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1.
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.
2.
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.
3.
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.
4.
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.
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.
