CLASS PREPARATION ASSIGNMENT #2 - QUESTIONS. Covering Chapters 4, 5 of Ferri textbook, plus other readings, videos as shown in the CPA.

Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve. Talmud, circa 1200 BC500 AD In todays terms, it means keep a third in stocks, a third in bonds, and a third in land. This will diversify a portfolio and guard it from total loss. Ferri, Richard (2010-07-12). What do you think is that good advice for today?

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Should personal home ownership be included as part of an allocation to real estate, as part of a persons overall asset allocation, in your view? Why or why not? (This answer requires critical thinking; the answer is not in the text.)

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What are international equities (also known as foreign stocks)? Why might a broad basket of foreign stocks not always move in unison with a broad basket of U.S. stocks?

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What is the MSCI EAFE Index? (Online research required.)

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What is the MSCI Emerging Markets (EM) Index? What countries are included in that index? (Online research required.)

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There are many different indexes that track various asset classes. Find the returns of the FTSE All-World ex-US Index (foreign stocks) and FTSE Emerging Index (foreign emerging markets stocks) indices, compared to the Russell 1000 Index (U.S. large company stocks), for the time period shown below. To undertake this assignment, complete the table below by visiting https://personal.vanguard.com/us/funds/tools/benchmarkreturns and find the most recent returns for:

INDEX	1-MONTH RETURN	1-YEAR RETURN	3-YEAR RETURN	5-YEAR RETURN	10-YEAR RETURN
Russell 1000 Index (U.S. Large Cap Stocks)
FTSE All-World Ex-US Index
FTSE Emerging Index

There are many different indexes that track bond market returns. To undertake this assignment, complete the table below by visiting https://personal.vanguard.com/us/funds/tools/benchmarkreturns and find the most recent returns for the indexes shown below:

INDEX	1-MONTH RETURN	1-YEAR RETURN	3-YEAR RETURN	5-YEAR RETURN	10-YEAR RETURN
Barclays US 1-5 Credit Index
Barclays US 5-10 Year Corp Index
Barclays US Long Treasury Index

What does credit refer to, in the index name shown above? (The answer is found in the chapter.)

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What is a basis point?

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Can you easily find asset classes that possess positive returns, above that of inflation, which also possess negative correlation? (Yes or No.)

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Explain the concept of multi-asset class investing in your own words.

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The author states that both U.S. stocks and U.S. bonds have real positive returns over time. What is real return? What is nominal return?

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The author states: There is no known way to design a portfolio that is fully hedged against market downturns while fully participating in market upturns. In your own words, what does he mean by this?

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What are the three important characteristics you should look for, when deciding which asset classes to include in your investment portfolio? (You may quote directly from the book, for this answer.)

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U.S. stocks are those stocks of companies that have their headquarters in the United States. But many corporations, especially of larger U.S. companies, possess substantial overseas operations and hence generate revenue, and profits, from foreign operations. Undertake a Google search for foreign revenues S&P 500 2014. For U.S. large corporations defined for this purpose as those corporations in the S&P 500 Index, what percentage of sales occurred to customers in foreign countries in any recent year?

(Note: For comparison purposes, U.S. small-cap stocks, as measured by the Russell 2000 Index, only derive about 20% of their revenues from sales to non-U.S. customers.)

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Explain, in your own words, the difference between a large cap and mid-cap and small-cap stock.

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Explain, in your own words, the difference between a value and growth stock.

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Do an online search for mutual funds. Find and note below the name and ticker symbol (a five-letter designation) for a fund you find in the following asset classes. Then visit www.morningstar.com, type in the ticker symbol (five letters) into the search box, and find the Morningstar style box for the fund. What style box is the fund in?

A large cap growth U.S. stock mutual fund:

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A small cap value U.S. stock mutual fund:

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A total stock market U.S. stock mutual fund:

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