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Old 08-11-2005, 10:46 AM
Dan Mezick Dan Mezick is offline
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Join Date: Jun 2004
Location: Foxwoods area
Posts: 297
Default Re: Hypothetical Investment Problem

Figuring out how to make 39K into 50K saving $150 a week @ 9.59% is the easy part.

Knowing how much risk you accept and assume to obtain the target return is the much harder problem.

Figure out your risk tolerance (how much of the total you are willing to put at risk of 100% loss) to get the 9.59%.

Studying the measure called Sharpe Ratio may be helpful to you at this stage in your process. See also: Efficient Frontier

After you know how much 'heat' you are willing to take, you can select from a set of suitable instruments that match the risk/reward ratio range you are OK with.

See also this great link for your next step. This has a nice little worksheet for asset allocation using risk as an input:
Sharpe Ratio and Portfolio Composition
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