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.
A mutual fund that changes its holdings as the market itself changes is called a(n) _______ fund.
Choose wisely. There is only one correct answer.
Asset allocation. Asset allocation funds use formulas to alter the percentages of their holdings as market conditions change.
2.
When a financial advisor says, "Let's talk about risk and how much you can deal with," he or she is talking about _______.
Choose wisely. There is only one correct answer.
Risk tolerance. Risk tolerance is the amount of risk with which you are comfortable.
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 closer the beta of an investment is to 1, _______.
Choose wisely. There is only one correct answer.
The closer its volatility is to that of the whole market. "1" is the base value of beta.
5.
The portion of the future over which you will invest is your _______.
Choose wisely. There is only one correct answer.
Time horizon. Taking your time horizon into consideration will help you determine how to allocate your resources.
6.
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.