HCE-5920 Exam Questions and Answers

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NEW QUESTION: 1
Asset allocation involves:
A. determining the specific stocks and bonds in which your client should invest his funds.
B. selecting the investments that are expected to offer the highest return over your client's investment
horizon.
C. selecting the investments that will expose your client to the least amount of risk.
D. determining the percentages that your client should be investing in various types of investments (e.g.,
stocks, bonds) based on his investment objectives.
Answer: D
Explanation:
Asset allocation involves determining the percentages that your client should be investing in
various types of investments (e.g., stocks, bonds) based on his investment objectives. You should not
necessarily select investments that are expected to offer the highest return for a risk-averse client
because higher returns entail more risk exposure. Nor should you necessarily select investments that will
expose your client to the least amount of risk. These may not offer the client the return he needs to
achieve his investment goals. Asset allocation refers only to determining the types of investments, not the
specific investments within each category. Specific investment selection is the next step after the asset
allocation decision is made.


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