Investment portfolio management has become an increasingly common topic in IELTS Writing Task 2 exams, particularly in questions about personal finance and economic security. Based on analysis of past exam papers and importance of diversified investment portfolios, this theme appears in roughly 15% of economics-related questions.
Frequency analysis of investment portfolio topics in IELTS Writing Task 2 exams
Today’s Sample Question
Some people believe that investing in different types of assets (stocks, bonds, real estate) is the best way to ensure financial security. Others think traditional savings accounts are safer. Discuss both views and give your opinion.
Question Analysis
This question requires candidates to:
- Compare two approaches to financial security
- Evaluate the benefits and risks of diversified investments versus traditional savings
- Present a balanced discussion before expressing a personal view
- Support arguments with relevant examples
The importance of building a diversified investment portfolio has become particularly relevant given recent economic uncertainties.
Sample Essay 1 (Band 8)
In today’s volatile economic climate, the debate between investment diversification and traditional savings has become increasingly relevant. While both approaches have their merits, I believe a balanced investment portfolio offers superior long-term financial security.
Proponents of traditional savings accounts emphasize their reliability and guaranteed returns. Banks typically offer fixed interest rates and government-backed deposit protection, making them an attractive option for risk-averse individuals. Moreover, savings accounts provide immediate access to funds during emergencies, which can be crucial for financial stability.
However, financial security through smart investment choices offers more compelling advantages. Diversified investments can provide higher returns that outpace inflation, a critical factor in maintaining long-term wealth. For instance, while savings accounts might offer 1-2% annual returns, a well-balanced portfolio incorporating stocks, bonds, and real estate can potentially yield 7-10% annually over time. Furthermore, importance of real estate in investments has shown that property investments can provide both rental income and capital appreciation.
Nevertheless, it’s important to acknowledge that how stock market volatility influences investments can create short-term uncertainty. However, historical data demonstrates that diversified portfolios tend to recover and grow over longer periods, making them more effective for building lasting wealth.
In conclusion, while traditional savings accounts offer security and accessibility, a diversified investment approach provides superior potential for long-term financial growth and security. The ideal strategy might involve maintaining both: emergency savings in traditional accounts while building wealth through diversified investments.
Sample Essay 2 (Band 6.5)
Many people disagree about the best way to keep their money safe. Some prefer investing in different things, while others like keeping money in bank accounts. This essay will discuss both ideas and share my opinion.
People who support traditional savings accounts have good reasons. First, the money is safe in the bank, and governments usually protect it. Second, you can get your money quickly when you need it. Also, the interest rate is fixed, so you know exactly how much you will earn.
On the other hand, investing in different things like stocks and property can be better. The main advantage is that you can earn more money. For example, the stock market usually gives better returns than savings accounts. Also, if you buy a house, you can rent it and get monthly income, plus the house might become more valuable.
However, investments can be risky. Sometimes stock prices go down, and you might lose money. Property can also be hard to sell quickly if you need cash. But if you wait long enough, most investments usually go up in value.
In my opinion, investing in different things is better for making more money in the long term. However, it’s good to have some money in a savings account for emergencies. This way, people can have both safety and the chance to grow their money.
Scoring Analysis
Band 8 Essay Features:
- Sophisticated vocabulary: “volatile economic climate,” “risk-averse individuals”
- Complex sentence structures with proper linking
- Clear organization and coherent arguments
- Balanced discussion with well-supported points
- Natural integration of examples
Band 6.5 Essay Features:
- Simpler vocabulary and structure
- Basic but clear arguments
- Some repetition in expressions
- Less sophisticated examples
- More straightforward organization
Key Vocabulary
- Portfolio diversification (n) /pɔːtˈfəʊliəʊ daɪˌvɜːsɪfɪˈkeɪʃən/ – spreading investments across different assets
- Volatility (n) /ˌvɒləˈtɪləti/ – tendency to change rapidly and unpredictably
- Risk-averse (adj) /rɪsk əˈvɜːs/ – preferring to avoid risk
- Capital appreciation (n) /ˈkæpɪtl əˌpriːʃiˈeɪʃən/ – increase in asset value
- Yield (v) /jiːld/ – to produce or generate (returns)
Consider practicing with this related topic: “What role should financial education play in school curricula?” Share your essays in the comments for feedback and discussion.
