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Exam (elaborations)

AWMA Investment Strategies Exam Study Guide

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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...

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  • October 16, 2024
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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 forth the financial goals of the client, investment strategy is the way9s0

to attaining those goals


What is the buy-and-hold strategy - Answer✔✔-as the name implies. the strategy involves

purchasing securities and then patiently keeping those securities for a long period of time,

selling only when there is a compelling need to do so


List of benifits of the buy and hold strategy - Answer✔✔-returns at least as good as stretegies

based on technical analysis, low transaction costs, the deferral of capital gains taxes on profits,

not missing the best days of the market


How does the efficient market hypothesis support the argument for a buy and hold strategy -

Answer✔✔-the efficient market hypothesis holds that current market prices reflet all the

available info about issuers and the future expectations of their investors; therefore, attempts

to invest in undervalued securities, with the inherent buying of undervalue securities and selling

overvalued securities, iscostly and a waste of time.

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, EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER, 2024


For each of the following economic stages, list the industries that are expected to do well. -

Answer✔✔-expansion: early stage (consumer credit, transportation, energy, and consumer

cyclicals), expansion: middle stage (basic materials), expansion: late stages (capital goods),

recession (consumer staples and utilities)


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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