Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
If you want to save on taxes while rebalancing your portfolio, you would do best by selling investments held in _______ accounts.
Tax-deferred. You will rack up much less in capital gains this way.
3.
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.
4.
Which statement is false?
Rebalancing doesn't allow you to benefit from a change in the market's favorites. Trimming back on a winner may have its tax consequences, but it allows you to reap the rewards of diversification and position your portfolio to benefit from a change in the market's favorites.
5.
How often should you rebalance your portfolio for best results?
Only as needed. Normally, rebalancing should occur only when your allocation is out of balance relative to your investment goals.
