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drdoombot drdoombot
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2 years ago
Mathew's 401-K plan offers a choice between and S&P 500 Index Fund, a large-cap stock fund, a blue chip stock fund that seeks high dividend income and modest growth, a fund that invests only in investment grade corporate bonds and a fund that that invests only in government bonds.  Mathew allocates 20% of his money to each fund.  Which of the following statements offers the best critique of Mathew's "1/N" allocation?

▸ Mathew may not be as well diversified as he thinks because the three stock funds probably own many of the same stocks.

▸ He should have allocated on 1/3 to stocks and 1/3 to each of the remaining funds.

▸ His plan does not provide sufficient liquidity.

▸ There is nothing wrong with Mathew's plan.
Textbook 
Fundamentals of Investing

Fundamentals of Investing


Edition: 14th
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KimbletonKimbleton
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