is it true?

Question

When constructing a diversified portfolio, the main
thing is to find low-volatility assets. After all, the idea is to reduce, not increase, risk.

Answer 1

Not really , the idea is the maintain the portfolio risk at a certain level given the expected rate of return. Which again depends on the investors risk aversity

Answer 2

Volatility is not your concern. Actually, added volatility would be good between you holdings as long as it is not correlated. The idea is that using different asset classes, you are using the uncorrelated volatility to sell high and buy low during what amounts to a cyclical value change of each class. With individual holdings, of equities for example, if you had a highly volatile firm dealing with luxury goods like a jewelry firm, and a highly volatile firm dealing with Ramen Noodles, hypothetically at the top of an economic upturn, you will sell the overprice jewelry firm shares and buy the underpriced Ramen firm shares. When the economy tanks, you will invert the investment given that no one is buying high end jewelry and we're all poor and eating Ramen noodles. Periodic rebalancing hypothetically anyway, helps you. Using asset classes instead of individual companies reduces the general risk of your company outright dying.

I'm not dis'ing Ramen noodles. Just an example.

Answer 3

It depends. You're probably better off finding reverse/uncorrelated assets, so that the portfolio risk goes down. If you have a bunch of low-vol assets with a covariance of 1, it's going to be more risky anyway.

Answer 4

Thats not what you are looking for. As far as I remember it is the portfolio mix which would determine your investment decision primarily.

Answer 5

Yes it is true. However, if you don't have any risk, then the gain is reflected by your return.

Answer 6

no yes maybe