Complete problem 10 from the questions and problems section of
This calculation assumes that all investments in the given assets are independent; meaning there is no correlation between them or any potential for diversifiable risk. It also does not take into account any taxes or transaction costs which could reduce returns from either asset.
Generally speaking, an investment portfolio with a higher average rate of return will yield greater profits over time than one with lower returns – so it is important that investors consider their own financial goals & objectives when building out their portfolios . Additionally , diversification should also be considered to help mitigate exposure to specific market risks since different classes/securities tend to behave differently under different economic conditions.
Ultimately , understanding how various investments may interact with one another within a larger portfolio can go a long way towards helping investors achieve their desired outcomes while simultaneously managing associated risk levels as well. Having reasonable expectations around future performance & properly balancing aggressive & conservative strategies should always remain top priorities when it comes to constructing portfolios geared towards long-term success.