Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
If you want to save on taxes while rebalancing your portfolio, _______.
Use new money to rebalance. Rebalancing less frequently will allow you to avoid taxes, as will selling securities from tax-deferred accounts BEFORE you sell securities from taxable accounts.
2.
Rebalancing your portfolio is ultimately meant to keep it in synch with your investment goals.
True. As it grows out of synch with your goals over time, you need to rebalance it to keep it in line.
3.
What's the primary reason to rebalance?
To control your portfolio's volatility. By rebalancing, you ensure that your portfolio isn't overly dependent on the success or failure of one investment, asset class, or style.
4.
Rebalancing your portfolio involves looking at where it has become lopsided over the years. What is most likely to have happened, as a general rule, with your bond and cash investments during this time?
They will have shrunk in proportion to stocks. Generally, stocks will have grown faster, leaving the bonds and cash in a lower proportion of your portfolio. This usually calls for some rebalancing.
5.
Imagine you're investing for your retirement via a 401(k) plan and an IRA. How should you rebalance these accounts?
Rebalance both simultaneously, because they make up one portfolio. If these accounts are all funding one goal, they are, for all intents and purposes, part of one portfolio. So when you rebalance, rebalance across all of these accounts simultaneously.
