4 Questions
- Which of the following is a nonfinancial consideration or circumstance?
A. Has the customer ever been divorced?
B. What is the customer's current income?
C. How much is the customer's mortgage balance?
D. What is the balance of the customer's 401(k)?
Has the customer ever been divorced?
- Which of the following is an investment recommendation?
A. A recommendation to read the business press to develop an understanding of the economy
B. A suggestion that the Windmill Family of Funds would be a good basis for a portfolio
C. A discussion about the inverse relationship between bond values and interest rates
D. An opinion about the amusement parks run by a particular company
A suggestion that the Windmill Family of Funds would be a good basis for a portfolio
- Sam Johnson is a 77-year-old retiree. He would like to invest cash to generate some additional income. He also says that he is very nervous about losing money in the markets. Which of the following is the most suitable recommendation for Johnson?
A. The Windmill Growth Fund
B. The Far Out Emerging Markets Fund
C. The Washington Treasury Bond Fund
D. Jim's Really Great Technology Fund
The Washington Treasury Bond Fund
- A customer owns a diversified portfolio of domestic large-cap stocks. This customer would like to compare her portfolio's performance to the overall market. The best index to use as a benchmark is which of the following?
A. EAFE Index
B. S&P 500 Index
C. Barclays U.S. Aggregate Bond Index
D. Russell 2000 INDEX
S&P 500 Index
Study Notes
Nonfinancial Considerations
- A nonfinancial consideration or circumstance is a personal aspect of a customer's life, such as their marital history (e.g., having been divorced)
Investment Recommendations
- An investment recommendation is a suggestion for a specific investment or portfolio, such as recommending the Windmill Family of Funds as a basis for a portfolio
- Investment recommendations do not include general advice or discussions about investing, such as recommending reading the business press to develop an understanding of the economy or discussing the inverse relationship between bond values and interest rates
Suitable Investment Recommendations
- For a 77-year-old retiree who wants to generate additional income and is nervous about losing money, a suitable investment recommendation is a conservative investment, such as the Washington Treasury Bond Fund
- Conservative investments are typically less risky and more stable, which is suitable for an investor who is risk-averse and wants to preserve their capital
Performance Benchmarking
- To compare the performance of a diversified portfolio of domestic large-cap stocks to the overall market, the best index to use as a benchmark is the S&P 500 Index
- The S&P 500 Index is a widely followed index of large-cap stocks in the US market, making it a suitable benchmark for a portfolio of domestic large-cap stocks
Test your knowledge on identifying nonfinancial considerations or circumstances with this multiple-choice quiz question. Choose the answer that does not involve financial information.
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