Question 25 of 90
Fixed ratio of asset allocation means
A
It is a relatively aggressive approach for managing investments.
B
Investing the same amount every month
C
Not doing any rebalancing
D
Maintaining the target allocation by liquidating part of the better-performing asset and reinvesting in the relatively lower-performing asset
Correct Option:
D
Explanation
Fixed ratio asset allocation involves maintaining a predetermined asset allocation, such as 60% equity and 40% debt, through periodic rebalancing. If one asset class outperforms and exceeds its target allocation, a portion is sold and the proceeds are invested in the underweight asset class to restore the desired ratio.