The expected return of Stock A is 7%, Stock B is 10% and Stock C is 12%. If you equally invest in these three stocks, what is the expected return of your three-stock portfolio?

Portfolio return = 0.09667 or 9.667% rounded off to 9.67%

Explanation:

To calculate the expected rate of return of a stock portfolio, we take the weighted average of the expected return for each stock. The formula to calculate the expected return of portfolio is,

Portfolio return = wA * rA  + wB * rB  +  ...  +  wN * rN

Where,

As we have 3 stocks with equal investment in each stock, we can say the weight of each stock is 1/3.

Portfolio return =  1/3 * 0.07  +  1/3 * 0.1  +  1/3 * 0.12

Portfolio return = 0.09667 or 9.667% rounded off to 9.67%

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.