Abstract
Investors can reduce risk by diversification or by forming a portfolio from its investment so that the possibility of the loss from one stock can be covered by gaining from other stock. One of the problems encountered in the formation of the portfolio is related to the size of the portfolio itself, is about how many stock in the portfolio that will minimize the level of risk. This research was conducted to determine the relationship between the size of the portfolio and risk level, both in total risk (variance) and unsystematic risk. By using Blue Chip stock in April 2012 as the sample period, the portfolio size range will be calculated for the level of risk, as result the number of stock in the portfolio that will produce the lowest level of risk. The result of this research showed that the greater the number of stocks in the portfolio will provide a level of lower unsystematic risk, meaning that the size of a large portfolio showed a good level of diversification. Optimally diversified portfolio consists of approximately 16 stocks, while over 16 stocks the level of unsystematic risk is decreased but not significant. This suggests that the size of the portfolio has a negative relationship with the level of unsystematic risk.
Highlights
There are three reasons why a person makes investments, such as: income, with the purpose of obtaining income; Appreciation, for the increasing of wealth and the ownership of an asset, and excitement, which is only a hobby realization
The results showed that a portfolio consists of 16 stocks can be regarded as a diversified portfolio, there was a tendency that stock replenishment will further lower the level of unsystematic risk, but the decline for the stock number above 16 is not significant
The variance, which is a combination of systematic risk and unsystematic risk, showed a fluctuating rate for each additional number of stocks
Summary
There are three reasons why a person makes investments, such as: income, with the purpose of obtaining income; Appreciation, for the increasing of wealth and the ownership of an asset, and excitement, which is only a hobby realization. The portfolio itself can be interpreted as a combination of investment in various forms of asset/wealth to reduce risk by diversification. In relation to the reduction in the level of unsystematic risk in investing, an investor can do diversification. Diversification can be done by forming a portfolio by selecting a combination of a number of assets so that risk can be minimized without reducing the expected returns. Reducing the level of risk without reducing the rate of return is the purpose of investor (Isynuwardhana 2013). In portfolio management, it is recognized the concept of risk reduction as a result of additional securities in the portfolio. Sector Manufacture Manufacture Manufacture Manufacture Manufacture cement cement Plantation Plantation Energy & Metal Energy & Metal Energy & Metal Energy & Metal Energy & Metal Service Service Service Service the portfolios that will produce the lowest level of risk, taking into account the variance and unsystematic risk of the portfolio
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