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. All of the following statements are true with respect to the various ways that equity investments may ...

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

  3. 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?

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

  5. You invest $1,000 in a mutual fund for two years. The mutual fund earned 25% in the first year and lost ...

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

  7. What counts as "debts" and "income" when calculating my debt-to-income (DTI) ratio?

  8. 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?

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

  10. How have portfolios from within the efficient frontier performed historically?

  11. Under the Uniform Securities Act, federal covered securities include those sold to qualified purchasers ...

  12. Under the Uniform Securities Act, federal covered securities include those sold to qualified purchasers ...

  13. How risky is it to create a counter-trend trading strategy?

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

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

  16. Federal student loan rates: who sets them, why they vary

  17. How are you taxed after selling a mutual fund in a Roth IRA?

  18. Can I take my 401(k) to buy a house?

  19. How do I calculate my gains and/or losses when I sell a stock?

  20. How do I calculate my Social Security break-even age?

RELATED FAQS

  1. All of the following statements are true with respect to the various ways that equity ...

    The correct answer is: b) Global investing is the proper definition for investing in stocks from all over the world. International ...
  2. Under the Investment Company Act of 1940, an investment company must have minimum ...

    A. $25,000B. $50,000C. $100,000D. $500,000 Correct answer: CAn investment company (mutual fund) must have at ...
  3. 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 ...
  4. 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 ...
  5. You invest $1,000 in a mutual fund for two years. The mutual fund earned 25% in ...

    The correct answer is c). If you invest $1,000 and earn 25% you will now have $1,250 at the end of the first year ($1,00 ...
  6. 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 ...
RELATED TERMS
  1. Contrarian

    An investment style that goes against prevailing market trends ...
  2. Style Analysis

    The process of determining what type of investment behavior an ...
  3. Investment Style

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

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

    In the context of stock mutual fund investing, refers to using ...
  6. Style

    The investment approach or objective that a fund manager uses ...
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center