Stock Advisor Portfolio Management Strategies 2

Question 1

What is 'risk tolerance' in the context of investing?

Accepted Answer

An investor's ability and willingness to endure investment losses

Answer

Risk tolerance describes an investor's capacity and psychological comfort with potential losses, which shapes how aggressively or conservatively they invest.

Question 2

What is a 'target-date fund'?

Accepted Answer

A fund that automatically shifts from aggressive to conservative allocation as a target retirement year approaches

Answer

Target-date funds gradually shift their asset allocation from growth-oriented to conservative as the investor approaches the specified target date, typically retirement.

Question 3

What is 'concentration risk' in a portfolio?

Accepted Answer

Excessive exposure to a single stock, sector, or geography

Answer

Concentration risk arises when a portfolio has too much exposure to a single investment, sector, or region, making it vulnerable to that specific risk.

Question 4

What is 'passive investing'?

Accepted Answer

Tracking a market index rather than actively selecting individual securities

Answer

Passive investing involves tracking a market index through index funds or ETFs rather than actively picking stocks, typically resulting in lower fees and broad market exposure.

Question 5

What is the primary goal of 'active portfolio management'?

Accepted Answer

Outperforming a benchmark through security selection and market timing

Answer

Active portfolio management aims to outperform a market benchmark through research-based security selection and tactical adjustments.

Stock Advisor Practice Test

Stock Advisor Practice Test

Stock Advisor Portfolio Management Strategies 2