Questions and Answers
What should be the primary focus when managing a portfolio?
Which of the following is a suitable strategy for avoiding unnecessary debt?
What is a primary reason for maintaining an emergency fund?
In the context of asset allocation, what does 'asset class' refer to?
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Which of the following is NOT a component of a balanced retirement savings strategy?
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What is the primary purpose of rebalancing a portfolio?
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Which strategy helps in limiting potential losses while capturing gains?
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Why is it essential to consider tax implications when executing trades?
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What factor should be considered when determining position sizing in an investment strategy?
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What is a key benefit of regularly monitoring a portfolio?
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What is the inflation rate in the Philippines for the year 2024?
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Which type of investment is typically associated with higher risk tolerance for younger individuals?
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What is a key benefit of using a diversified portfolio for investment?
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If you initially invest $100 and it earns $10 in the first year, what will be your total after the second year following compounding interest?
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Which strategy is essential for saving adequately for retirement?
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Which of the following investment options typically provides the lowest returns over time?
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How does compounding interest benefit an investment over time?
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What is one of the primary benefits of starting and expanding a business as an investment strategy?
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Study Notes
Philippine Inflation Rate
- Inflation rates in the Philippines from 2021 to 2024 show fluctuations:
- 2024: 3.58%
- 2023: 5.98%
- 2022: 5.82%
- 2021: 3.93%
Power of Compounding Interest
- Compounding interest amplifies wealth; initial investment earns interest on both the original amount and the interest accrued.
- Example:
- Invest 100,earn100, earn 100,earn10 interest in the first year, total becomes $110.
- In the second year, 110earns110 earns 110earns11, total is $121.
- In the third year, 121earns121 earns 121earns12, total is $133.
- The compounding effect continues as long as the investment grows.
- Compounding formulas:
- Future Value: ( P(1 + i)^n )
- Compound Value: ( P[(1 + i)^n - 1] )
Benefits of Portfolio Investment
- Save for retirement and secure financial future.
- Potential for higher returns compared to traditional saving methods.
- Supports business ventures and helps others in the community.
Achieving Financial Security
- Live within means and practice frugality.
- Budget allocation for both short-term and long-term goals.
- Avoid unnecessary debt and focus on savings.
- Establish an emergency fund for unexpected expenses.
Asset Allocation Decision
- Asset allocation involves distributing investments across different asset classes (e.g., stocks, bonds) to manage risk.
- Bonds can be categorized into treasury bonds, corporate bonds, and high-yield bonds for risk management.
- Strategies include:
- Diversification across asset classes and sectors to spread risk.
- Position sizing based on overall portfolio allocation to control exposure.
Trade Management and Monitoring
- Execute trades through a brokerage, considering transaction fees and costs.
- Rebalance the portfolio periodically to maintain target asset allocations.
- Regularly monitor portfolio performance and market changes for informed decision-making.
- Consider tax implications from trades to minimize capital gains taxes.
- Maintain accurate documentation for all investments for tracking and tax purposes.
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Description
Test your knowledge on the inflation rates in the Philippines from 1987 to 2029. This quiz will challenge your understanding of economic trends and the factors influencing inflation in the country over the years.
