Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
To tone down your foreign investments, consider _______.
Large companies domiciled in developed markets. The stocks of larger foreign companies may not have the same return potential as the stocks of smaller companies or companies domiciled in emerging markets, but they don't have the same volatility, either.
3.
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.
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.
How aggressive you should be with your investments depends on several things. Which of the following is not one of them?
None of the above. All the factors listed are relevant.
