Basics Beginner: Creating a Portfolio

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1.
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.
2.
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.
3.
Investment portfolios can be called efficient when they ________.
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Contain the best possible mixes of assets for a specific risk level and return. Efficiency is relative to the kind of objective that you are trying to fulfill.
4.
Investment advisors suggest increasing the number of fixed-income securities in your portfolio as you age because _______.
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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.
5.
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.
6.
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.