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CFP® > D.34 Investment strategies > Flashcards

D.34 Investment strategies Flashcards

Learners will be able to identify and explain various investment strategies, including diversification, asset allocation, and rebalancing, and how they apply to different client profiles and financial goals.

1
Q

Which investment strategy is best suited for a retiree who desires steady income and capital preservation?

A. Growth Investing
B. Value investing
C. Income investing
D. Momentum investing

A

C. Income investing

D.34 Investment strategies

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2
Q

An investor believes that the stock of a particular company is currently undervalued and expects it to appreciate over the next few years. Which investment strategy is most appropriate?

A. Growth investing
B. Value investing
C. Income investing
D. Momentum investing

A

B. Value investing

D.34 Investment strategies

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3
Q

A new investor with a long-term investment horizon and high risk tolerance wants to invest in stocks. Which investment strategy is most appropriate?

A. Growth investing
B. Value investing
C. Income investing
D. Momentum investing

A

A. Growth investing

D.34 Investment strategies

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4
Q

An investor is looking to make short-term gains by investing in stocks that have recently experienced strong price increases. Which investment strategy is most appropriate?

A. Growth investing
B. Value investing
C. Income investing
D. Momentum investing

A

B. Momentum investing

D.34 Investment strategies

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5
Q

Jane is looking to invest her money in a way that maximizes her returns while minimizing her risk. Which of the following investment strategies is best suited for her?

A. Day trading
B. Long-term investing
C. Speculative investing
D. Options trading

A

B. Long-term investing

D.34 Investment strategies

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6
Q

John is looking to invest his money in a way that provides a steady stream of income. Which of the following investment strategies is best suited for him?

A. Growth investing
B. Value investing
C. Dividend investing
D. Momentum investing

A

C. Dividend investing

D.34 Investment strategies

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7
Q

Maria is looking to invest her money in a way that provides the highest possible returns, but she is willing to take on a higher level of risk to achieve this. Which of the following investment strategies is best suited for her?

A. Growth investing
B. Value investing
C. Dividend investing
D. Fixed-income investing

A

A. Growth investing

D.34 Investment strategies

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8
Q

You are advising a client who has a low-risk tolerance and wants to invest in a diversified portfolio of fixed-income securities. Which investment strategy would be most appropriate for this client?

A. Value investing
B. Growth Investing
C. Dollar-cost averaging
D. Buy-and-hold

A

D. Buy-and-hold

D.34 Investment strategies

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9
Q

A client wants to invest in a single stock that they believe will perform well in the future. Which investment strategy would be most appropriate for this client?

A. Value investing
B. Growth Investing
C. Dollar-cost averaging
D. Index investing

A

B. Growth Investing

D.34 Investment strategies

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10
Q

A client is interested in investing in the stock market but is worried about market volatility. Which investment strategy would be most appropriate for this client?

A. Value investing
B. Growth investing
C. Dollar-cost averaging
D. Asset allocation

A

C. Dollar-cost averaging

D.34 Investment strategies

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11
Q

An investor is looking to maximize their returns in a short period of time. Which investment strategy is best suited for this goal?

A. Value investing
B. Growth Investing
C. Dividend Investing
D. Index investing

A

B. Growth investing

D.34 Investment strategies

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12
Q

An investor is looking to minimize their risks and generate steady income. Which investment strategy is best suited for this goal?

A. Value investing
B. Growth investing
C. Dividend investing
D. Index investing

A

C. Dividend investing

D.34 Investment strategies

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13
Q

An investor is looking to invest in a variety of assets to reduce overall risk. Which investment strategy is best suited for this goal?

A. Value investing
B. Growth investing
C. Asset allocation
D. Market timing

A

C. Asset allocation

D.34 Investment strategies

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14
Q

An investor believes that certain stocks are undervalued and will increase in price over time. Which investment strategy is best suited for this belief?

A. Value investing
B. Growth investing
C. Dividend investing
D. Index investing

A

A. Value investing

D.34 Investment strategies

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15
Q

Which investment strategy is most appropriate for someone in their 20s?

A. Investing solely in bonds
B. Investing solely in stocks
C. Diversifying their portfolio with a mix of stocks and bonds
D. Investing in real estate

A

C. Diversifying their portfolio with a mix of stocks and bonds

D.34 Investment strategies

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16
Q

Which of the folowing best describes dollar-cost averaging?

A. Investing a fixed amount of money in the stock market each year
B. Investing a fixed amount of money in the stock market each month
C. Investing a variable amount of money in the stock market each year
D. Investing a variable amount of money in the stock market each month

A

B. Investing a fixed amount of money in the stock market each month

D.34 Investment strategies

17
Q

Which of the following is an example of a passive investment strategy?

A. Stock picking
B. Market timing
C. Index fund investing
D. Short selling

A

C. Index fund investing

D.34 Investment strategies

18
Q

Which investment strategy is best for someone with a high risk tolerance?

A. Investing solely in bonds
B. Investing solely in stocks
C. Diversifying their portfolio with a mix of stocks and bonds
D. Investing in commodities

A

B. Investing solely in stocks

D.34 Investment strategies

19
Q

Which of the following is an advantage of investing in real estate?

A. High liquidity
B. Low barrier to entry
C. Potential for passive income
D. Limited tax benefits

A

C. Potential for passive income

D.34 Investment strategies

20
Q

Which of the following investment strategies is **most **appropriate for someone nearing retirement?

A. Investing solely in stocks
B. Investing solely in bonds
C. Diversifying their portfolio with a mix of stocks, bonds, and other assets
D. Investing in high-risk, high-reward assets

A

C. Diversifying their portfolio with a mix of stocks, bonds, and other assets

D.34 Investment strategies

21
Q

Which of the following describes a target-date fund?

A. A fund that invests in a specific industry sector
B. A fund that adjusts its investment mix to become more conservative as its target date approaches
C. A fund that invests solely in foreign equities
D. A fund that invests in short-term, high-yield bonds

A

B. A fund that adjusts its investment mix to become more conservative as its target date approaches

D.34 Investment strategies

22
Q

At what life stage might an investment strategy with a greater focus on growth be appropriate?

A. Early career
B. Mid-career
C. Pre-retirement
D. Retirement

A

A. Early career

D.34 Investment strategies

23
Q

Which of the following investment strategies may be most appropriate for a client in the pre-retirement phase?

A. Value investing
B. Growth investing
C. Balanced investing
D. International investing

A

C. Balanced investing

D.34 Investment strategies

24
Q

What investment strategy may be appropriate for a client who has a special needs child and wants to ensure they are taken care of financially in the event of their death?

A. Annuities
B. Life insurance
C. Real estate investment trusts
D. Hedge funds

A

B. Life insurance

D.34 Investment strategies

25
Q

Which investment strategy may be most appropriate for a client who is retired and needs to generate income from their investments?

A. Value investing
B. Growth investing
C. Dividend investing
D. Real estate investment trusts

A

C. Dividend investing

D.34 Investment strategies

26
Q

Lisa is a financial planner and has a client named Maria. Maria approached Lisa for assistance in evaluating an investment in fixed-income securities. Given Maria’s very low risk tolerance, her main investment objectives are to achieve a high after-tax total return and to preserve her capital. It’s worth noting that Maria resides in a state with no income tax, and her marginal federal tax rate stands at 24%. She forecasts inflation to average around 2.5% over the subsequent two decades. Considering the aforementioned details, which two securities from the options provided below, each having a 10-year maturity, would be the MOST appropriate to fulfill Maria’s investment objectives? Note: Out of the options, only the municipal general obligation bonds are insured.

  • Municipal general obligation bonds with a coupon rate of 3.85%
  • Municipal revenue bonds with a coupon rate of 4.25%
  • Treasury bonds with a coupon rate of 4.5%
  • Treasury inflation-protected securities with a coupon rate of 2.00%

A. Municipal general obligation bonds and municipal revenue bonds
B. Municipal general obligation bonds and U.S. Treasury inflation-protected securities
C. Municipal revenue bonds and U.S. Treasury bonds
D. Municipal revenue bonds and U.S. Treasury inflation-protected securities.

A

B. Municipal general obligation bonds and U.S. Treasury inflation-protected securities.

D.34 Investment strategies

27
Q

XYZ Corp’s stock is currently valued at $48. Jordan anticipates that due to an upcoming revelation about a potential major acquisition, the stock price for XYZ Corp has an even chance of either surging or plummeting in the near future. Which of the following investment tactics is most suitable for Jordan?

A. Purchase a $50 put and buy a $50 call.
B. Write a $55 call and buy a $45 call.
C. Write a $60 put and write a $60 call.
D. Short sell at $55 and buy a call at $45.

A

A. Purchase a $50 put and buy a $50 call.

D.34 Investment strategies

28
Q

Samantha, a new client, approaches Daniel, a CFP® professional, seeking advice on her investment strategy. She has a lump sum of $100,000 and is unsure whether to invest it all at once or spread it out over time. Daniel recommends dollar cost averaging for her situation. What could be the primary reason for this recommendation?

A. To instill a habit of disciplined investing.
B. To capitalize on a continuously rising market.
C. To maximize returns while minimizing market risk.
D. To consistently surpass the returns of a lump-sum investment strategy.

A

A. To instill a habit of disciplined investing.

D.34 Investment strategies

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