Your client want to invest 80 percent of their funds in stocks that are steady and not effected by the economy and to invest another 20 percent of their funds in stock that would take advantage of economical shifts. Where type of stocks would you suggest 80 percent of the funds purchase?
Explanation
Answer: C - Eighty-percent of the client’s funds should be in defensive stocks. Defensive stocks are relatively unaffected by general fluctuations in the economy. Examples are soft drinks, groceries, alcohol, and tobacco. The other 20 percent of the client’s funds could purchase interest-sensitive stocks; they are largely affected by changes in interest rates and the issues of supply and demand. Examples are housing industry, insurance companies, or utilities.
