Funds Intermediate: Asset Allocation Mutual Funds

Test your knowledge

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

0%
Keep studying!
Review your answers below to learn more.
1.
The multi-fund approach is one in which the investor establishes investment positions in a number of funds _______.
Choose wisely. There is only one correct answer.
With different objectives. The multi-fund approach involves handling several investment objectives simultaneously.
2.
If you select a mutual fund that invests in bonds, preferred stocks, and blue chip stocks, you most likely have selected a(n) _______.
Choose wisely. There is only one correct answer.
Conservative fund. Current income, through bonds and preferred and blue chip stocks, is often the primary objective of a conservative fund.
3.
Which of the following is not considered when deciding whether or not to reallocate assets using active allocation?
Choose wisely. There is only one correct answer.
The Dow Jones Industrial Average. While the Dow can influence investor decisions, its daily performance is too universal to have any meaningful effect on an individual portfolio. Instead, investors should look to such benchmarks as the price, volatility, and performance of their portfolios, as well as interest rates and changes in management of their funds.
4.
With the multi-fund approach to asset allocation, each transaction can have costs associated with both the sale and purchase of fund shares.
Choose wisely. There is only one correct answer.
True. Each time an investor using the multi-fund approach makes a change in the allocation, it may involve the liquidation of one fund's shares and the purchase of another. Such transactions can have costs associated with both the sale of the old shares and the purchase of the new ones.
5.
Mutual funds are a poor choice with which to attempt asset allocation.
Choose wisely. There is only one correct answer.
False. One of the best ways to diversify a given sum of money is to invest it into one or more mutual funds.