Basics Beginner: Creating a Portfolio

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.
Investment risk is the risk that one may never have enough resources to begin investing.
Choose wisely. There is only one correct answer.
False. Investment risk is the chance of loss due to the uncertainty of future events.
2.
Investment advisors suggest increasing the number of fixed-income securities in your portfolio as you age because _______.
Choose wisely. There is only one correct answer.
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.
3.
For a given investment return, there are optimal mixes of stocks, bonds, and cash that produce different returns with a minimum of risk.
Choose wisely. There is only one correct answer.
True. These portfolios are called "efficient." Their optimality has been demonstrated by analyzing returns over history.
4.
The amount of money you have to invest does not play a role in your choice of investments.
Choose wisely. There is only one correct answer.
False. It plays a role because it alters your investment options and risk tolerance.
5.
How does having a lot of money affect your risk tolerance?
Choose wisely. There is only one correct answer.
It can enable you to afford loss. If you have a lot of money, you can afford to lose some, and so your risk tolerance will increase.
6.
There are mutual funds that change the amounts of their holdings to keep up with market changes.
Choose wisely. There is only one correct answer.
True. These funds are called asset allocation funds. They use formulas to change their allocations.