CRC CRC Investment Strategies & Asset Allocation

Question 1

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

Accepted Answer

Glide path strategy

Answer

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

Question 2

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

Accepted Answer

Reduce unsystematic risk across asset classes

Answer

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

Question 3

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

Accepted Answer

Dividing assets into time-segmented pools with different risk levels

Answer

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

Question 4

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

Accepted Answer

Sequence-of-returns risk

Answer

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.

Question 5

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

Accepted Answer

Restoring the portfolio to its target asset allocation

Answer

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

(CRC) Certified Retirement Counselor Practice Test

(CRC) Certified Retirement Counselor Practice Test

CRC CRC Investment Strategies & Asset Allocation