Investment Strategies Flashcards
7 cards from real AAMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Investment Strategies flashcards as text
Which tactical asset allocation approach involves shifting weights toward asset classes that have recently underperformed relative to their historical averages?
Answer: Contrarian rebalancing
Contrarian rebalancing shifts weights toward underperforming asset classes, betting on mean reversion to historical averages.
A client wants to reduce sequence-of-returns risk during the first decade of retirement. Which strategy best addresses this concern?
Answer: Implementing a bucket strategy with cash reserves for near-term needs
A bucket strategy holds cash or short-term assets for near-term withdrawals, shielding the portfolio from selling equities at depressed prices.
What is the primary objective of a liability-driven investing (LDI) strategy?
Answer: Matching asset cash flows to future liability obligations
LDI focuses on structuring assets so their cash flows match the timing and magnitude of the investor's future liabilities.
A 130/30 strategy involves what combination of long and short positions?
Answer: 130% long equities, 30% short equities
A 130/30 fund takes 130% long equity exposure and 30% short equity exposure, maintaining net 100% market exposure while adding alpha potential.
Which of the following best describes a 'core-satellite' portfolio construction approach?
Answer: Pairing a passive core with actively managed satellite positions
Core-satellite combines a low-cost passive core (e.g., broad index funds) with smaller active or alternative satellite allocations seeking enhanced returns.
In factor investing, the 'value' factor is typically captured by buying stocks with:
Answer: Low price-to-book or price-to-earnings ratios relative to peers
The value factor targets stocks with low valuation multiples (e.g., P/B, P/E), which historically have delivered a premium over growth stocks.
A systematic rebalancing policy that triggers trades only when allocations drift beyond a set band (e.g., ±5%) is called:
Answer: Threshold or tolerance-band rebalancing
Threshold rebalancing triggers only when allocations breach a predefined drift band, reducing unnecessary turnover compared to calendar-based approaches.