Basics Beginner: Creating a Portfolio

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1.
Financial advisors suggest diversifying because putting your money into different investments is often the best way to avoid losing large sums of money.
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True. Diversifying spreads risk among several investments.
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.
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.
4.
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.
5.
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.
6.
How does having a lot of money affect your risk tolerance?
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It can enable you to afford loss. If you have a lot of money, you can afford to lose some, and so your risk tolerance will increase.