Funds Intermediate: Asset Allocation Mutual Funds

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1.
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.
2.
The primary advantage of the single-fund approach to asset allocation is ________.
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Cost. There are only a few costs involved.
3.
Investors using the multifund approach to asset allocation are interested in _______.
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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.
4.
Which of the following is not one of the basic instruments of asset allocation?
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Annuities. Through a combination of cash, bonds, and common stocks, mutual funds afford an investor diversification and professional management.
5.
Active allocation adopts a buy-and-hold strategy.
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False. Passive, not active, allocation is a strategy in which the investor does little to alter his or her mix of investments, adopting a buy-and-hold philosophy.