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1.
A mutual fund that changes its holdings as the market itself changes is called a(n) _______ fund.
Asset allocation. Asset allocation funds use formulas to alter the percentages of their holdings as market conditions change.
2.
When a financial advisor says, "Let's talk about risk and how much you can deal with," he or she is talking about _______.
Risk tolerance. Risk tolerance is the amount of risk with which you are comfortable.
3.
Investment advisors suggest increasing the number of fixed-income securities in your portfolio as you age because _______.
Advanced age makes it difficult to regain losses from more volatile investments such as stocks. Having fixed-income securities in your portfolio can reduce this problem.
4.
The amount of money you have to invest does not play a role in your choice of investments.
False. It plays a role because it alters your investment options and risk tolerance.
5.
Financial advisors suggest diversifying because putting your money into different investments is often the best way to avoid losing large sums of money.
True. Diversifying spreads risk among several investments.
6.
In investing, taking as many factors as possible into account and then choosing the best course of action is called _______.
Calculated risk. This approach involves taking account of various factors to judge how they will affect your possible choices.