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# Investment Advisor: It is well-known that investing in

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Manager
Joined: 17 Oct 2012
Posts: 72

Kudos [?]: 126 [0], given: 52

Location: India
Concentration: Strategy, Finance
WE: Information Technology (Computer Software)

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23 Jul 2013, 23:20
If A is true then it will be counter productive for the Advisor so as per my observation A should be the answer.

Kudos [?]: 126 [0], given: 52

Manager
Joined: 14 Nov 2008
Posts: 67

Kudos [?]: 26 [0], given: 1

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04 Sep 2013, 23:44
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.

Kudos [?]: 26 [0], given: 1

GMAT Club Legend
Joined: 01 Oct 2013
Posts: 10110

Kudos [?]: 263 [0], given: 0

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17 May 2015, 03:33
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.

Kudos [?]: 263 [0], given: 0

Director
Joined: 26 Oct 2016
Posts: 693

Kudos [?]: 180 [0], given: 855

Location: United States
Schools: HBS '19
GMAT 1: 770 Q51 V44
GPA: 4
WE: Education (Education)

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13 Apr 2017, 23:20
Following points mentioned below Advisor assumes to be true :-
1) Investing in mutual funds reduces portfolio risk.
2) Past investment performance is often related to future investment prospects.
Conclusion :-
Advisor selects a group of mutual funds that meet the client’s objectives and then invest the client’s assets in the fund that has delivered the highest returns in this group over the past 2 years. So, client can earn high returns with low risk.
Reasoning :-
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.
_________________

Thanks & Regards,
Anaira Mitch

Kudos [?]: 180 [0], given: 855

Manager
Joined: 21 Jul 2017
Posts: 86

Kudos [?]: 8 [0], given: 63

Location: India
GMAT 1: 750 Q51 V41
GPA: 4

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07 Aug 2017, 08:57

D) Strengthens.
C), E) Out of scope.
B) select a group of mutual funds that meet the client's objectives and then invest the client's assets in the fund that has delivered the highest returns in this group over the past 2 years.

The investment manager is not selecting a single fund for every investor.

A) Past performance will not be repeated in the future. Hence, the correct answer.

Kudos [?]: 8 [0], given: 63

Re: Investment Advisor: It is well-known that investing in   [#permalink] 07 Aug 2017, 08:57

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