Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
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.
Why does it become necessary to periodically rebalance your portfolio?
Some investments will naturally perform better than others and increase the risk of your portfolio. For this reason, you may need to readjust its risk level.
3.
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.
4.
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.
5.
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.
