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Investment Strategies - Review Questions 12 - 16

  1. Tactical asset allocation differs from strategic asset allocation:
    1. In that it provides the overall framework for implementation pursuant to the IPS.
    2. In that it involves shifts in the overall allocation, but only within the context of the strategic allocation in an effort to exploit short term market inefficiencies.
    3. May impact return.
    4. Both b. and c.
  2. Risks of rebalancing include all of the following:
    1. Additional transaction costs.
    2. Added tax liability.
    3. The consistent application of the client's strategic asset allocation.
    4. All of the foregoing.
  3. Hedging and monetization strategies include all of the following, EXCEPT:
    1. Use of variable prepaid forwards.
    2. Gradual sale of shares over time.
    3. Use of a separate account for increase diversification.
    4. Exchange traded fund.
  4. Strategic asset allocation may be implemented through any of the following means, except:
    1. Index funds.
    2. Separate account managers.
    3. Tax deferred retirement accounts.
    4. Core plus approach.
  5. The risks of not addressing low basis stock include:
    1. Severe tax liability.
    2. Heightened volatility due to lack of diversification.
    3. Effective risk-management.
    4. Both a. and b.
Review Questions 17 - 22

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