Lesson 7: Suitability

Question 1

Asset Allocation

Answer 1

Mixing investments across asset classes (stocks, bonds, cash, RE) in order to reduce risk

Question 2

Diversification

Answer 2

Mixing investments in different sectors within a portfolio so that the positive performance in some investments offsets the negative performance in others

Question 3

Speculation objective

Answer 3

Goal of outsized investment returns in exchange for taking on much higher risk
(High Risk)

Question 4

Growth

Answer 4

Goal of long term portfolio appreciation with less focus on generating current cash
(Moderately High Risk)

Question 5

Current Income

Answer 5

goal of generating current cash for the investor with less focus on growth or long term appreciation
(slightly high risk)

Question 6

Tax Free Income

Answer 6

Goal of generating tax free income by investing in muni bonds
(low risk)

Question 7

Liquidity Objective

Answer 7

Goal of immediate access to funds/cash in order to meet short term needs
(lower risk)

Question 8

Preservation of Capital

Answer 8

Goal of zero decline in value of the investors portfolio
(very low risk)

Question 9

Total Return

Answer 9

Measures all income (dividends and interest) and capital gains/losses over a time period