Asset Protection 101

Posts Tagged ‘liability’

Question: Which answer is true? The difference between direct investment and portfolio investment is:?

1. with direct investments you know what you are purchasing.
2. portfolio investors take a greater risk
3. direct investors own assets in foreign economy.
4. portfolio investors are provided greater protection against bancruptcy.

Answer: Technically, none of the above is correct.

The last one is the closest to being correct.

A portfolio provides greater protection against losing your money as your investment is diversified and as a result you are more protected as if one of the companies in the portfolio goes bankrupt it only represents a small fraction of your investment.

However, you can invest in a portfolio through direct investment, in otherqwords build your own mutial fund by diversifying your invesrtments.

This will provide you with the same protection.

Direct investment just means that you buy the stock yourself, but these is nothign to stop you from buying many different stockas and building your own portfolio (assuming you have the cash)

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