The typical standard deviation of the annual return on a stock is 20 and the typical mean return is about 12 The typical correlation between the annual returns of two stocks is about 0 25 Mutual funds often put an equal percentage of their money in a given number of stocks By choosing a large numbe...

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The typical standard deviation of the annual return on a stock is 20% and the typical mean

Question:

The typical standard deviation of the annual return on a stock is 20% and the typical mean return is about 12%. The typical correlation between the annual returns of two is about 0.25. often put an equal percentage of their money in a given number of By choosing a large number of they hope to diversify away the risk involved with choosing particular How many does an investor need to own to diversify away the risk associated with individual
To answer this question, use the above information about “typical” to determine the mean and standard deviation for the following portfolios:
• 1: Half your money in each of 2 2: 20% of your money in each of 5 3: 10% of your money in each of 10 4: 5% of your money in each of 20 5: 1% of your money in each of 100 do your answers tell you about the number of a mutual fund needs to invest in to diversify adequately?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Mutual Funds
Mutual funds are like a pool of funds gathered by different small investors that have simalar investment perspective about returns on their investments. These funds are managed by professional investment managers who act smartly on behalf of the... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...