Practice Quiz

Financial Planner

Category - Investment Planning

Start a Study Session Sign up for Question of the Day
Which of the following is true regarding asset allocation and portfolio diversification?
  1. Through diversification, you should maximize risk in a portfolio by spreading investments across various types.
  2. You should periodically rebalance the asset allocation.
  3. Clients will never understand the techniques you employ, so it is not important to explain them.
  4. You should educate the client at the beginning of portfolio management, but should not need to do it again.
Explanation
Answer: B - Different asset classes have a tendency to drift away from targets, thus causing a difference in returns. Because of this, you should periodically rebalance the asset allocation based on the client’s objectives and risk tolerance.
Was this helpful? Upvote!
Login to contribute your own answer or details
Start a Study Session Sign up for Question of the Day

Top questions

Related questions

Most popular on PracticeQuiz