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.
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.
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.
Why is your age important when you create an investment portfolio?
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All of the above. All of these make your age a factor for successful investing.
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.
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.