Sei sulla pagina 1di 10

My Point View

On Invest
Diversification

FB1204
201235129


Nowadays, due to the rapid economic development,
people have accumulated a mounts of wealth. They all
think to use limited money and making more. Most of
people choose to put their money in the bank. This is the
safest investment. Of cause, you can invest in bonds,
stocks and so on. These high return investment always
with high risk. There are many ways to invest securities;
every investment has their own risk. High return means
high risk. When you choose which way to do the
investment, you must be careful. I will talk about one
investment I have familiar with. To the situation in China,
investment diversification is very necessary.
Keywords: investment diversification, risk, ways of
investment.

Summery
1. Risk and return
1.1 The concept of return
1.2 The concept of rick
1.3 In general of risk and return
2. Investment types of securities
2.1 Introduce the types of securities investment

2.2 Introduce my interested type of securities


3. My opinion of investment diversification
3.1 The concept investment diversification
3.2 Advantages of investment diversification
4. The diversification of investment in china situation
4.1 China situation
4.2 In case of Mayun
5. My opinion

Text paper
1.Risk and return
1.1 The concept of return
Your gain (or loss) from that investment is called the return on your
investment. The return will usually have two components. First, you may
receive some cash directly while you own the investment. Second, the
value of the asset you purchase may change. In this case, you have a
capital gain or capital loss on your investment. As a practical matter, what
is and what is not a capital gain (or loss) is determined by the internal
revenue service. Even so, as is commonly done, we use these terms to
refer to a change in value. Total dollar return is the return on an
investment measured in dollars that accounts for all cash flows and
capital gains or losses. Dividend yield is the annual stock dividend as a
percentage of the initial stock price. Capital gains yield is the change in
stock price as a percentage of the initial stock price. Total percent return
is the return on an investment measured as a percentage that accounts for
all cash flows and capital gains or losses.
1.2 The concept of rick

Risk, is the uncertainty of production purpose and work achievement.


There are two meanings: the risk that a definition for the performance
of the income uncertainty; and another one is emphasizes the risk for
the cost or expense uncertainty.
1.3 In general of risk and return
In the economic market, risk and return is coexisting. The higher return
must follow the higher risk. But if the investment has the higher risk, it
will not have high return every time.
If we are willing to bear risk, then we can expect to earn a risk
premium, at least on average. Further, the more risk we are willing to
bear, the greater is the risk premium. Investment advisers like to say
that an investment has a wait component and a worry component.
In our figure, the time value of money is the compensation for waiting,
and the risk premium is the compensation for worrying.
There are two important caveats to discussion. First, risky investments
do not always pay more than risk-free investments. Second, weve
intentionally been a little imprecise about what we mean exactly by
risk. As we will discuss in chapters ahead, not all risks are
compensated.

2.investment types of securities


2.1

Introduce the types of securities investment

Interest-bearing
Financial assets can be grouped into three broad categories: interestbearing, equities and derivatives. Each of these categories can be further
subdivided into a few major subtypes. This classification is not
exhaustive, but it covers the major types of financial assets.
Interest-bearing
Broadly speaking, interest-bearing assets (as the name suggests) pay
interest. Some pay interest implicitly and some pay it explicitly, but
common denominator is that the value of these assets depends, at least for
most part, on interest rate. The reason that these assets pay interest is that

they all begin life as a loan of some sort, so they are all debt obligations
of some issuer.
For the most part, money market instruments are the simplest form of
interest-bearing asset. Money market instruments generally have the
following two properties:
1. They are essentially IOUs sold by large corporations or governments
to borrow money.
2. They mature in less than one year from the time they are sold,
meaning that the loan must be repaid within one year.
The most familiar example of money market instrument is a Treasury bill
or T-bill for short. Every week, the U.S. treasury borrows billions of
dollars by selling T-bills to the public. Like many (but not all) money
market instruments, T-bills are sold on a discount basis. This simply
means that T-bills are sold at a price that is less than their stated face
value. In other words, an investor buy a T-bill at one price and later, when
the bill matures, receives the full face value. The difference is the interest
earned. U.S. Treasury bills are the most liquid type of money market
instrument-that is, the type with the largest and most active market, other
types of money market instruments traded in active markets include bank
certificates of deposit (or CDs) and corporate and municipal money
market instruments. The most risk is the risk of default. This is the
possibility that the borrower will not repay the loan as promised. With a
T-bill, there is no possibility of default. Prices for different money market
instruments are quoted in the financial press in different ways. In fact,
usually interest rates are quoted, not prices, so some calculation is
necessary to convert rates to prices. The procedures are not complicated,
but they involve a fair amount of detail, so we save them for another
chapter.
Fixed-income securities are exactly what name suggests: securities that
promise to make fixed payments according to some preset schedule.
Fixed-income securities have lives that exceed 12 months at the time they
are issued. The words note and bond are generic terms for fixedincome securities, but fixed income is more accurate. This term is
being used more frequently as securities are increasingly being created

that do not fit within traditional note or bond frameworks but are
nonetheless fixed income securities.
Equities
Common stock represents ownership in a corporation. The potential
benefits from owning common stock come primarily in two forms. First,
many companies (but not all) pay cash dividends to their shareholders.
However, neither the timing nor the amount of any dividends is
guaranteed. At any time, it can be increased, decreased, or omitted
altogether. Dividends are paid strictly at the discretion of a companys
board of directors, which is elected by shareholders. The second potential
benefit from owning stock is that the value of your stock may rise
because share values in general increase or because the future prospects
for your particular company improve (or both). The downside is just the
reverse: you shares may lose value if either the economy or your
particular company falters.
The other type of equity security, preferred stock, differs from common
stock in several important ways. First, the dividend on a preferred share is
usually fixed at some amount and never changed. Further, in the event of
liquidation, preferred shares have a particular face value. The reason
preferred stock is called preferred is that a company must pay the fixed
dividend on its preferred stock before any dividends can paid to common
shareholders. In other words, preferred shareholders must be paid first.
Derivatives
Derivative asset is a financial asset that is derived from an existing traded
asset rather than issued by a business or government to raise capital.
More generally, any financial asset that is not a primary asset. As we will
see, derivative assets usually represent claim either on other financial
assets, such as of stock or even other derivative assets, or on other
financial assets, such as shares of stock or even other derivative assets, or
on the suture price of a real asset such gold. Beyond this, it is difficult to
give a general definition of term derivative asset because there are so
many different types, and new ones are created almost every day.

On most basic level, however, any financial asset that is not a primary
asset is a derivative asset.
There are two particularly important types of derivative assets, futures
and options.
A futures contract is the simplest of all financial assets. A futures contract
is just an agreement made today regarding the terms of a trade that will
take place later. Futures contracts are traded all over the world on many
types of assets, and futures contracts can be traced back to ancient
civilizations. An important feature of traded futures contracts is that they
are standardized, meaning that one contract calls for purchase of a
specific quantity of the underlying asset. Further, the contract specifies in
detail what the underlying asset is and where it is to be delivered.
An option contract is an agreement that gives the owner the right, but not
the obligation, to buy or sell (depending on the type of option) a specific
asset at a specific price for a specific period of time. The most familiar
options are stock options. These are options to buy or sell shares of stock,
and they are the focus of our discussion here. Options are a very flexible
investment tool, and a great deal is know about them. Options come in
two flavors, calls and puts. The owner of a call option has the right, but
not the obligation, to buy an underlying asset at a fixed price for a
specified time. The owner of a put option has the right, but not the
obligation, to sell an underlying asset at a fixed price for a specified time.

2.2 Introduce my interested type of securities


Nowadays, students are not particularly wealthy. I suggest them investing
monetary fund. This is one of safe investment. Teenagers do not have
quality and ability in their mind to face to the risk. If they invest the stock
or futures, they may lose everything. There is a report says teenagers who
invest the stock, their loss is a large population. But fund is not the same.
The fund is issued by the country. Compared to the stock, the fund has a
higher security. Although the profit is less than the stock, but you do not
pay attention to the risk. Now there are many platform issue fund. For
example, the Yuebao on the Alipay is one of the found. The advantages of
this are you can check the income every time and everywhere. It is
convenient than in the bank.

3. My opinion of investment diversification


3.1 The concept of investment diversification
First, some of the riskiness associated with individual assets can be
eliminated by forming portfolios. The process of spreading an investment
across assets (and thereby forming portfolio) is called diversification. The
principle of diversification tells us that spreading an investment across
many assets will eliminated some of the risk. Not surprisingly, risks that
can be eliminated by diversification are called diversifiable risks. The
second point is equally important. There is a minimum level of risk
cannot be eliminated by simply diversifying. This minimum level is
labeled no diversifiable risk. Taken together, these two point are
another important lesson from financial market history: diversification
reduces risk, but only up to a point. Put another way, some risk is
diversifiable and some is not.
Why diversification reduces portfolio risk as measured by the portfolio
standard deviation is important and worth exploring in some detail. The
key concept is correlation, which is the extent to which the returns on two
assets move together. If the returns on two assets tend to move up and
down together, we soy they are positively correlated. If they tend to move
in opposite directions, we say they are negatively correlated. If there is no
particular relationship between the two assets, we say they are
uncorrelated.
3.2 Advantages of investment diversification
Investment diversification will reduce the risks. You can try the
investment diversification binding of a security or portfolio. For
example, a stock investment with long-term investment
strategy, part of the stock investment by the short-term
investment strategy, but also can be understood as the
diversification.

4.The diversification of investment in china


situation
4.1 China situation
With other investment way like fund be popular these years, people can
choose the invest way which is suitable for them. But in early years, the
only invest way in China is bank interest, stock and futures. Bank interest
rate is too low, and the risk of stocks and futures are too high. There is no
middle way to balance this situation. So, many of them put their money to

buy the house. Even though, the price of the house is so high and poor
people cannot afford them. In the recent years, the diversification of
investment became popular. So people can find their suitable way of
invest. The government put out many rules let Chinese economic track.
4.2 In case of Huarun
Huarun was set up in 1948. At the beginning of Huarun, it has involved
many different areas. It has diversification of investment. In 1980s, China
Resources Company turned from trade agency business to self-operating
business, developing investment projects of long and medium terms and
investing mainly in the retail, real estate, power and infrastructure
industries. China Resources Company began to invest in large-scale and
highly specialized projects, laying a solid foundation for its development
as one of the multi-business enterprises in Hong Kong and Mainland
China with the greatest competency.
Nowadays, The Group operates in seven major fields and is equipped
with 19 first level profit centers and 2,300 business entities with a total
employment of 400,000. China Resources Enterprise, Limited, China
Resources Power Holdings Company Limited and China Resources Land
Limited under the management of the Group are listed as Hang Seng
Index constituent stocks and known as the Three Blue Chips of China
Resources. As one of the Global 500 in the world, China Resources was
ranked the 143th of the Global 500 by Fortune in 2014.
CR operates in seven major sectors, namely the consumables (retail,
brewery, food and drinks), power supply, real estate, cement, gas,
medicine and finance. The multi-business operations of China Resources
are supported by its solid industrial foundation and market competency
with its business in retail, breweries, power, land and property, gas and
medicine taking the lead in their respective fields.

5.My opinion
The nature of investment is for the future uncertainty of gambling.
Fishing lure placed on several fishing rods, so even if a bait is not bite,
and a few other place can let you have the harvest, the investment is the

same, the risk of dispersion can effectively reduce the investment of the
moderate.

Potrebbero piacerti anche