CRPC exam 2023/2024 with 100% correct answers

Diversification - correct answer Acquiring assets with low or negative correlations to each other with the goal of lowering overall risk Correlation - correct answer - a relative measure of the degree to which the returns of two assets move together - range from +1.0 to -1.0 - in practice negative correlations are rare - the further a correlation is from +1.0, the more diversified Asset allocation - correct answer - the apportioning of available funds among a number of asset classes in a way that meets the needs of a particular client, dampens the effects of periodic market fluctuations, and meets investment goals Four steps in the asset allocation process - correct answer 1) select asset classes to be represented 2) determine the percentage that each asset class should represent in the total portfolio 3) Select individual securities 4) Review and rebalance Strategic Asset Allocation - correct answer - determine asset mix that provides optimal balance of expected risk and ROR - asset classes selected and % weight determined - Used to develop long-term allocation policy - utilizes rebalancing to maintain targeted weight Tactical Asset Allocation - correct answer - used to develop short term strategies to exploit changes in market conditions - ofter viewed as a contrarian strategy - periodic revisions of asset mix; moving funds from over valued investments to undervalued investments - market timing strategy Core-Satellite asset allocation - correct answer 70-80% invested in broad index fund or etfs - remain