RIA Investment Strategies 1

Question 1

A passive investment strategy seeks to:

Accepted Answer

Replicate market index returns with minimal trading and costs

Answer

Passive investing aims to match market index returns by holding the same securities as the index with minimal trading.

Question 2

The value investing approach, associated with Benjamin Graham, focuses on:

Accepted Answer

Buying securities trading below their intrinsic value

Answer

Value investing seeks stocks trading below their intrinsic value, providing a 'margin of safety' against loss.

Question 3

In a rising interest rate environment, which bond strategy would best protect a portfolio?

Accepted Answer

Reducing duration (shortening maturities)

Answer

Shortening portfolio duration reduces interest rate risk when rates are rising, as shorter-term bonds are less sensitive to rate changes.

Question 4

Dollar-cost averaging (DCA) is most beneficial when:

Accepted Answer

Investors are uncertain about market timing and invest regularly over time

Answer

DCA is most valuable for investors who want to reduce timing risk by investing fixed amounts consistently rather than trying to pick the optimal entry point.

Question 5

A covered call options strategy involves:

Accepted Answer

Selling call options against existing stock holdings to generate income

Answer

A covered call sells call options against stock the investor already owns, generating premium income while capping upside potential.

(RIA) Registered Investment Advisor Practice Test

(RIA) Registered Investment Advisor Practice Test

RIA Investment Strategies 1