Stock Trading Stock Trading Portfolio Strategy & Asset Allocation

Question 1

What is 'diversification' in portfolio management?

Accepted Answer

Spreading investments across different assets to reduce risk

Answer

Concentrating all capital in the highest-performing sector

Answer

Buying only large-cap stocks

Answer

Rebalancing a portfolio monthly

Question 2

What does 'asset allocation' refer to in portfolio strategy?

Accepted Answer

The distribution of investments among different asset classes like stocks, bonds, and cash

Answer

Selecting individual stocks within a sector

Answer

The process of rebalancing monthly

Answer

Setting stop-loss orders on each position

Question 3

What is 'beta' in the context of stock portfolio management?

Accepted Answer

A measure of a stock's volatility relative to the overall market

Answer

The excess return of a portfolio over its benchmark

Answer

The percentage of a portfolio allocated to bonds

Answer

The dividend payment schedule of a stock

Question 4

What is 'rebalancing' a portfolio?

Accepted Answer

Restoring a portfolio to its target asset allocation after market movements shift the weights

Answer

Selling all underperforming stocks

Answer

Doubling down on winning positions

Answer

Switching from individual stocks to index funds

Question 5

What does 'alpha' represent in portfolio performance?

Accepted Answer

The excess return generated above a benchmark, adjusted for risk

Answer

The total return of the portfolio

Answer

The volatility of the portfolio relative to peers

Answer

The percentage allocation to alternative assets

Question 6

What is the 'efficient frontier' in modern portfolio theory?

Accepted Answer

The set of portfolios that offer the highest expected return for a given level of risk

Answer

The minimum return required to beat inflation

Answer

The maximum number of stocks a portfolio should hold

Answer

The regulatory capital requirement for margin accounts