A portfolio consists of three index funds: an equity index accounting for 40% of the total portfolio, a bond index accounting for 30% of the total portfolio, and an international index accounting for 30% of the total portfolio. After each quarter the portfolio manager buys and sells some of each sector to preserve the original weights for each sector. This is an example of ________.

A) a passively managed core with an actively managed component
B) a totally passively managed fund
C) passive asset allocation with active security selection
D) active asset allocation with passive security selection

Question

Sandy Sherer · Accepted Answer

Final Answer : B, Explanation :  The portfolio manager is maintaining the original weights of each sector by buying and selling after each quarter, which aligns with the strategy of a totally passively managed fund. This approach does not involve active decision-making regarding asset allocation or security selection; instead, it adheres to a predetermined investment strategy.

Definitions

Learning Objectives

Learning Objectives

Related questions