Three Fund Portfolio Investment Strategy Quiz

What are the three components of a three fund portfolio?

• US stocks, bonds, and commodities

• US stocks, international stocks, and real estate

• International stocks, bonds, and commodities

• US stocks, international stocks, and bonds

Why is diversification important in a three fund portfolio?

• It reduces risk by spreading investments across various markets

• It guarantees higher returns

• It focuses on a single market

• It increases the risk of the portfolio

What is a key benefit of passively managed funds in a three fund portfolio?

• They have higher fees compared to actively managed funds

• They require constant monitoring

• They have lower fees, making it easier to achieve market returns

• They focus on individual stock picking

What is the typical expense ratio range for passively managed funds in a three fund portfolio?

• 1% to 2%

• 0.05% to 0.1%

• 0.5% to 1%

• 2% to 3%

How should younger investors typically allocate their assets in a three fund portfolio?

• Only in international stocks

• More towards stocks

• Equally between stocks and bonds

• More towards bonds

Why might an investor choose a 90% stocks and 10% bonds allocation?

• To minimize risk

• To focus on international markets

• To avoid US stocks

• To maximize potential returns with some stability

What is a potential downside of holding bonds in a three fund portfolio during a strong stock market year?

• Bonds will outperform stocks

• The portfolio will become too volatile

• The portfolio may miss out on some stock market gains

• Bonds will increase the portfolio's risk

What is the purpose of rebalancing a portfolio?

• To eliminate bonds from the portfolio

• To maintain the desired asset allocation

• To focus solely on US stocks

• To increase the number of funds

What is the average annual return of the stock market according to the S&P index history?

• 7.5%

• 8.5%

• 5.5%

• 6.5%

What is a key strategy for growing your investment balance over time?

• Investing sporadically

• Consistently contributing to your investment accounts

• Focusing only on bonds

• Avoiding rebalancing