Choose wisely. There is only one correct answer to each question.
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1.
Imagine you have plenty of stocks in the software sector, the energy sector, and the agriculture sector, but you want to add some mutual funds to your portfolio to gain some breadth. Which of the following sectors would make the most sense to look into?
Manufacturing. Begin by looking for gaps. Here, manufacturing would be a gap. It may have some promising opportunities for you.
2.
If an economic event affects every single stock in the country, it is likely an example of _______ risk.
Systematic. Systematic risk is the type that affects all stocks, not those of a particular company. It cannot normally be diversified away.
3.
Portfolio weighting is all about what percentage of your portfolio each stock occupies.
True. As such, it adds a new dimension to your portfolio and can potentially enhance returns.
4.
Which number of stocks in a portfolio is the most likely to let you outperform the market?
15. There is an optimum range of stocks, and it is 12 to 20.
5.
By holding a concentrated portfolio, your returns will be better than the stock market _______.
Some of the time. Assuming that you are a good stock-picker, your returns should be better than the market some of the time. It would be rare to beat the market every year.
6.
An advantage of investing within your circle of competence is that it is fairly easy to find companies to invest in.
True. When you know an industry, it is usually fairly easy to evaluate potential investments in it.
