Funds Intermediate: Asset Allocation Mutual Funds

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1.
Mutual funds are a poor choice with which to attempt asset allocation.
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False. One of the best ways to diversify a given sum of money is to invest it into one or more mutual 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) _______.
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Conservative fund. Current income, through bonds and preferred and blue chip stocks, is often the primary objective of a conservative fund.
3.
The primary advantage of the single-fund approach to asset allocation is ________.
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Cost. There are only a few costs involved.
4.
The multi-fund approach is one in which the investor establishes investment positions in a number of funds _______.
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With different objectives. The multi-fund approach involves handling several investment objectives simultaneously.
5.
Which of the following is true regarding the relationship between passive and active asset allocation?
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Active allocation is generally more expensive. Active allocation can be considerably more expensive because each reallocation can result in the liquidation of shares of one or more securities in exchange for shares of new securities.