CRC Investment Strategies & Asset Allocation Flashcards

Which investment strategy involves gradually shifting a portfolio from growth-oriented to income-oriented assets as retirement approaches?

Answer: Glide path strategy

A glide path strategy systematically reduces equity exposure and increases fixed-income holdings as an investor nears retirement.

What is the primary purpose of diversification in a retirement portfolio?

Answer: Reduce unsystematic risk across asset classes

Diversification reduces unsystematic (company-specific) risk by spreading investments across different asset classes, sectors, and geographies.

A CRC client aged 65 asks about the 'bucket strategy' for retirement income. Which description is most accurate?

Answer: Dividing assets into time-segmented pools with different risk levels

The bucket strategy segments retirement assets into short-term (cash/bonds), mid-term, and long-term (growth) pools to manage sequence-of-returns risk.

Which risk refers to the danger of experiencing poor investment returns early in retirement, which can permanently deplete a portfolio?

Answer: Sequence-of-returns risk

Sequence-of-returns risk is the threat that negative returns early in the withdrawal phase will reduce the portfolio's ability to recover, even if average returns are acceptable.

In a retirement portfolio, what does 'rebalancing' accomplish?

Answer: Restoring the portfolio to its target asset allocation

Rebalancing restores the original target allocation by selling assets that have grown above target weights and buying those that have fallen below.

Which asset class is generally considered the most effective long-term hedge against inflation within a retirement portfolio?

Answer: Equities (stocks)

Equities historically provide returns that outpace inflation over long periods, making them the most effective long-term inflation hedge in a diversified retirement portfolio.