Widely diversified investment portfolio – a tool to protect your investment in terms of markets volatility

Abstract

The recent financial crisis has shown that even well-diversified stock portfolio may not protect against significant loss. Better portfolio diversification can be achieved only by combining different assets in portfolio. Aiming to create a widely diversified investment portfolio the analysis of portfolio theory evolution was carried out in the article. The basic propositions of different assets combining in investment portfolio suggested by the scientists were named. 24 exchange traded funds (ETF), which can be divided into four main groups (stock, bond, currency and commodity ETFs) were selected for the analysis, their historical data and main characteristics were evaluated. Nine Markowitz efficient widely diversified portfolios were selected, their efficiency in period 2011-02-10 – 2011-11-10 was evaluated.