... investor has to first determine whether or not they are risky investor or risk-adverse. After this has been determined, an investor can gauge the amount of return they can potentially receive in. An investor must also determine whether they are looking for a short-term investment or a long-term investment. This will also determine how much capital the investor wants to place in any one asset. Since money markets are considered inefficient and unregulated by the actual investor, an investor has to apply diversification techniques to mitigate the market risks associate with investing. Throughout the report, it is important to note that both risk and the rate of return share a positive correlation. As an investor, the higher the risk associated with the asset, the higher the potential for a greater rate of return. This report will look at key terms associated with portfolio diversification, relevant theories and applications, the limitation ...

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