Chapter 6, Problem 25AA

To determine

To create:A chart showing the choices of investment made by an individual that can help achieve investment diversification.

Explanation of Solution

The chart below shows the choices of investment that can be made:

Investment Type	% of Funds	Diversification
Savings account	50%	More amount of the fund should be invested in a plan that is less risky so that there is security with the savings.
Mutual fund	25%	An individual should invest some amount of savings in mutual fund by taking some risk for better returns.
Retirement plan	25%	The remaining amount of funds should be invested for better returns in future. This amount should be invested to get better benefits after retirement and to save taxes too.

Table (1)

Economics Concept Introduction

Introduction:

Investment diversification-To lower the risk, it is suggested that an individual should invest in different type of investments. If one investment fails, return can be reaped from another. The strategy of investing in different plans is termed as diversification by financial planners.