Multiple choice

Which of the following lets an investor book profits in a rising market and increase holdings in a falling market?

  1. Fixed ratio of asset allocation

  2. Flexible ratio of asset allocation

  3. Investment without any asset allocation plan

  4. Buy and hold strategy
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Fixed ratio asset allocation allows investors to book profits in rising markets and increase holdings in falling markets through regular rebalancing. When certain asset classes rise in value, selling them to maintain the target allocation locks in gains. Conversely, when assets fall, buying more to restore the target ratio increases exposure at lower valuations.

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