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Investing Basics Beginner:
Creating a Portfolio
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1.
The portion of the future over which you will invest is your _______.
Choose wisely. There is only one correct answer.
Asset allocation
Time horizon
Risk tolerance
Time horizon. Taking your time horizon into consideration will help you determine how to allocate your resources.
2.
For a given investment return, there are optimal mixes of stocks, bonds, and cash that produce different returns with a minimum of risk.
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True
False
True. These portfolios are called "efficient." Their optimality has been demonstrated by analyzing returns over history.
3.
The closer the beta of an investment is to 1, _______.
Choose wisely. There is only one correct answer.
The more volatile it is
The less volatile it is
The closer its volatility is to that of the whole market
The safer it is
The closer its volatility is to that of the whole market. "1" is the base value of beta.
4.
How does having a lot of money affect your risk tolerance?
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It can enable you to afford loss.
It can buy you longer life.
It can enable you to buy volatile investments.
It can't. Risk tolerance affects all other factors.
It can enable you to afford loss. If you have a lot of money, you can afford to lose some, and so your risk tolerance will increase.
5.
There are mutual funds that change the amounts of their holdings to keep up with market changes.
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True
False
True. These funds are called asset allocation funds. They use formulas to change their allocations.
6.
Having lots of money opens you to a wide choice of investment options.
Choose wisely. There is only one correct answer.
True
False
True. Many investments require a large minimum amount to begin. For example, some bonds are sold in $5,000 minimums.
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