Test your knowledge

Choose wisely. There is only one correct answer to each question.

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1.
You need several pieces of information about a financial goal in order to determine the asset allocation strategy to use to achieve it. Which of the following is not one of those pieces of information?
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Current investment earnings rates. These will not help you determine an asset allocation strategy. For one thing, they may be different next year.
2.
If youre uncomfortable taking on more risk, what can you do to improve your chances of meeting your goals?
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Invest more each month and lengthen your time horizon. Neither investing more each month nor lengthening your time horizon increases your risk. But decreasing your exposure to bonds/cash increases your possible three-month loss.
3.
Your asset allocation is _______.
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Your portfolios blend of stocks, bonds, and cash. Asset allocation simply means how youve divided up your investment mix.
4.
Why is it hard to get consistent recommendations from different online asset allocation tools?
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They all use different assumptions. They all use different assumptions about inflation rates, earnings, and possibly taxes.
5.
If you want to improve your chances of meeting your investment goal, what can you do?
Choose wisely. There is only one correct answer.
Invest more money now. Investing more will always improve your chances. So will lengthening your time horizon or becoming more aggressive with your investments.