CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

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Question 1 of 10

Which of the following is an advantage of investing in your home market:

  • A It introduces diversification to your portfolio
  • B You’ll have easier access to news that could affect your assets
  • C It’s more lucrative
  • D All of the above

Explanation

Investing locally benefits you because you’ll possibly have earlier access to breaking news that could affect your investment than you would with an overseas holding.

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Question 2 of 10

Which of the following is an advantage of investing overseas:

  • A It introduces diversification to your portfolio
  • B You’ll have easier access to news that could affect your assets
  • C It’s more lucrative
  • D All of the above

Explanation

Investing offshore helps with diversification because your money isn’t tied up in one market.

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Question 3 of 10

ABC plc and XYZ ltd are competitor laptop brands with an almost equal share of the market, rate of production and they generally have the same level of annual returns. In an effort to grow their business, ABC plc hires 500 more employees across the globe to increase output. A global pandemic strikes, forcing several people to work from home and thus increasing demand for laptops. All else equal, which company would be the better investment?

  • A ABC plc
  • B XYZ ltd

Explanation

ABC plc is better prepared to deal with the increased demand
and will likely make more money during this period and possibly beyond.

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Question 4 of 10

Fundamental analysis relies solely on charts, graphs and price data to form conclusions about an asset.

  • A True
  • B False

Explanation

Fundamental analysis takes a holistic look at an asset using all the publicly available information, such as the financials of a company, to form conclusions about its future performance.

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Question 5 of 10

Company X, a newly listed tech company, has experienced high levels of volatility since its initial public offering. John decides to try and profit from these price fluctuations. To get started, he looks at the company’s price chart for patterns before putting his money up. This is an example of:

  • A Fundamental analysis
  • B Technical analysis

Explanation

Technical analysis involves looking at an asset’s price data for clues on how it’ll move next. Fundamental analysis would need in-depth analysis of the company before any conclusions are drawn.

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Question 6 of 10

You can diversify your portfolio by:

  • A Buying both local and offshore assets
  • B Investing across different sectors
  • C Varying the financial instruments you buy and sell
  • D All of the above

Explanation

All of these actions can help diversify your portfolio.

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Question 7 of 10

A second-tier portfolio is used for long-term investments.

  • A True
  • B False

Explanation

You’d generally use a second-tier portfolio for short-to-medium term investments. The aim is to capitalise on shorter-term price momentum rather than long-term growth.

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Question 8 of 10

Inflation rose by 4% in the last year. If your portfolio grew by 8% to $500,000 in the same period, what’s the maximum amount you can withdraw without hurting your wealth?

  • A $50,000
  • B $25,000
  • C $20,000
  • D $15,000

Explanation

You can withdraw 4% of your funds without making too big an impact on your portfolio. 4% of $500,000 is $20,000.

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Question 9 of 10

Why is it sometimes good to sell holdings that are performing very well?

  • A Because it’s a sign they’ll depreciate soon
  • B To rebalance your portfolio
  • C To slow down your portfolio growth
  • D All of the above

Explanation

If the asset that’s overperforming changes the amount of risk in your portfolio, you may want to sell parts of it to bring it back to a desirable level. This is called rebalancing.

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Question 10 of 10

Your drawdown rate should always be at the same level as inflation.

  • A True
  • B False

Explanation

You ideally want your drawdown rate to be any amount above the rate of inflation, ie % of growth - inflation = ideal drawdown percentage. That way, the growth rate of your portfolio is at least on par with inflation.

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