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ETFs 107: Using Exchange-Traded Funds for Portfolio Construction

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1.
Asset allocation refers to _______.
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The mix of assets in the portfolio. By diversifying assets, return can be improved or risk can be reduced.
2.
ETFs are ideal as core portfolio holdings because _______.
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All of the above. ETFs are generally low cost and some cover broad index funds, which are ideal characteristics for core portfolio holdings. They are also available in a variety of different asset classes.
3.
Generally, an investor with a shorter investment horizon should have _______.
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A more conservative portfolio, invested in lower risk assets. An investor with a shorter time horizon will want to invest conservatively, in lower risk assets.
4.
In a "core-satellite" approach to asset allocation, core holdings _______.
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Are building blocks held for long periods of time. They do not have to be low risk, but are held strategically and not for short term trading reasons.
5.
ETF investors might want to have some alternative assets such as commodities and currencies in their portfolios because those assets are less correlated to broader stock market returns.
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True. They tend to be less correlated to broader stock market returns over long periods of time. This can provide some needed diversification to ETF investors.