Course Catalog > Stocks > 500
Stocks 501: Constructing a Portfolio

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
If your circle of competence in investing is within the software industry, then it is a good idea to have all the stocks you own be in the software industry.
Choose wisely. There is only one correct answer.
False. Having your portfolio fully weighted in one industry can expose it to a lot of risk.
2.
How many stocks do you need to own in your portfolio to derive 90% of the benefits from diversification?
Choose wisely. There is only one correct answer.
12 to 18. Ninety percent of the benefits of diversification are achieved by holding 12 to 18 stocks.
3.
Imagine you have plenty of stocks in the software sector, the energy sector, and the agriculture sector, but you want to add some mutual funds to your portfolio to gain some breadth. Which of the following sectors would make the most sense to look into?
Choose wisely. There is only one correct answer.
Manufacturing. Begin by looking for gaps. Here, manufacturing would be a gap. It may have some promising opportunities for you.
4.
Unsystematic risk can be diversified away by _______.
Choose wisely. There is only one correct answer.
Holding a larger number of stocks. Unsystematic risk is the risk involved in holding individual companies. It can be diversified away by holding a larger number of stocks.
5.
Which number of stocks in a portfolio is the most likely to let you outperform the market?
Choose wisely. There is only one correct answer.
15. There is an optimum range of stocks, and it is 12 to 20.
6.
The concept of portfolio weighting refers to _______.
Choose wisely. There is only one correct answer.
The percentage of your portfolio that each stock occupies. The percentage is where the weighting comes in.