What is diversification in portfolio management?
Diversification involves spreading investments across various assets to reduce overall risk and minimize the impact of any single asset’s performance.
Which strategy is typically used for long-term investment growth?
Buy and hold is a passive investment strategy focused on purchasing quality investments and holding them over time to gain long-term appreciation.
What is the primary goal of asset allocation?
Asset allocation seeks to balance risk and reward by distributing investments among different asset categories, such as stocks, bonds, and cash.
What does a high beta value indicate about a stock?
A high beta stock is more volatile and tends to move more than the market, representing higher risk and potentially higher return.
Which of the following is considered a defensive investment?
Utilities are considered defensive investments because they tend to provide steady returns and are less sensitive to economic cycles.
What does rebalancing a portfolio involve?
Rebalancing adjusts the asset mix back to target allocations, helping manage risk by maintaining the intended level of diversification.