Test your knowledge

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1.
Why is it hard to get consistent recommendations from different online asset allocation tools?
Choose wisely. There is only one correct answer.
They all use different assumptions. They all use different assumptions about inflation rates, earnings, and possibly taxes.
2.
If youre uncomfortable taking on more risk, what can you do to improve your chances of meeting your goals?
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Invest more each month and lengthen your time horizon. Neither investing more each month nor lengthening your time horizon increases your risk. But decreasing your exposure to bonds/cash increases your possible three-month loss.
3.
Investment professionals say which of the following is more important?
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Your asset allocation. While selecting good funds or stocks is certainly important to meeting your goals, most investment professionals agree that asset allocation is even more important.
4.
You need several pieces of information about a financial goal in order to determine the asset allocation strategy to use to achieve it. Which of the following is not one of those pieces of information?
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Current investment earnings rates. These will not help you determine an asset allocation strategy. For one thing, they may be different next year.
5.
Different online asset allocation tools are good for giving you _______.
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A ballpark view of your asset allocation. At best, you can expect a decent ballpark estimate of where you stand, though not a truly accurate determination.