Multiple choice

Financial planners and their clients should focus on

  1. allocating funds to asset classes Based on objectives (e.g. debt, equity Etc.)

  2. allocating funds to individual Securities

  3. tracking stocks, which they feel, have Potential

  4. None of the above
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A Correct answer
Explanation

Financial planning emphasizes asset allocation - deciding how much to invest in different asset classes (debt, equity, real estate, gold, etc.) based on objectives, time horizon, and risk tolerance. Research shows that over 90% of portfolio returns come from asset allocation decisions, not individual security selection. Financial planners should focus on getting the asset class mix right rather than picking individual stocks or chasing perceived potential winners.

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