Investment Strategies Flashcards
6 cards from real RIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Investment Strategies flashcards as text
Factor investing (smart beta) seeks to systematically capture returns associated with:
Answer: Specific risk factors like value, momentum, quality, and low volatility
Factor investing targets specific return drivers (value, momentum, quality, size, low volatility) that academic research shows generate systematic risk premiums.
Market neutral strategy aims to:
Answer: Generate returns independent of market direction by balancing long and short positions
Market neutral strategies balance long and short positions to eliminate market risk, generating returns from security selection rather than market direction.
A global macro investment strategy bases decisions on:
Answer: Top-down analysis of macroeconomic and geopolitical trends across countries
Global macro strategies use top-down analysis of economic, political, and financial conditions across countries to make directional bets on currencies, bonds, equities, and commodities.
Target-date retirement funds automatically:
Answer: Shift from aggressive to conservative asset allocation as the target date approaches
Target-date funds (lifecycle funds) gradually shift from equity-heavy to bond-heavy allocations as the target retirement date approaches (the 'glide path').
Tactical asset allocation uses which analytical approach?
Answer: Market timing and short-term opportunity identification to deviate from strategic targets
Tactical asset allocation uses market analysis to make short-term deviations from strategic targets, seeking to exploit market inefficiencies or trends.
When constructing a liability-driven investment (LDI) strategy, the primary objective is:
Answer: Matching the portfolio's assets to specific future liabilities
LDI strategies match asset characteristics (duration, cash flows) to specific future liabilities, minimizing funding risk.
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