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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.
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.
3.
An asset allocation mutual fund spreads its portfolio among only a handful of investments.
False. An asset allocation mutual fund spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, cash, gold, and real estate stocks.
4.
Which of the following is not one of the basic instruments of asset allocation?
Annuities. Through a combination of cash, bonds, and common stocks, mutual funds afford an investor diversification and professional management.
5.
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.