Choose wisely. There is only one correct answer to each question.
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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.
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.
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.
Selling some winning investments earlier than you'd like and then buying new investments has some advantages. These advantages include which of the following?
All of the above. All of these are reasons to sell off winning investments and thus rebalance your portfolio.
5.
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.