5/12 Investment Strategies and Risk Management Quiz

What is the role of risk in investing?

• It guarantees profits

• It is irrelevant to investment

• It helps in understanding potential losses and gains

• It eliminates the need for diversification

Which of the following is a strategy to manage investment risk?

• Ignoring market trends

• Investing early

• Putting all money in one stock

• Avoiding investments altogether

What is dollar cost averaging?

• Investing a fixed amount regularly

• Investing a lump sum at once

• Avoiding investments during market dips

• Selling stocks at a loss

How can the impact of dollar cost averaging be calculated?

• By guessing future market trends

• By using hypothetical scenarios and historical performance

• By investing only in high-risk stocks

• By avoiding index funds

Which of the following is NOT a method to manage investment risk?

• Diversification

• Dollar cost averaging

• Investing early

• Ignoring market research

What is the benefit of using historical performance of an index fund?

• It predicts future profits with certainty

• It provides a basis for understanding past market behavior

• It eliminates all investment risks

• It guarantees higher returns than individual stocks

Why is investing early considered a good strategy?

• It guarantees immediate returns

• It allows more time for investments to grow

• It eliminates the need for diversification

• It reduces the need for market analysis

What is the primary goal of managing investment risk?

• To avoid all losses

• To maximize potential returns while minimizing potential losses

• To invest only in government bonds

• To ensure constant profits

What is the significance of using real historical performance in investment?

• It ensures future success

• It provides insights into past market trends

• It eliminates the need for diversification

• It guarantees higher returns

Which strategy involves investing a fixed amount at regular intervals?

• Lump sum investing

• Dollar cost averaging

• High-risk investing

• Short selling