Pesonal invenstmnt in UK - Is it a science or a matter of good fortune Essay

Pesonal invenstmnt in UK - Is it a science or a matter of good fortune - Essay Example Participation by the people in the investment activity of United Kingdom is a long history. Personal investment is done by the individual. Personal investing constitutes an important part in personal financial investment. Personal investment is done for future expenditure plans such as to buy real estate, pay for family expenses and also to pay off outstanding loans. Now, the question is how an individual invest. He may begin to build up his financial assets in order to pay for long term financial goals. He may want assets accessible to make down payments on housing and may also want to guarantee that human capital is low risk by buying disability insurance and term insurance (Schewart, 1999, pp.1-2). Personal Investment is done in order to create a safe financial cushion which will be used in after years. The cushion includes various types of investment such as participating in pension plans, individual saving accounts, investment trusts, unit trusts, open ended investment companies , endowment policies, annuities and other transaction of gilts and bonds, shares, property, liquidity funds and other options (Nestpensions, pp.1-2). Personal investor should create an investment portfolio in order to better manage their investment which in turn helps them to improve their standard of living. In personal investment, portfolio plays very important role. Markowitz’s theory indicates that successful combination of a portfolio present a given level of risk with maximum expected return, or a given expected return with low level of risk (Ou, 2005, pp.31-39). If personal investor will be able to manage their portfolio in a well manner, then market will be defeated by them and they will get good return. However, it is impossible for everyone to get good return in investment in the United Kingdom. For this particular reason, there can be a debate that â€Å"the personal investment in UK – is it a science or a matter of good fortune†? Evaluation: It is a Science If personal investors in UK want to get higher return and to decrease investment risk, then they should learn and use some principles, theories and approaches in order to manage their portfolio in a significant manner and to make predictions on the trend of investment to achieve their goals. With the growth of investment theory, more principles, theories and approaches are coming up with the experts, scholars and investors. Modern Portfolio Theory (MPT) Modern portfolio theory (MPT) is published by Harry Markowitz in 1952. It offers a framework for the systematic selection of portfolios which are based on expected return and risk principles. MPT principles are used by the financial advisors in advising their individual investor client and MPT terms are used by the financial commentators in discussing the current investing environment. The theory focuses on how risk averse investors can build a portfolio to formulate the best on expected return in view of a given level of ris k. Markowitz was the first to develop the portfolio diversification concept. He showed quantitatively, how portfolio