Choose wisely. There is only one correct answer to each question.
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1.
What's the most significant move you can make to damp your long-term volatility?
Increasing your bond and cash investments and decreasing your position in stocks. Your blend of cash, stocks, and bonds likely contributes more to your portfolio's return and volatility than what investment styles you practice, what sectors you have exposure to, and what individual securities you choose. The more of your portfolio you have in stocks and the less you have in bonds and cash, the more intense your portfolio's performance will be.
2.
Short-term bonds are less volatile than intermediate-term bonds.
True. This is due to their shorter maturities.
3.
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.
4.
The stock of which foreign company would be the least volatile?
A large manufacturer. As a rule, the large companies would be the least volatile.
5.
Why should tilting your portfolio toward larger-company stocks and away from smaller-company stocks curtail its volatility?
Because larger companies growing at a slower rate should be less volatile than smaller companies growing at a faster rate. The faster the growth and the smaller the company, the more volatile the stock. If curtailing volatility is your goal, focus the U.S. stock portion of your portfolio on the very largest companies.
