Series65 MOD 10 Portfolio Mngmnt

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Series65 MOD 10 Portfolio Mngmnt
2015-01-31 13:46:37

Portfolio Mngmnt
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    changing the proportions of the assets that are allocated within the portfolio to correspond with changes in market conditions or other reasons.
  2. Tactical Asset Allocation is also referred to as:
  3. INSURED ASSET ALLOCATION strategy involves:
    • Determining a minimum value for the overall portfolio.
    • When the total value of the portfolio goes above the minimum, the portfolio can shift into more aggressive investments, such as common stock.
    • When the total value of the portfolio starts to contract, the asset allocation shifts intosafer investments, such as T-bills or money market funds
  4. The PASSIVE MANAGEMENT approach assumes the market is:
  5. EFFICIENTMARKET THEORY (or EFFICIENT MARKET HYPOTHESIS) states that current market prices for securities reflect:
    All information about those securities because this information is available to everyone.
  6. The three forms of Efficient Market Theory are:
    • Weak
    • Semi-strong
    • Strong
  7. The WEAK FORM of the Efficient Market Theory assumes that:
    Current stock pricesfully reflect all security market information
  8. If the weak form of the Efficient Market Theory holds, then security market information should have:
    No relationship to future returns and technical analysis should not allow investors to earn excess returns
  9. The SEMI-STRONG form of the Efficient Market Theory assumes that the prices of securities:
    Adjust rapidly to all publicly available information.
  10. The STRONG FORM of the Efficient Market Theory assumes that the prices of securities:
    reflect all information about the firm, whether it be public or private
  11. The PASSIVE APPROACH is also related to the RANDOM WALK THEORY, which states that:
    it is impossible to predict the market’s future by looking at past performance
  12. Advisers who recommend the Passive Approach believe that carefully selecting securities and using a BUY AND HOLD STRATEGY for long periods of time
    Result in greater returns than MARKET TIMING and IN-AND-OUT TRADING techniques
  13. The major advantages of the passive management approach such as a buy and holdstrategy include:
    • Lower management fees
    • Lower capital gains taxes
    • Lower transaction and commission costs
  14. Two examples of passive investments are:
    investing in a fixed income security or a unit investment trust
    Passive Management strategy. Rather than investing inindividual securities, the client is advised to invest in index funds
  16. Another example of active management is SECTOR INVESTING, or SECTOR ROTATION, where money is:
    moved from one industrial sector to another in an effort to take advantage of the cycles of different sectors.
  17. GEOMETRIC AVERAGE is the method most frequently used in comparing and determining:
    the performance of a portfolio manager for periods that are greater than one year.
  18. VALUE INVESTORS seek securities that are:
    undervalued (compared to other securities in the same industry) by comparing price/earnings ratios, price/book ratios, or dividend payout ratios.
  19. The advantages of value investing are:
    • Lower downside risk
    • lower volatility
    • lower portfolio turnover
    • transaction fees
    • capital gains taxes
  20. While growth investing may make larger capital appreciation possible, the disadvantages include:
    • Higher portfolio turnover
    • higher management fees
    • higher transaction costs
    • higher capital gains taxes for investors than with a value-oriented portfolio
  21. A company’s Market Capitalization is calculated by:
    multiplying the market price per share by the number of shares outstanding
  22. LUMP-SUM INVESTING involves:
    Market-timing risk.
  23. A round lot is:
  24. An odd lot is any amount of shares:
    not divisible by 100
  25. A block trade is a minimum of:
  26. MARKET MAKERS are broker/dealers who offer to buy or sell securities in the:
    OTC market by publishing their quotes in an interdealer quotation system
  27. If a question on the test asks for a way to protect:
    always buy puts
  28. Investors who have a stock position will incorporate option positions to enhance their stock position. They do this in one of two ways:
    • Buying options to protect their stock
    • Writing options for income
  29. When investors buy options to protect their positions, they are considered to be:
    HEDGING their positions
  30. When investors write options against their stock position, they are doing so to:
    generate income for their portfolios
  31. American options can be exercised____________while European options may only be exercised __________________.
    • prior to the expiration date
    • on the expiration date
  32. Covered options are options written while the investor is in:
    • A stock position to meet the exercise obligation.
    • Covered options are written to increase the return on an existing portfolio or to reduce speculative risk for a short-term investor.
    • Writers would have a covered call if they wrote a call option at the same time that they had a stock position.
  33. Derivatives are any investment instrument that:
    derives its value from another investment
  34. Examples of derivatives include:
    • Futures contracts
    • Forward contracts
    • CMOs
  35. RISK ARBITRAGE is a type of special situation investing in which the:
    investor seeks to purchase investments in companies involved in takeovers or acquisitions