NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process
Over time, a portfolio's actual asset mix drifts away from the target allocation because of differing asset price movements. Restoring the original target weights is known as:
This is called rebalancing. When market movements shift the portfolio weights away from the strategic target, the manager buys or sells holdings to return to the intended allocation, which keeps the risk level consistent with the client's agreed profile.
- ARebalancingCorrect
- BBenchmarking
- CAttribution
- DDiversification
Explanation
Rebalancing means buying or selling assets to bring weights back to the target allocation set in the investment policy. Benchmarking compares performance with an index. Attribution explains sources of return. Diversification means spreading across assets to reduce risk.
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