Justina Shiroka Pula, Gentrit Berisha, Skender Ahmeti

(Faculty of Economy, University of Prishtina, 10,000 Pristina, Kosovo)

 

 

Abstract: Savings for people constitute the guaranty and the support for the uncertain future, consequently managing them comprises a gross interest. The investment of employee savings is exercised between necessity to wariness for the welfare of contributors and the investment possibilities, risks and returns related to them. Every entity engaged in investments is in permanent effort to find the best investment destination, which means the acquisition of assets with the highest return at the lowest risk. As if this in on contrast with the theoretical framework that teaches us that the relationship between risk and return or profit is positive, the higher the risk the higher the return. This constitutes exactly the greatest challenge for the investor. Investments have enabled people to put further the processes, whereas the people have elevated the investments into institutional level, giving life to innumerable investment funds and institutions. Pension funds invests in different classes of investments, always taking into consideration the need to find the alternative leading to high returns and low risk. One of the most comprehensive and most meaningful practices in this designation is diversification, otherwise said the investment in different assets to neutralize volatility in levels of return. Moreover, pension trusts, as the likes of Kosovo Pension Savings Trust, are obligated by law to diversify their investments. Financial literature recognizes as a publicly accepted fact the positive effect of diversification in the increase of investment effectiveness, this paper is tasked with incitement to try to testify that portfolio diversification has positive effect in reduction of risk and in increase in performance of Trust investments.

 

 

Key words: investment; risk; return; portfolio diversification; Kosovo Pension Savings (KPS)

 

JEL Code: G11