Basics Beginner: Creating a Portfolio

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1.
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.
2.
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.
3.
In investing, taking as many factors as possible into account and then choosing the best course of action is called _______.
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Calculated risk. This approach involves taking account of various factors to judge how they will affect your possible choices.
4.
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.
5.
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.
6.
Mutual fund holdings are allocated to meet certain ________.
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Investment goals. With investment goals in mind, mutual fund managers can meet all their other objectives.