Multiple choice

Investors who follow the fixed Asset Allocation approach

  1. maintain balance in their portfolio by liquidating some investments from the asset class which has given higher return and reinvesting in the other asset class which has lower return

  2. are not disciplined

  3. increase their equity position when equity prices tend to climb

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Fixed asset allocation requires maintaining the target percentage mix between asset classes (equity, debt, gold). When one asset class outperforms, its portfolio weight increases. To rebalance back to the target allocation, you liquidate some of the outperforming asset class (sell high) and reinvest in the underperforming class (buy low). This disciplined approach maintains risk profile and forces buy-low-sell-high behavior.

Keep practicing — related questions