AWMA Investment Strategies Exam
Study Guide
3 key elements invt strategy - Answer-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? - Answer-
investment policy sets fort...
Define sector rotation - Answer✔✔-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 - Answer✔✔-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 advisers is often wrong. That is,
when the majority of investment advisors are bullish, a contrarian should sell securities), put-
call ratio (high and increasing putt-call ratios suggest buying oppurtunities to the contrarian, and
low or decreasing put-call ratios sugget the opposite)
List three general guidelines for low P/E investors - Answer✔✔-select only contrarian (low P/E)
stocks, but only if the companies have superior performance characteristics. Many stocks
deserve low P/Es because the companies they represent the companies they represent are truly
inferior companies, Diversify. a diversified portofolio should have an equal weighting in 20 to 30
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