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Where would you invest a million dollars?

02/08/2011

1 Comment

 
Most people answer this question by recommending one stock. Then they'd go through a list of why they recommend this stock. That is not the intent of this question. The interviewer is testing your portfolio management skills. Here is a better way to go about answering this question:
 1- Tell the interviewer that this is a portfolio management question. Ask who is this for, someone young, retired or in between. Then make a point about the level of risk they could take.
 2- Build a proper portfolio with asset diversification in mind. For example: someone who is young could invest 30% of their portfolio in small cap U.S. equities, 30% in global equities, 20% in blue chip, and 20% in bonds. Someone who's retired would invest in safer instruments with yield, like bonds and dividend paying, large cap stocks.
 3- Stress that asset class and geographic diversification is important and that the composition of the portfolio depends on the age and circumstances of the investor.
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