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Assets that can be included in a portfolio include stocks, options, bonds, futures contracts, real estate, currencies and gold certificates. Owning investment in several assets generally reduces the risk involved. A proper management of the investment portfolio gives the investors some idea as to what should be included, depending upon the market and economic conditions.
Portfolio management helps individuals and entrepreneurs to earn maximum profit with the optimum use of resources.
A few of the models used by economists for portfolio management:
- Modern theory of portfolio
- Maximizing the return of an asset at an acceptable level of risk
- The single-index model of portfolio variance
- Arbitrage pricing theory
- Capital asset pricing model
- The Jensen Index
- The Sharpe Diagonal (or Index) model
- The Treynor Index
- Value at risk model
Portfolio management software is also available, and is mainly used to by businesses to monitor projects and diminish the risks involved. Professional financial agencies are also available to provide solutions on how to build an effective portfolio.