The formula to calculate the Sector Allocation (SA) is:
\[ SA = \left( \frac{V}{TV} \right) \times 100 \]
Where:
Let's say the value of investments in a sector (V) is $50,000 and the total value of the portfolio (TV) is $200,000. Using the formula:
\[ SA = \left( \frac{50000}{200000} \right) \times 100 = 25 \% \]
So, the sector allocation is 25%.
Portfolio Sector Allocation is an investment strategy that involves dividing an investment portfolio across various sectors of the economy to reduce risk and increase potential returns. This strategy aims to take advantage of the fact that different sectors of the economy perform differently under different market conditions. By investing in a diverse range of sectors, investors can potentially protect themselves from downturns in any one sector and increase their chances of achieving a positive return on their investments.
