Chartered Investment Manager (CIM) Practice Exam · Question
A portfolio manager adheres to a disciplined rebalancing strategy. Which of the following best describes the primary benefit of rebalancing?
Portfolio rebalancing ensures that the asset allocation returns to its target weights, preventing drift that could expose the client to unintended risk levels o
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Question: A portfolio manager adheres to a disciplined rebalancing strategy. Which of the following best describes the primary benefit of rebalancing?
Answer options:
- To consistently outperform the market benchmark. ✅ To ensure the portfolio's risk level and asset allocation remain aligned with the client's IPS.
- To minimize all transaction costs by rarely adjusting the portfolio.
- To allow winning asset classes to grow unimpeded without intervention.
Correct answer: To ensure the portfolio's risk level and asset allocation remain aligned with the client's IPS.
Explanation: Portfolio rebalancing ensures that the asset allocation returns to its target weights, preventing drift that could expose the client to unintended risk levels or stray from their investment objectives.
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