CIC Client Portfolio Management 3

Question 1

A client's investment policy statement (IPS) specifies a maximum 15% allocation to alternative investments. The portfolio currently holds 22%. What must the counselor do?

Accepted Answer

Reduce alternatives to comply with the IPS constraint

Answer

The IPS is a binding guideline; the counselor must reduce the alternatives allocation to within the stated maximum of 15%.

Question 2

Which factor primarily determines the appropriate asset allocation for a client?

Accepted Answer

Client's time horizon, risk tolerance, and financial goals

Answer

Asset allocation must be customized to the individual client's time horizon, risk tolerance, and specific financial objectives.

Question 3

Dollar-cost averaging into an equity fund most benefits an investor in which market condition?

Accepted Answer

Declining or volatile market

Answer

Dollar-cost averaging acquires more shares when prices fall, lowering the average cost basis and benefiting most in volatile or declining markets.

Question 4

A client in the highest tax bracket holds large unrealized capital gains. Which tax-efficient strategy can reduce current-year tax liability?

Accepted Answer

Tax-loss harvesting to offset gains with losses

Answer

Tax-loss harvesting realizes losses to offset capital gains, reducing the client's net taxable gain for the year.

Question 5

What is the primary purpose of a benchmark in portfolio management?

Accepted Answer

To measure portfolio performance against a relevant standard

Answer

A benchmark provides a relevant standard to evaluate whether the portfolio's performance meets expectations relative to its investment mandate.

(CIC) Certified Investment Counselor Practice Test

(CIC) Certified Investment Counselor Practice Test

CIC Client Portfolio Management 3