In age-based asset allocation, Group of answer choicesstock investment decisions depend on the life expectancy of the investor.the higher the life expectancy, the higher the portion of investments committed to riskier arenas, such as the stock market.investors to make the stock investment decision based on a deduction of their age from a base value of a 100.the investment decision is based on the age of the investors.All of these.
Question
In age-based asset allocation, Group of answer choicesstock investment decisions depend on the life expectancy of the investor.the higher the life expectancy, the higher the portion of investments committed to riskier arenas, such as the stock market.investors to make the stock investment decision based on a deduction of their age from a base value of a 100.the investment decision is based on the age of the investors.All of these.
Solution
The statement is referring to the concept of age-based asset allocation. This is a strategy used by investors to decide how to distribute their investments among different asset classes such as stocks, bonds, and cash. The strategy is based on the investor's age, with the idea being that the younger the investor, the more risk they can afford to take, and therefore, the more they should invest in riskier assets like stocks.
Here's a step-by-step breakdown of the statement:
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"Stock investment decisions depend on the life expectancy of the investor." This means that an investor's age and expected lifespan are factors in deciding how much to invest in stocks. The longer an investor expects to live, the more time they have to recover from any potential short-term losses, so they can afford to take on more risk.
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"The higher the life expectancy, the higher the portion of investments committed to riskier arenas, such as the stock market." This is a further explanation of the first point. It means that if an investor expects to live a long time, they can invest a larger portion of their assets in stocks, which are riskier but also have the potential for higher returns.
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"Investors make the stock investment decision based on a deduction of their age from a base value of 100." This is a rule of thumb used by some investors. The idea is to subtract your age from 100, and that's the percentage of your portfolio that you should invest in stocks. So if you're 30, you would invest 70% of your portfolio in stocks.
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"The investment decision is based on the age of the investors." This is a summary of the previous points. The investor's age is a key factor in deciding how much to invest in different asset classes.
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"All of these." This indicates that all of the previous statements are part of the concept of age-based asset allocation.
Similar Questions
In age-based asset allocation, the investment decision is based on the age of the investors. Therefore, most financial advisors advise investors to make the stock investment decision based on a deduction of their age from a base value of a 100. The figure depends on the life expectancy of the investor. The higher the life expectancy, the higher the portion of investments committed to riskier arenas, such as the stock market.ExampleUsing the previous example, let’s assume that Joe is now at 50 years and he is looking forward to retiring at 60. According to the age-based investment approach, his advisor may advise him to invest in stocks in a proportion of 50%, then the rest in other assets. This is because when you subtract his age (50) from a hundred-base value, you’ll get 50.Now assume that Joe was 35 years old, instead of 50. Which of the following would not be true?Group of answer choicesMore of Joe's investments should be in stocks.The implied message is that stocks are riskier than other investments.65% of investments should be in less risky investments.None of these are true.Joe would have a higher life expectancy at age 35 than at 50/
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Suppose there are two investors: Michael and Steve. Both have pension funds, into which they deposit money each month from their paychecks. Both are in their early 30s, and anticipate retiring at around age 65. Neither anticipates withdrawing any money from his pension fund prior to retirement.Michael watches his pension fund closely, looking each week at whether has gone up or down in value. On a week to week basis, the US equity markets are down almost as often as they are up. Steve, on the other hand, only checks the value of his pension fund once every five years or so. On a five-year basis, the US equity markets are down less than 10% of the time.Michael’s pension fund money is all in bonds, while Steve’s is all in equities. Which single feature of Prospect Theory provides the best explanation for the two men’s different portfolio allocations?1 pointRisk seeking over lossesRisk aversion over gainsLoss aversion
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