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 often requires you to _______.
Sell some of your winners. Investments that have done well will begin to take up more of your portfolio; those that haven't done as well will take up less. To restore balance, you may need to sell some of your winners.
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.
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.
5.
If you have both small-company stocks and large-company stocks in your portfolio, which of them is more likely to have grown in proportion over time, assuming you haven't rebalanced during this time?
Small-company stocks. Since small-company stocks have more growth potential, they likely will have grown more, thus necessitating rebalancing if you want to maintain the volatility level of your portfolio.
