IFIC Question and answers verified to pass Unique Risk - correct answer - If a security's price is affected by new information, and if new information arrives frequently, then its price will tend to be volatile, and so will the returns that it generates
- When more than one security is held i...
IFIC - Section 5 Chapter 15 - Selecting a
Mutual Fund
Unique Risk - correct answer ✔- If a security's price is affected by new
information, and if new information arrives frequently, then its price will tend to
be volatile, and so will the returns that it generates
- When more than one security is held in a portfolio, these unique risks tend to
cancel each other out. (diversification will cancel unique risk out.)
Default Risk - correct answer ✔- The risk that a bond coupon will not be paid
(You can reduce this by avoid specializing in corporate bonds.)
Market Risk (Systematic risk) - correct answer ✔- Changes in the overall
market affecting an entire class of securities; no way to reduce this
Exchange Rate Risk - correct answer ✔- Changes in the relative value of the
currencies of the countries of investment
(You can reduce this by Hedging)
Interest Rate Risk - correct answer ✔- Changes in interest rates leading to
changes in Fixed-income securities prices
(You can reduce this by avoid specializing in fixed-income securities.)
What are the steps in selecting a Mutual Fund ? - correct answer ✔1)
Research the Performance Data
2) Focus on Appropriate Investment Objectives
3) Focus on Best Long Term Performance: a
, 4) Focus on Best Year to Year Performance:
5) Focus on Good Performers with Lower Volatility:
6) Focus on Funds with Successful Investment Managers
7) Compare Fund Facts Documents and Compare Prospectuses
8) Examine Fees and Charges
9) Analyze the Size of the Fund
10) Make the Decision
Canadian Investment Funds Standards Committee (CIFSC) - correct answer
✔the body that oversees mutual fund classification, listing 45 categories
containing more than 5000 funds
4 elements of mutual funds before selecting candidates - correct answer ✔1.
People
2. Philosophy
3. Process
4. Performance
GARP managers seek companies with which of the following criteria
compared to the industry average? - correct answer ✔Stocks with high
return on equity.
Managers that use the Growth at a Reasonable Price (GARP) approach tend
to look
1. Companies with projections of growing earnings plus high and increasing
returns on equity relative to the industry average.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Academia199. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.49. You're not tied to anything after your purchase.
