AnswersPersonal FinanceBuilding a Diversified Investment Strategy

Building a Diversified Investment Strategy — Quiz Answers

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1
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Why should risk tolerance match investment strategy?

A
To reduce time horizon
B
To guarantee returns
C
To align decisions with comfort and goals
D
To eliminate taxes
2
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What is diversification?

A
Increasing risk
B
Avoiding investments
C
Investing in one asset
D
Spreading investments across assets
3

Why is diversification important?

A
Eliminates risk
B
Increases taxes
C
Reduces impact of losses
D
Guarantees profit
4

What is risk tolerance?

A
The level of risk a person is willing to accept
B
The total return earned
C
The amount of money invested
D
The time horizon of an investment
5

Why can two investments with the same return produce different outcomes?

A
Same growth
B
Different fees and taxes
C
Same risk
D
Same structure
6

What does benchmarking compare?

A
Investment performance
B
Risk levels
C
Tax rates
D
Income types
7

Why does time horizon matter?

A
Guarantees returns
B
Eliminates risk
C
Reduces income
D
Influences investment choice
8

What is a tax-deferred account?

A
Taxes are paid immediately
B
Taxes are avoided
C
Taxes are paid later
D
Taxes are never paid
9

Why compare investments to a benchmark?

A
Reduce taxes
B
Eliminate risk
C
Guarantee profits
D
Measure performance
10

What is asset allocation?

A
Distribution across assets
B
Total return
C
Risk level
D
Amount invested

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