Investment Strategies and Asset Allocation

The video tutorial discusses the basics of mutual funds, focusing on asset allocation and lifecycle funds. It explains how these funds are suitable for individuals who lack the time or expertise to manage investments actively. The tutorial highlights the importance of choosing funds based on risk tolerance and investment timeframe. It also emphasizes the need for a long-term investment approach to avoid losses during market fluctuations.

What is a key benefit of asset allocation mutual funds for investors?

• They are only available to experienced investors.

• They provide a diversified portfolio based on risk tolerance.

• They offer a fixed return rate.

• They require active management by the investor.

What determines the choice of an asset allocation mutual fund?

• The investor's favorite stocks.

• The investor's risk tolerance and investment timeframe.

• The current market trends.

• The fund manager's reputation.

How do life cycle funds adjust their investment strategy over time?

• They increase the proportion of stocks as the target date approaches.

• They maintain a constant ratio of stocks and bonds.

• They become more conservative by reducing stocks and increasing bonds.

• They switch entirely to cash investments.

What is a common feature of both asset allocation and life cycle funds?

• They invest solely in stocks.

• They adjust based on the investor's age.

• They offer a diversified mix of stocks, bonds, and cash.

• They require a minimum investment of $10,000.

Which type of fund adjusts its asset allocation as the investor nears a specific date?

• Hedge fund

• Life cycle fund

• Index fund

• Real estate fund

Why is it important to set aside investment money for at least five years?

• To receive dividends.

• To qualify for tax benefits.

• To avoid selling during short-term market declines.

• To ensure a guaranteed profit.

What is a potential risk of not setting aside investment money for a long period?

• Missing out on short-term gains.

• Increased management fees.

• Paying higher taxes.

• Selling during a market dip.