Client Suitability and Portfolio Management Flashcards
6 cards from real Investment Advisor practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Client Suitability and Portfolio Management flashcards as text
What does 'beta' measure in portfolio management?
Answer: The portfolio's sensitivity to market movements
Beta measures how much a portfolio or security moves relative to the overall market — a beta of 1.2 means the portfolio typically moves 20% more than the market.
A client who wants to maintain their current lifestyle throughout retirement and leave a significant estate would have what type of primary objectives?
Answer: Income, capital preservation, and growth
Balancing current income needs, preserving capital, and achieving modest growth to fund an estate legacy requires a blended objective strategy.
Which investment constraint refers to restrictions on the types of investments a client is legally or ethically permitted to hold?
Answer: Legal and regulatory constraint
Legal and regulatory constraints include rules that prohibit certain investments — such as insiders restricted from trading company stock or pension funds subject to ERISA investment limits.
Dollar-cost averaging is best described as:
Answer: Investing fixed amounts at regular intervals regardless of market price
Dollar-cost averaging involves investing a fixed dollar amount at regular intervals, automatically buying more shares when prices are low and fewer when prices are high.
Which type of analysis focuses on evaluating a company's financial statements, management, and competitive position to determine intrinsic value?
Answer: Fundamental analysis
Fundamental analysis examines a company's financial health, earnings, management quality, and competitive advantages to estimate its intrinsic value.
An investment adviser constructs a portfolio that closely tracks a market index with minimal active management. This approach is called:
Answer: Passive (index) investing
Passive or index investing aims to replicate the returns of a market index with low costs and minimal active trading, contrasting with actively managed strategies.