Chartered Investment Manager (CIM) Practice Exam · Question
A Canadian investment manager notices that a client's portfolio has drifted significantly from its target asset allocation due to recent market performance. What action would be most appropriate in this situation?
Portfolio rebalancing involves adjusting the asset weights back to their original target allocation to maintain the desired risk/return profile and align with t
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Question: A Canadian investment manager notices that a client's portfolio has drifted significantly from its target asset allocation due to recent market performance. What action would be most appropriate in this situation?
Answer options:
- Ignore the drift, as market performance is unpredictable.
- Immediately sell all underperforming assets. ✅ Rebalance the portfolio back to its target weights.
- Increase allocation to the best-performing assets.
Correct answer: Rebalance the portfolio back to its target weights.
Explanation: Portfolio rebalancing involves adjusting the asset weights back to their original target allocation to maintain the desired risk/return profile and align with the client's IPS.
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