Asked by Elise Chiong on Jun 28, 2024
Verified
The first major step in asset allocation is
A) assessing risk tolerance.
B) analyzing financial statements.
C) estimating security betas.
D) identifying market anomalies.
Asset Allocation
The process of spreading investments among various categories of assets (e.g., stocks, bonds, real estate) to optimize risk and return.
Risk Tolerance
The degree of variability in investment returns that an investor is willing to withstand.
Financial Statements
Formal records of the financial activities and position of a business, individual, or other entity, including the balance sheet, income statement, and cash flow statement.
- Acquire knowledge on how to allocate investments between risky and safe assets.
Verified Answer
JH
Jatayaa HowellJul 02, 2024
Final Answer :
A
Explanation :
Assessing risk tolerance is the first major step in asset allocation because it helps in determining how much risk an investor is willing and able to take, which in turn guides the selection of investments that match their risk profile.
Learning Objectives
- Acquire knowledge on how to allocate investments between risky and safe assets.