Funds Beginner: Life-Cycle Funds

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!

Get a certificate for this quiz
Enter your name to generate a certificate that you can save or print immediately. Optionally, add your email address to have a copy of the certificate emailed to you.


Review your answers below to learn more.
1.
The huge number of stocks held in the mutual funds held by a life-cycle funds spreads the associated expenses and thereby reduces the overall cost.
Choose wisely. There is only one correct answer.
False. There are a large number of funds involved in the "fund of funds" approach. Each of those underlying funds has an expense ratio, which tends to increase the overall cost of managing them.
2.
Which is a disadvantage of life-cycle funds?
Choose wisely. There is only one correct answer.
Many of the individual funds that comprise a life-cycle fund are likely to contain holdings in a number of the same companies. Therefore, the diversification you might be aiming for is not really there.
3.
A life-cycle fund is ___________.
Choose wisely. There is only one correct answer.
A fund "basket" composed of other mutual funds. The mix of funds is designed to be suited to the retirement target date you have chosen.
4.
Life-cycle funds eliminate risk by investing in a broad universe of diversified mutual funds.
Choose wisely. There is only one correct answer.
False. Nothing can eliminate investment risk. Life-cycle funds aim to minimize it.
5.
Life-cycle funds eliminate _______.
Choose wisely. There is only one correct answer.
The need to adjust asset allocation on your own. These funds take care of that on their own.