module 10 Flashcards
What is the main goal of managing investment risk?
To maximize potential returns while minimizing losses
Which strategy involves buying an asset when its price is rising and selling when it falls?
Trend Trading
What is rebalancing in investment management?
Adjusting asset allocation to maintain desired risk levels
Which of the following refers to spreading investments across various asset types to reduce risk?
Diversification
What does a stop-loss order do?
Automatically sells a stock when it reaches a predetermined price
How does position sizing help manage investment risk?
By determining how much capital to allocate to a single investment
What is the advantage of following market trends in investing?
Reduces investment volatility by aligning with price movements
Which investment strategy ensures that an investor does not put too much money into one asset?
Position Sizing
What is a key benefit of rebalancing a portfolio?
It maintains the original risk level by adjusting asset distribution
If a stock’s value starts declining, which strategy can limit an investor’s losses?
Using a stop-loss order
Which of the following is an example of diversification?
Buying stocks from different sectors and asset classes
What does ‘trend’ refer to in investment management?
A movement in stock prices in a general direction
How does position sizing help in investment risk management?
It determines the appropriate amount of investment in a security based on risk tolerance
What is the purpose of a stop-loss order?
To protect investors from excessive losses
Which investment risk management strategy involves holding a variety of asset types?
Diversification
Why is diversification an important risk management technique?
It reduces the impact of a single asset’s poor performance
What is one common mistake investors make with stop-loss orders?
Setting the stop price too close to normal price fluctuations
Which strategy helps investors avoid emotional decision-making in stock trading?
Stop-Loss Orders
What does rebalancing a portfolio involve?
Realigning the proportion of assets to maintain the original investment strategy
Which of the following best describes market order in stock trading?
A directive to buy or sell a stock immediately at the current market price
