Basics Beginner: Creating a Portfolio

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1.
There are mutual funds that change the amounts of their holdings to keep up with market changes.
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True. These funds are called asset allocation funds. They use formulas to change their allocations.
2.
Investment risk is the risk that one may never have enough resources to begin investing.
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False. Investment risk is the chance of loss due to the uncertainty of future events.
3.
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.
4.
When a financial advisor says, "Let's talk about risk and how much you can deal with," he or she is talking about _______.
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Risk tolerance. Risk tolerance is the amount of risk with which you are comfortable.
5.
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.
6.
By first _______, you can comfortably allocate a desired amount of money to investing.
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Taking an inventory of what you own. This will help you figure how much cash you have available to invest.