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1.
Why are short-term bonds a good fit for a conservative portfolio?
Because they have short maturities, they are less volatile. Thus, short-term bonds are often advised for anyone wanting to make his or her portfolio more conservative.
2.
Stocks trading at prices that are in line with their earnings, sales, or cash flows would help keep a portfolio conservative.
True. Stocks of this nature tend to have relatively low price risk, which helps dampen a portfolio's volatility.
3.
Which of the following companies would NOT lessen the volatility of your portfolio?
Very small companies. Very small companies tend to grow quickly, and that makes them volatile -- too volatile for a conservative portfolio.
4.
How conservative you should be with your investments depends on what?
Your investment goal, your investment horizon, and your ability to handle volatility. Your goal, time horizon, and volatility tolerance should all help determine how conservative your portfolio is.
5.
To dampen volatility in your foreign investments, focus on small international companies in developed markets.
False. You should focus on large companies, not small ones.
