RIA Portfolio Management 2

Question 1

Asset allocation primarily aims to:

Accepted Answer

Balance risk and return across different asset classes

Answer

Asset allocation distributes investments across asset classes to optimize the risk-return tradeoff for a client's goals.

Question 2

Rebalancing a portfolio involves:

Accepted Answer

Returning allocations to target percentages

Answer

Rebalancing restores the portfolio to its original target allocation by selling assets that have grown beyond targets and buying those that have fallen below.

Question 3

The primary purpose of a benchmark in portfolio management is to:

Accepted Answer

Provide a standard against which portfolio performance is measured

Answer

A benchmark provides a reference point to evaluate whether a portfolio manager is adding value relative to the market.

Question 4

Dollar-cost averaging is a strategy that involves:

Accepted Answer

Investing fixed amounts at regular intervals regardless of price

Answer

Dollar-cost averaging invests a fixed dollar amount at regular intervals, buying more shares when prices are low and fewer when high.

Question 5

Which portfolio theory concept suggests that investors should only take on additional risk if compensated with additional return?

Accepted Answer

Risk-return tradeoff

Answer

The risk-return tradeoff principle states that higher potential returns require accepting higher risk.

(RIA) Registered Investment Advisor Practice Test

(RIA) Registered Investment Advisor Practice Test

RIA Portfolio Management 2