Question 5

Holding only equities since 1970 could have given you several potential heart failures but little more in the way of actual return compared with holding a portfolio of 60 per cent equities and 40 per cent bonds. When equities fell in March 2000, and then in 2008-09, bonds did very well, for example.

Critically evaluate and discuss this statement. In your answer, refer to theory and provide evidence where suitable.

[50 marks]