Basics Beginner: Creating a Portfolio

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1.
For a given investment return, there are optimal mixes of stocks, bonds, and cash that produce different returns with a minimum of risk.
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True. These portfolios are called "efficient." Their optimality has been demonstrated by analyzing returns over history.
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.
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.
4.
Having lots of money opens you to a wide choice of investment options.
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True. Many investments require a large minimum amount to begin. For example, some bonds are sold in $5,000 minimums.
5.
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.
6.
Risk tolerance is the amount of risk with which you are comfortable.
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True. It determines your choices of investments, among many other things.