Risk Management

How an investor allocates or divides up the assets in a portfolio is called?

• diversification

• balance

• asset allocation

How many stocks should a portfolio have to be adequately diversified?

• 15 - 20

• 1-10

• asset allocation

• 5 - 10

A collection of financial assets, such as stocks, bonds, real estate, commodities and perhaps cash or bank deposits is called?

• broker

• Investment portfolio

• leverage

Never put money in the stock market that, if it disappeared or went to zero, would affect your lifestyle.

• True

• False

_____________ involves placing money at risk in the hopes of earning a positive rate of return.

• time horizon

• capitalization

• leverage

• investing

Leverage

• increases your risk

• magnifies your rate of return

• may leave you with a debt to your broker

• all of the above

An investor with low risk aversion has high risk tolerance.

• True

• False

A willingness to hold riskier assets in the portfolio is?

• diversification

• risk tolerance

• aversion

• leverage

Choosing companies in a broad range of industries and with different market capitalizations is a way to ________________.

• leverage

• compound

• diversify

What is the most effective way to reduce risk?

• a diversified portfolio

• ETF’s

• Mutual Funds

• invest in a hot tip