LLQP Segregated Funds & Annuities · Component 2.1 · 30% of the exam
'Dollar-cost averaging' through pre-authorized contributions:
- AIncreases risk, since the client is buying units when prices may be about to fall
- BGuarantees a profit, since the average cost is always below the average price
- Invests a fixed amount at regular intervals, buying more units when prices are low
- DIs only for lump sums, since regular contributions are too small to average anything
Correct answer: C) Invests a fixed amount at regular intervals, buying more units when prices are low
PACs suit clients with regular surplus and reduce the fear of investing at a peak.
Why the other options are wrong
- AIt reduces timing risk.
- BNothing guarantees a profit.
- DIt is the opposite of lump-sum investing.
Exam tip
PAC/DCA: regular fixed amounts, lower timing risk.
Common mistake
Promising DCA always beats lump-sum investing.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
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