Investment Portfolio Management

What does the term "negatively correlated" mean in finance?

• Assets move in opposite directions

• Assets move in the same direction

• Assets never change in value

• Assets are always profitable

What is the purpose of dollar cost averaging?

• To reduce the impact of volatility by investing regularly

• To maximize risk

• To invest only when prices are high

• To avoid investing altogether

If the price of steel increases while property stocks drop, what is the correlation?

• Negative correlation

• Positive correlation

• No correlation

• Direct correlation

What is the concept of "not putting all your eggs in one basket" related to in investing?

• Diversification

• Speculation

• Inflation

• Arbitrage

If two asset classes move in opposite directions, what is their correlation?

• Negative

• Positive

• Zero

• Direct

What happens if you put all your money into assets that are not correlated?

• You would be down a lot less in a market downturn.

• You would lose all your money.

• You would gain more in a downturn.

• You would have no change in value.

What is meant by a "big draw down" in investing?

• A significant decrease in the value of investments

• A significant increase in the value of investments

• No change in investment value

• A small fluctuation in value

What is the main strategy to reduce the chances of major investment losses?

• Diversify investments and spread out risk

• Invest only in cash

• Buy only real estate

• Hold all assets in one stock

What is the risk of holding all your money in cash, according to the text?

• Inflation risk

• Market risk

• Liquidity risk

• Credit risk

What is the primary purpose of asset allocation in portfolio management?

• To determine which stocks to buy

• To decide how much of a portfolio is invested in various asset classes

• To select the best performing mutual fund

• To minimize taxes on investments