In earth resources are limited but wants and demands are unlimited. It causes a lot of problems for the people around the globe to fulfill their sky-limit desires. Economics, the concept comes to us to clarify how to manage unlimited wants and demand by the limited resources.
Therefore, economics precisely can be defined as the studies of managing limitless needs, wants and demands by the limited assets or resources. It explains what to produce, how to produce, for whom to produce.
There is a saying that “Don’t keep all the eggs in a basket”.
Suppose you keep many eggs in a basket. If basket falls, all eggs of the basket may be
damaged at a time. But if you keep some of them in the different basket, one
may be fallen down, rest will remain safe.
Similarly, for investment, whole of your funds if you invest in a single security, price of the security goes down or becomes more volatile your investment may be lost. This is why you should invest funds into different securities or assets to minimize the risk and maximize the profit. It means risks should be diversified. So portfolio is the management and investment the whole funds into different securities or assets to diversify the risks and gain optimum level of profit.
Finance can be defined as the processes of planning and implementing on; from where to collect the funds (sources), how to utilize the funds (disbursement or investment), how to generate income from there (cost & inflows) and how to overall manage the funds (assets management and control).
A n investor would be willing to forgo current consumption in order to increase future consumption at a rate of exchange called the risk-fr...
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