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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Portfolio Construction Process

Which asset allocation approach involves setting long-term target weights based on the client's risk profile and returns expectations, and then periodically rebalancing back to those weights regardless of short-term market views?

This is strategic asset allocation. Long-term target weights are set from the client's objectives and risk profile, and the portfolio is periodically rebalanced back to them rather than being changed on short-term market views, which is what tactical allocation does.

  1. ATactical asset allocation
  2. BStrategic asset allocationCorrect
  3. CInsured asset allocation
  4. DMarket timing

Explanation

Strategic asset allocation fixes long-term policy weights from the client's objectives and risk profile and rebalances to them. Tactical allocation makes short-term deviations based on market views.

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