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Merton's portfolio problem. Merton's portfolio problem is a problem in continuous-time finance and in particular intertemporal portfolio choice. An investor must choose how much to consume and must allocate their wealth between stocks and a risk-free asset so as to maximize expected utility.
Your investment goals: Your reasons for investing can be a great way to determine your risk tolerance. If your goal is just to increase your wealth, you might be able to handle riskier but ...
Advisors often ask clients to complete a questionnaire to gauge their risk profile and provide other financial details. If you’re working with a fiduciary financial advisor, expect to fill out ...
Modern portfolio theory. Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk. It is a formalization and extension of diversification in investing, the idea that owning different kinds of financial assets is ...
Portfolio optimization is the process of selecting an optimal portfolio (asset distribution), out of a set of considered portfolios, according to some objective. The objective typically maximizes factors such as expected return, and minimizes costs like financial risk, resulting in a multi-objective optimization problem.
After you create an account, you’ll be prompted to complete a questionnaire designed to evaluate your income, age, financial goals and risk tolerance. From there, the robo-advisor picks the ...
Asset allocation. Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. [1] The focus is on the characteristics of the overall portfolio.
Should a financial advisor ask me for my risk tolerance, then invest accordingly? Or do they use their own proven strategy? -Chris This question sets up a false dichotomy. These risk-related ...