Investment Strategies Flashcards
7 cards from real AAMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Investment Strategies flashcards as text
A 'barbell' fixed-income strategy concentrates holdings at which maturities?
Answer: Both short-term and long-term maturities, avoiding the middle
The barbell strategy holds securities at the short and long ends of the yield curve while avoiding intermediate maturities.
Which strategy explicitly tilts a portfolio toward low-volatility stocks, exploiting the empirical finding that lower-risk stocks often produce higher risk-adjusted returns?
Answer: Low-volatility or minimum-variance factor strategy
Low-volatility factor strategies overweight stocks with historically lower price fluctuations, which research shows can outperform on a risk-adjusted basis.
Dollar-cost averaging (DCA) reduces which specific investment risk compared to lump-sum investing?
Answer: Timing risk of investing a large sum at a market peak
DCA spreads purchases over time, reducing the danger of deploying a large sum right before a market decline.
What distinguishes a 'growth at a reasonable price' (GARP) strategy from pure growth investing?
Answer: GARP combines growth criteria with valuation constraints to avoid overpaying
GARP seeks companies with strong growth prospects but also screens for reasonable valuation, blending growth and value disciplines.
A risk parity portfolio weights asset classes by:
Answer: Equal contribution to overall portfolio risk rather than equal dollar weight
Risk parity allocates so that each asset class contributes equally to total portfolio volatility, often resulting in larger allocations to bonds than equities.
Which of the following best describes 'tactical asset allocation' (TAA) compared to 'strategic asset allocation' (SAA)?
Answer: TAA makes short-term deviations from the long-term SAA target based on market views
TAA involves deliberate short-term deviations from the strategic benchmark to exploit perceived market mispricings or economic conditions.
An investor concerned about inflation eroding real purchasing power would most likely add which asset class to a traditional stock-bond portfolio?
Answer: Treasury Inflation-Protected Securities (TIPS) or real assets like commodities
TIPS and real assets like commodities and real estate historically provide returns that move with inflation, protecting real purchasing power.