Used by individual investors and firms alike, the matching strategy is one in which you invest in investments with payouts that “match” up with your liabilities. Perfect matching isn’t always possible, but getting your investments and debts to equal each other (or get pretty close) still counts as a matching strategy.
In order to “match,” the payouts of the investment have to be predictable, as do your liabilities (what you owe). That means investments like stocks can’t be used as a good tool for a matching strategy. Rather, fixed payout assets with known maturity dates are used for matching investments with existing liabilities.
For an individual investor, diversification is probably more important than matching, at least if you want the potential for high expected returns. Using a matching strategy is great for hedging to mitigate risk though, so it makes it a smart option for firms (or low-risk individuals) looking for some financial stability.
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Finance: What is a Diversified Mutual Fu...20 Views
finance a la shmoop what is a diversified mutual fund? all right people
listen up it's lots of investments stocks bonds exposure to risk and reward [Risk and reward punch man in face]
everywhere energy, telecom, insurance, real estate, banking, chemicals, tech, retail not
enough diversity yet well those are just sectors or industries and there's a
whole bunch of them what about geography geographic diversity the US, Russia, China
Europe someday maybe Mars Elon what do you think well maybe exposures to [Elon Musk floating in space]
different currencies or commodities cycles as the diversity you seek hmm
well that's diversity Benetton eat your heart out so the bigger question is why
would you want such diversity? well the idea is that you mitigate risk by being
diverse the don't put all your eggs in one basket thing if one investment goes [Value of investment graph appears]
bust well at least you have plans B C and D to fall back on and if this is
grabbing you check out our videos on efficient markets theory for more on the
subject or maybe diversify your knowledge and watch all of our finance
videos food for thought and you know please click on the ads that we got to [Man holding begging sign]
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