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Open AccessArticle

Achieving Portfolio Diversification for Individuals with Low Financial Sustainability

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Department of Industrial Engineering, Ulsan National Institute of Science and Technology (UNIST), Ulsan 44919, Korea
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Department of Industrial and Systems Engineering, Korea Advanced Institute of Science and Technology (KAIST), Daejeon 34141, Korea
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Department of Industrial and Management Systems Engineering, Kyung Hee University, Yongin-si 17104, Gyeonggi-do, Korea
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(17), 7073; https://doi.org/10.3390/su12177073
Received: 5 August 2020 / Revised: 25 August 2020 / Accepted: 26 August 2020 / Published: 30 August 2020
(This article belongs to the Section Economic and Business Aspects of Sustainability)
While many individuals make investments to gain financial stability, most individual investors hold under-diversified portfolios that consist of only a few financial assets. Lack of diversification is alarming especially for average individuals because it may result in massive drawdowns in their portfolio returns. In this study, we analyze if it is theoretically feasible to construct fully risk-diversified portfolios even for the small accounts of not-so-rich individuals. In this regard, we formulate an investment size constrained mean-variance portfolio selection problem and investigate the relationship between the investment amount and diversification effect. View Full-Text
Keywords: portfolio size; portfolio diversification; individual investor; financial sustainability portfolio size; portfolio diversification; individual investor; financial sustainability
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Lee, Y.; Kim, W.C.; Kim, J.H. Achieving Portfolio Diversification for Individuals with Low Financial Sustainability. Sustainability 2020, 12, 7073.

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