Investment Planning Flashcards

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1
Q

What is non-systematic risk, how do you address

A

company specific risk, by proper diversification

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2
Q

What is Systematic risk, how to address

A

market specific risk, include variety of asset classes such as fixed-income, cash, equities and real estate

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3
Q

What is Inflation rate risk, how to address

A

accept lower returns and not hold cash

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4
Q

What is Marketability risk, how to address

A

low level of buyers and sellers, invest in highly marketable investments

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5
Q

What is Interest rate risk, how to address

A

bond prices are most prone to interest rate risk, hold shorter or longer term bonds

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6
Q

Passive investment strategy

A

For those who believe in efficacy of markets
Believe when markets are efficient, unable to earn returns in excess of market
Low fees
Invest in index

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7
Q

Active investment strategy

A

Buying stocks that are below intrinsic value and selling above intrinsic value
Beating benchmark index

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