Portfolio risk management

The overall comparison of the risk and return from the different investment alternatives that comprise of real estate investment and portfolio without real estate investment and correlating the same with the current weighing of investment certain result has been derived. In this relation, making the portfolio of investment through 10% investment in real estate along with 41% in SCS and 49% in LTGB is regarded to be highly efficient investment alternative or a portfolio, as the relative return of such portfolio is 2.61 and risk is 4.50. Moreover, the overall analysis reveals the fact that different portfolio provides different risk and return scenario but investing the RE with the relative weighting of 0.10 in RE, 0.41 in SCS and 0.49 in LTGB will provide a relatively lower amount of risk and higher return over the similar risk category. This is why the particular portfolio has been mentioned.

A portfolio is an important concept of financial management, which refers to the combination of various investment tools including stocks, bonds, shares, mutual funds, and cash that varies based on the income, budget and period of the investor (Reilly & Brown, 2011). Additionally, the art of selection of appropriate investment approach in terms of a minimal amount of risk along with the maximum return is regarded as the approach of portfolio management. Moreover, the key importance of portfolio management is to derive superior investment plan for the investors. Furthermore, managing the entire budget of investor based on the different alternative will enable them to minimize the risk in comparison to investing the fund in a single investment proposal and increase the likelihood of profitability. In relation to the portfolio theory, it has been assumed that investor is risk-averse and they like to select the investment proposal from the given set of investments with equal rate of return having a minimal amount of risk.&nbsp.The ability to combine and form the investment based on the combination of risk versus return is the prior reason to invest in the portfolio for investors. The ideal role of portfolio management is to develop an optional portfolio based on the risk-return opportunities in particular risk constraints (Lee, 2014. Kevin, 2008).

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