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1.
Short-term bonds are less volatile than intermediate-term bonds.
True. This is due to their shorter maturities.
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.
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.
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.
5.
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.
