AWMA Investment Strategies Questions & 100% Correct Answers

3 key elements invt strategy ~~ identifiable goal, a method to attain a goal, the competencies and resources to sustain the strategy What is the difference between investment strategy and investment policy? ~~ investment policy sets forth the financial goals of the client, investment strategy is the way9s0 to attaining those goals What is the buy-and-hold strategy ~~ as the name implies. the strategy involves purchasing securities and then patiently keeping those securities for a long period of time, selling only when there is a compelling need to do so List of benifits of the buy and hold strategy ~~ returns at least as good as stretegies based on technical analysis, low transaction costs, the deferral of capital gains taxes on profits, not missing the best days of the market 2 | P a g e | © copyright 2024/2025 | Grade A+ Master01 | September, 2024/2025 | Latest update How does the efficient market hypothesis support the argument for a buy and hold strategy ~~ the efficient market hypothesis holds that current market prices reflet all the available info about issuers and the future expectations of their investors; therefore, attempts to invest in undervalued securities, with the inherent buying of undervalue securities and selling overvalued securities, iscostly and a waste of time. For each of the following economic stages, list the industries that are expected to do well. ~~ expansion: early stage (consumer credit, transportation, energy, and consumer cyclicals), expansion: middle stage (basic materials), expansion: late stages (capital goods), recession (consumer staples and utilities) Define sector rotation ~~ a timing strategy that shifts portfolio assests from one sector of the economy to another in anticipation of broad-based economic developments Describe the following technical indicators used by contrarians 3 | P a g e | © copyright 2024/2025 | Grade A+ Master01 | September, 2024/2025 | Latest update ~~ short selling (increaasing short selling in a stock indicates a growing herd consensus that the market will decline; the contrarian should consider the opposite move), specialists' sentiment (considered to be the "smart money," increased bullishness by specialists in a stock makes contrarians bullish as well, and vise versa), mutual fund cash positions (mutual fund managers are considered to be herd animals; when mutual funds have low and decreasing cash positions, contrarians take this as a cell signal; the revers is true as well), investment advisory opinions (this theory suggests that the aggregate opinion investment advise