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.
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.
3.
The greater potential return that investments offer in return for accepting greater risk is called ________.
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Risk premium. This is the "reward" for taking on risk.
4.
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.
5.
It is never smart to invest through a full-service broker.
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False. Investors who do not want to put in the time or effort to research and manage their investments may find a full-service broker essential.