometric growth. 2. A regional fund is a mutual fund run by managers who invest in securities from a specified geographical area, such as Latin America. A mix of asset classes that tend to move in opposite directions, such as stocks and bonds, is often a smart way to balance a portfolio. 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