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1.
For saving for your long-term goals, advisors usually recommend starting out with stocks and holding them over the long term rather than switching eventually to safer investments.
False. Advisors usually recommend shifting to safer investments over time in order to protect the wealth you have built up.
2.
Asset allocation means _______.
Dividing your portfolio among stocks, bonds, and cash investments. Although there is some truth to the other options, this one is the basic definition of asset allocation.
3.
In general, how should investors who are funding long-term goals allocate their assets?
Start heavy with high-quality stocks, then gradually shift more into safer securities over time. A portfolio that consists entirely of cash and short-term bonds will exhibit very few fluctuations, which can provide peace of mind and may be appropriate for very short-term goals, but not for long-term goals. Over time, it will get eaten alive by a portfolio that includes a stock component.
4.
Once you're retired, you won't need to adjust your spending rate.
False. Market downturns and unexpected expenses can necessitate adjusting your spending rate.
5.
What types of activities form the base of the investment pyramid?
The most important activities for investment success. The other parts will depend on these.
