Diversification

Diversification is good because:

• It focuses investments on a single stock to take advantage of growth potential

• Mutual funds have higher fees than individual stocks

• Interest rates rise and fall

• It spreads the risk of investment

As you go from being a young investor to a much older one, your portfolio should probably:

• Change from higher-risk to lower-risk investments

• Sell every holding each year to figure out how well you are doing

• Grow equally well in all sectors, or it is a bad financial plan

• Become less and less conservative, increasing in risk from year to year

Your return with a diversified portfolio will:

• Be exactly 11.3% every year

• Rise and fall, but have less risk than a smaller number of stocks.

• Fall if a single company in your portfolio goes out of business

• Beat absolutely every other investor

True or False: Risk can be reduced through diversification.

• True

• False

Diversification

• an individual and their tolerance for risk

• strategy in which you spread your investment dollars among different markets

• a financial website

By purchasing stocks in an index fund, you are decreasing your financial risk

• True

• False

Actively managed funds tend to perform better than index funds over time because there are experts making wise decisions.

• False

• True

Just buying the whole market (in an index fund) helps you get a better return over time than investing in special choices of companies by experts.

• True

• False

If you are looking for an index fund that has the best chance of giving you the best return, you should look at..

• The expense ratio

• The people who run it

• How it has done in the past

If you pay more for an investment fund, you will get better returns.(in general)

• True

• False