Choose wisely. There is only one correct answer to each question.
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1.
Let's say you're investing for retirement in 25 years. You decide to use some of those saved-up retirement dollars for a new goal: paying for part of your 15-year-old nephew's college education in three years. What should you do to your portfolio?
Consider selling some of the long-term securities and investing the proceeds in shorter-term investments to fund your new goal. Because your goal has changed, your portfolio should, too. In this case, you need to sell some longer-term investments and invest in shorter-term fare.
2.
If the price of one of your investments drops, the most rational thing to do may be to keep it.
True. It may even be a good idea to buy more of it.
3.
When has an investment become too expensive?
There are no hard and fast rules about what's "too expensive"--that's up to you. You need to define what expensive means to you as part of your investment philosophy.
4.
It may be a good idea to sell an investment if it does not live up to your expectations. But before you sell, it's a good idea to _______.
Compare the investment to an appropriate benchmark. Doing so will give you some needed perspective on the underperformance. You might also compare it to its industry peers or a suitable index.
5.
Which of the following is not a good reason to sell an investment?
You need the money. Before you invest in stocks or funds, make sure you have an emergency stash in an easy-to-access savings or money-market account to cover unexpected car repairs or sudden unemployment.
