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.
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.
3.
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.
4.
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.
5.
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.
6.
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.