Strategy Beginner: Introduction to Investment Strategy

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1.
Investors diversify to reduce the risks of different business trends.
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True. Diversifying helps them avoid any particular trend affecting their investments too much.
2.
If you might need to use your principal soon, which aspect(s) of trading would especially concern you?
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Maturity date and minimum investment. Minimum investment determines how much of your principal will be tied up, and the maturity date how long.
3.
The more liquid an investment is, _______.
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The easier it is to turn into cash. Liquid investments are easy to turn into cash, either by withdrawing from them or selling them.
4.
A reasonably intelligent person who studies the tax code from time to time can probably make good decisions about how to shelter investment income from taxes.
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False. Even the simplest workplace retirement plan can have tax implications that require expert advice.
5.
If your investment strategy is risk-averse, you avoid risk whenever possible.
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False. A risk-averse strategy does not seek to avoid risk entirely, but to get the best possible return at the lowest possible risk.