PFL Segment Exam: (4.02) Regina, a 25-year-old professional, wants to start an investment portfolio. What strategy may her financial advisor suggest? (5 points)

Start a low-risk portfolio, then shift to bonds.

Invest only in national companies.

Buy 100% international stocks.

Choose a high-risk portfolio now and change it, if needed, in the future.

Start a low-risk portfolio, then shift to bonds.

Explanation:

Regina has the advantage of time. She is still young and has the time to learn and master an investment strategy of her choice. At the time of starting, her portfolio is not that large. It will be wise of her to start with a low-risk strategy and let her portfolio grow steadily.  A low-risk strategy will be made of mostly short-term investments.

As she gains experience and her portfolio grows, she can then diversify in other long term instruments bonds. These instruments have a relatively high risk but offer higher returns.

answer; coefficient of correlation;