IFIC Mutual Funds Licensing Practice Exam · Question
What is 'portfolio rebalancing' in the context of mutual fund investing?
Portfolio rebalancing involves periodically adjusting the allocation of assets (e.g., stocks, bonds) in a portfolio back to the investor's original target perce
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Question: What is 'portfolio rebalancing' in the context of mutual fund investing?
Answer options:
- Changing the fund manager regularly. ✅ Adjusting the asset allocation of a portfolio back to its original target weights.
- Selling all current investments and investing in entirely new funds.
- Only investing in funds that have recently outperformed the market.
Correct answer: Adjusting the asset allocation of a portfolio back to its original target weights.
Explanation: Portfolio rebalancing involves periodically adjusting the allocation of assets (e.g., stocks, bonds) in a portfolio back to the investor's original target percentages. This strategy helps manage risk and ensure the portfolio remains aligned with the investor's objectives.
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