Basics Beginner: Creating a Portfolio

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1.
The closer the beta of an investment is to 1, _______.
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The closer its volatility is to that of the whole market. "1" is the base value of beta.
2.
The portion of the future over which you will invest is your _______.
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Time horizon. Taking your time horizon into consideration will help you determine how to allocate your resources.
3.
A mutual fund that changes its holdings as the market itself changes is called a(n) _______ fund.
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Asset allocation. Asset allocation funds use formulas to alter the percentages of their holdings as market conditions change.
4.
Financial advisors suggest diversifying because putting your money into different investments is often the best way to avoid losing large sums of money.
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True. Diversifying spreads risk among several investments.
5.
The amount of money you have to invest does not play a role in your choice of investments.
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False. It plays a role because it alters your investment options and risk tolerance.
6.
How does having a lot of money affect your risk tolerance?
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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.