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1.
Which of the following is not considered when deciding whether or not to reallocate assets using active allocation?
The Dow Jones Industrial Average. While the Dow can influence investor decisions, its daily performance is too universal to have any meaningful effect on an individual portfolio. Instead, investors should look to such benchmarks as the price, volatility, and performance of their portfolios, as well as interest rates and changes in management of their funds.
2.
Asset allocation is the practice of dividing investment assets among different markets.
True. Asset allocation is the practice of dividing investment assets among different markets to achieve diversification and a balance between risk and return consistent with an investor's objective.
3.
If you select a mutual fund that invests in bonds, preferred stocks, and blue chip stocks, you most likely have selected a(n) _______.
Conservative fund. Current income, through bonds and preferred and blue chip stocks, is often the primary objective of a conservative fund.
4.
A 12b-1 fee is used to offset reduced sales charges and to cover some of the administrative costs of a mutual fund.
True. A 12b-1 fee, which is assessed annually, is based on the fund's total net asset value, and is used to offset reduced sales charges and to cover some of the administrative costs of the fund.
5.
Investors using the multifund approach to asset allocation are interested in _______.
Taking advantage of particular fund managers or families. Investors are interested in taking advantage of the management expertise of particular fund managers to duplicate specific historical performances.