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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process

Which statement best describes strategic asset allocation as used in the portfolio management process?

Strategic asset allocation means setting long-term target weights for asset classes according to the client's objectives, horizon and risk profile. The portfolio is rebalanced back to these targets. Short-term deviations based on market views are tactical allocation, not strategic.

  1. AFrequently shifting between asset classes to exploit short-term market views
  2. BSetting long-term target weights for asset classes based on the client's objectives and risk profileCorrect
  3. CChoosing stocks only from the benchmark index
  4. DSelling all assets when the market falls

Explanation

Strategic asset allocation fixes long-term target weights in line with the client's goals, horizon and risk tolerance, and the portfolio is periodically rebalanced to them. Short-term shifts based on market views describe tactical allocation.

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