An investor decides to include a larger weighting of Real Estate Investment Trusts (REITs) and infrastructure funds in their portfolio, both of which are known for their income-generating capabilities and relatively lower correlation to traditional equities. This decision is most directly related to which aspect of portfolio construction?

Question: An investor decides to include a larger weighting of Real Estate Investment Trusts (REITs) and infrastructure funds in their portfolio, both of which are known for their income-generating capabilities and relatively lower correlation to traditional equities. This decision is most directly related to which aspect of portfolio construction?

Answer options:

• Market timing.
• Active trading. ✅ Asset allocation.
• Security selection.

Correct answer: Asset allocation.

Explanation: The decision to allocate a larger portion of the portfolio to specific asset classes like REITs and infrastructure funds falls under asset allocation, which is the process of deciding how to distribute investments among various categories of assets.