Strategy Intermediate: Rebalancing Your Portfolio

Test your knowledge

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?
Choose wisely. There is only one correct answer.
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 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?
Choose wisely. There is only one correct answer.
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.
Selling some winning investments earlier than you'd like and then buying new investments has some advantages. These advantages include which of the following?
Choose wisely. There is only one correct answer.
All of the above. All of these are reasons to sell off winning investments and thus rebalance your portfolio.
4.
If you want to save on taxes while rebalancing your portfolio, you would do best by selling investments held in _______ accounts.
Choose wisely. There is only one correct answer.
Tax-deferred. You will rack up much less in capital gains this way.
5.
Rebalancing your portfolio is ultimately meant to keep it in synch with your investment goals.
Choose wisely. There is only one correct answer.
True. As it grows out of synch with your goals over time, you need to rebalance it to keep it in line.