Stock Jobs Portfolio Management

Question 1

What is 'asset allocation' in portfolio management?

Accepted Answer

Distributing investments across different asset classes like stocks, bonds, and cash based on goals and risk tolerance

Answer

Choosing individual stocks within a sector

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Allocating company assets across different business units

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The process of selling underperforming assets

Question 2

What is 'diversification' in investing?

Accepted Answer

Spreading investments across multiple assets to reduce exposure to any single investment's risk

Answer

Investing in a variety of different brokerage accounts

Answer

Diversifying the currencies used to fund an account

Answer

Changing investment strategies multiple times per year

Question 3

What is 'rebalancing' a portfolio?

Accepted Answer

Periodically adjusting portfolio holdings back to target allocations as market movements cause drift

Answer

Moving all assets to higher-performing investments

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Replacing underperforming fund managers

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Balancing between growth and dividend stocks equally

Question 4

What is 'systematic risk' (also called market risk)?

Accepted Answer

Risk inherent to the entire market or economy that cannot be eliminated through diversification

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Risk caused by flaws in trading systems and technology

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Risk systematically identified and categorized in a risk register

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The risk of following a systematic trading strategy

Question 5

What is 'Modern Portfolio Theory' (MPT)?

Accepted Answer

A framework by Harry Markowitz showing how to construct portfolios to maximize return for a given level of risk

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A trading framework developed for modern electronic markets

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The most current approach to fundamental stock analysis

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A theory that modern markets are too complex to predict

Question 6

What is 'alpha' in portfolio performance measurement?

Accepted Answer

The excess return of a portfolio above its benchmark index, adjusted for risk

Answer

The first letter of the Greek alphabet used to denote market risk

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The proportion of the portfolio invested in equities

Answer

The annualized return of a portfolio before fees