Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
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.
With the multi-fund approach to asset allocation, each transaction can have costs associated with both the sale and purchase of fund shares.
True. Each time an investor using the multi-fund approach makes a change in the allocation, it may involve the liquidation of one fund's shares and the purchase of another. Such transactions can have costs associated with both the sale of the old shares and the purchase of the new ones.
3.
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.
4.
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.
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.