Practice Test Geeks(CFP) Certified Fintech Practitioner Practice Test
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Investment Strategies Flashcards

7 cards from real CFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. A fintech robo-advisor uses factor-based investing. Which factor is most associated with generating excess returns through 'value' exposure?

    Answer: Low price-to-book ratio stocks

    Value factor investing targets stocks trading at low price-to-book ratios, which historically have generated excess returns over growth stocks.

  2. An investor uses a fintech platform to implement a 'smart beta' ETF strategy. What distinguishes smart beta from traditional market-cap-weighted indexing?

    Answer: It weights holdings by factors like volatility, dividends, or momentum rather than market cap

    Smart beta ETFs use alternative weighting schemes based on factors like low volatility, dividends, or momentum instead of traditional market-cap weighting.

  3. A CFP practitioner recommends dollar-cost averaging (DCA) via an automated fintech platform. What is the primary behavioral finance benefit of DCA?

    Answer: It removes emotional decision-making by automating purchases regardless of market conditions

    DCA's primary behavioral benefit is removing emotional bias by automating regular investments, preventing panic selling or euphoric buying.

  4. A fintech investment platform offers 'direct indexing.' What key advantage does direct indexing offer over ETFs for high-net-worth investors?

    Answer: Tax-loss harvesting at the individual security level

    Direct indexing allows investors to own individual securities directly, enabling tax-loss harvesting on specific positions unavailable in pooled ETFs.

  5. Which portfolio rebalancing trigger is most commonly used by automated fintech investment platforms?

    Answer: Threshold-based rebalancing when asset allocation drifts beyond a set percentage

    Threshold-based rebalancing triggers trades only when allocations drift beyond a preset band (e.g., ±5%), optimizing tax efficiency versus calendar methods.

  6. A fintech platform offers cryptocurrency as an asset class for portfolio diversification. What is a key risk unique to crypto that differs from traditional equities?

    Answer: Regulatory uncertainty and lack of FDIC/SIPC protection

    Cryptocurrency carries unique regulatory uncertainty and lacks FDIC/SIPC investor protections that govern traditional securities accounts.

  7. An investor's fintech portfolio uses 'lifecycle investing' (target-date approach). How does asset allocation typically shift as the target date approaches?

    Answer: Gradually reduces equity exposure and increases fixed-income and cash equivalents

    Target-date funds follow a 'glide path' that progressively reduces equity risk and increases bonds/cash as the investor approaches their target retirement date.