Q:
The general investing public is under the opinion that today's new tech stock is going to take off and that its high price/earnings ratio is insignificant. Mary invests with the philosophy that the new tech stock is highly over-valued and that when the stock price is lower and the company begins to show earnings, it may represent a good buy. This is known as:
A) Modern Portfolio Theory
B) Efficient frontier
C) Contrarian investing
D)
A:
The correct answer is C).
Mary invests with a contrarian investment strategy, a style that does not follow public opinion and market trends. Contrarian style investing generally places value on solid companies with low P/E ratios.

MORE FAQS

  1. Under the Investment Company Act of 1940, an investment company, or mutual fund company, must have minimum net assets of how much before it can issue shares to the public?

  2. Tina and Mary are sisters seeking to save enough money to contribute to their eight-year-old nephew's ...

  3. Tiffany's brother, Jamal, is a new investor but believes that the markets are basically efficient and ...

  4. The real rate of return is the amount of interest earned over and above the:

  5. Stocks with high P/E ratios can be overpriced. Is a stock with a lower P/E always a better investment than a stock with a higher one?

  6. A “normal market” is also called a (an): A) Inverted market b) Carrying charge market c) Premium market ...

  7. The primary reason for an IA to rebalance a client’s portfolio is to:

  8. What are some of the limitations of only looking at the rate of return for an investment?

  9. How can I protect my portfolio from market corrections?

  10. Under the Uniform Securities Act, a broker-dealer is generally required to obtain surety bond coverage ...

  11. Under the Investment Company Act of 1940, which of the following is not a formal classification ...

  12. What proportion of my overall investments should be in securities?

  13. A registered representative has discovered an article in a major news magazine that makes statements ...

  14. Are dividends the best way to make money for retirement?

  15. How many attempts at each CFA exam is a candidate permitted?

  16. What's the average salary of a financial advisor?

  17. Why is Hong Kong considered a tax haven?

  18. Is smart beta cheaper than hedge funds?

RELATED FAQS

  1. Under the Investment Company Act of 1940, an investment company, or mutual fund company, ...

    A. $25,000B. $50,000C. $100,000D. $500,000 Correct answer: CAn investment company (mutual fund) must have at least ...
  2. Tina and Mary are sisters seeking to save enough money to contribute to their eight-year-old ...

    The correct answer is b). Wrap account programs are designed for those who trade often within their accounts and want to ...
  3. Tiffany's brother, Jamal, is a new investor but believes that the markets are basically ...

    The correct answer is C). A buy-and-hold strategy describes a passive investment approach. This approach assumes that markets ...
  4. The real rate of return is the amount of interest earned over and above the:

    a. discount rate. b. tax rate. c. inflation rate. d. risk-free rate of return. Answer: C Since the real rate of return measures ...
RELATED TERMS
  1. Investment Style

    The overarching strategy or theory used by either a retail investor ...
  2. Style Drift

    The divergence of a mutual fund from its stated investment style ...
  3. Investing Style

    In the context of stock mutual fund investing, refers to using ...
  4. Investment Philosophy

    A set of guiding principles that inform and shape an individual's ...
  5. Tactical Trading

    A style of investing for the relatively short term based on anticipated ...
  6. Opinion Shopping

    The practice of searching for an outside auditor who will provide ...
Hot Definitions
  1. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price ...
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  3. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center