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Investment Advisor: It is well-known that investing in

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Manager
Manager
User avatar
Joined: 17 Oct 2012
Posts: 62
Location: India
Concentration: Finance, Entrepreneurship
WE: Information Technology (Computer Software)
Followers: 0

Kudos [?]: 25 [0], given: 44

Re: Investment Advisor: It is well-known that investing in [#permalink] New post 23 Jul 2013, 22:20
If A is true then it will be counter productive for the Advisor so as per my observation A should be the answer.
Manager
Manager
avatar
Joined: 14 Nov 2008
Posts: 70
Followers: 2

Kudos [?]: 14 [0], given: 1

Re: Investment Advisor: It is well-known that investing in [#permalink] New post 04 Sep 2013, 22:44
The strategy of the investment advisor is based on selecting the fund that has
delivered the highest returns within the peer group that meets the client’s
objectives. One of the major assumptions underlying this strategy is that the
funds that have delivered the best returns will continue to do so in the future. If
this assumption is inaccurate, the strategy of the investment advisor will be
seriously weakened.
(A) CORRECT. This answer choice demonstrates a serious flaw in the logic of
the investment advisor. If it is true that the best-performing fund managers have
already used their strongest ideas and are unlikely to sustain this level of
performance in the future, then the advisor’s winner-oriented strategy is unlikely
to deliver high returns.
(B) Since the investment advisor selects the fund from the group that meets the
client’s objectives, this statement does not weaken the advisor’s strategy.
(C) Since the advisor’s strategy is oriented only towards her clients rather than
the public in general, the fact that many investors choose to manage their own
portfolios is outside the scope of the argument.
(D) This statement, if true, would support rather than weaken the advisor’s
strategy. If the funds with strongest past performance continue to outperform
others, the advisor’s strategy is likely to yield high future returns.
(E) Since this answer choice does not provide any specific reason for the decline
in the advisor’s clientele, it is not relevant to the effectiveness of the advisor’s
strategy. This decline could have occurred for a variety of reasons unrelated to
investment returns. For example, the decline in the clientele could have resulted
from the fact that the advisor moved from a larger metropolitan area to a smaller
town with fewer active investors.
Re: Investment Advisor: It is well-known that investing in   [#permalink] 04 Sep 2013, 22:44
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