Choose wisely. There is only one correct answer to each question.
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1.
How can you limit market risk?
Invest in a variety of markets. To limit the risk of one entire market losing money, invest in a variety of markets.
2.
What type of risk do investors overlook most often?
The risk of not meeting their investment goals. Investors generally notice short-term volatility that's driven by factors such as market risk. As a result, they ignore the greater threat of not meeting their goals.
3.
Learning to tolerate day-to-day gyrations in your portfolio is not helpful for dealing with risks in the longer term.
False. Most likely, it will help you to put risk into perspective and help you tolerate longer-term risks.
4.
To help you develop your investment philosophy about volatility and risk, there are several questions you should answer. Of the following, which one would be least helpful?
What are your stock prices today? This question is not helpful for developing your investment philosophy.
5.
Which is NOT a way that volatility can lead you to miss the forest for the trees?
Volatility may make you buy or sell a security based on your goals. Volatility can make you invest too conservatively or make an investment decision based solely on short-term performance. Either way, you're not seeing the forest (your goal) for the trees (volatility).