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What is a Stock?
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Active Trading vs Portfolio Management
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What is Portfolio Management Strategy?
What is Diversification?
What is the Diversification Score?
How to Build a Basic ETF Portfolio
What are asset-classes?
What is Industry Exposure?
What is Geopolitical Exposure?
How to read impact on diversification
What is Volatility?
What is Return?
What is Sharpe Ratio?
How to Improve Sharpe Ratio
How do I measure risk?
What are average excess returns?
What is a good Sharpe Ratio?
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Case Study: 2019 Credit-Suisse Results
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The Diversification Score evaluates how effectively you are spreading risk across different types of investments.
The Math behind Diversification Score
There are two main parts of the Diversification score:
Individual Security Allocation (worth 70% of the score): You want to make sure you are not too heavily exposed to a single security
- Max Exposure [Cash] = 10%
- Max Exposure [Stocks / Bonds] = 15%
- Max Exposure [ETFs] = 30%
Investment Type Allocation (worth 30% of score):
You want to make sure you are invested in several Industries (eg. technology, financials, energy, etc.), Geographies (eg. United States, China, Japan, etc.), and Asset Classes (eg. Stocks, Bonds, ETFs, etc.).
Tips to Keep in Mind:
Tip #1: As a professional portfolio manager, holding a large amount of cash generates high opportunity risk (missing out on returns you could have generated). You'll want to invest 90%+ of your entire cash holding.
Tip #2: Use the exposure column to communicate the strength of your beliefs behind each investment.
You will want to aim for a score of 80+. If you are in a challenge this will earn you a Portfolio Management badge.
FAQ: Where's my score?
Find your score under the "Performance Tab":