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Portfolios 501: Why Bother with Investment Theory?

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1.
What is a total-return approach in which a retiree segments a portfolio based on when the retiree expects to need the money?
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Bucketing.
2.
Favoring smaller companies over larger ones is an example of ______.
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Factor investing.
3.
In the bucketing approach to retirement allocation, where would funds for the distant future be placed?
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In bonds and stocks. Putting that money in stocks and bonds will give it some room to grow as it awaits eventual use.
4.
What investment theory suggests that investors cannot beat the market, so they should index it?
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Efficient market theory.
5.
What investment theory says that you can limit your volatility by spreading your risk among different types of investments?
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Modern Portfolio Theory.