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50% Equity and 50% Fixed-Income Investment

Joven Karl G. Malasig

Meycauayan College

Ma. Rica Hermoso

December 16, 2022

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Equity Investment

Directly purchasing shares from businesses or other investors in the hopes of earning

dividends or reselling them at a profit when the price is high. The asset allocation of a portfolio

becomes more diversified thanks to equities. The right to receive interest and dividends each

year. The return on investment (ROI) includes dividends in some form. A specific interest rate is

paid on each share.

Fixed-Income Investment

Certificates of deposit, savings accounts, money market funds, and fixed-rate annuities

are examples of securities that promise fixed amounts of cash flows at fixed dates. Paid a set of

returns at predetermined intervals that were guaranteed. The risk is low because the returns are

typically low. Investors may receive a respectable annual income from a sizable number of fixed

income securities.

Equity vs Fixed-Income Investment

Investments can be made using financial instruments like equity and fixed-income

securities to help investors reach their financial objectives. Equity investments generally consist

of stocks or stock funds, while fixed income securities generally consist of corporate or

government bonds.
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Diversification

Diversification is a risk management strategy that mixes a wide variety of investments

within a portfolio. A diversified investment contains a mix of distinct asset types and investment

vehicles in an attempt at limiting exposure to any single asset or risk.

Investment Diversification

In order to reduce systematic risk in a portfolio and maintain levels of expected return,

diversification is an essential investment strategy. The investor reduces the risk that they would

have otherwise faced if they had invested in a 100% equity fund or 100% bond fund by

diversifying their investments across various asset classes. In a situation where industry volatility

exists, a balanced fund portfolio will experience less fluctuation than a pure equity portfolio

investing in the same industry.

In conclusion, it is the best option for an investor who wants a return profile that

combines a low risk (bond investments) and a higher risk (equity investments) component. If

interest rates are not anticipated to rise, diversification will reduce the risk of holding only stocks

or bonds, and the bond component won't be subject to significant fluctuations.

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References:

https://www.wallstreetmojo.com/equity-investment/

https://www.thebalancemoney.com/what-is-fixed-income-3306250

https://www.advisoryhq.com/articles/fixed-income-definition-advantages-risks/

https://www.investopedia.com/terms/d/diversification.asp#:~:text=Diversification%20is%20a

%20risk%20management,any%20single%20asset%20or%20risk.

https://corporatefinanceinstitute.com/resources/wealth-management/balanced-fund/

https://corporatefinanceinstitute.com/resources/fixed-income/equity-vs-fixed-income/