Which one of the following statements is correct concerning asset allocation?
A)Because there is an ideal mix, all investors should use the same asset allocation for their portfolios.
B)The minimum variance portfolio will have a 50/50 asset allocation between stocks and bonds.
C)Asset allocation affects the expected return but not the risk level of a portfolio.
D)There is an ideal asset allocation between stocks and bonds given a specified level of risk.
E)Asset allocation should play a minor role in portfolio construction.

Question

Quizplus · Accepted Answer

Asset allocation is a key aspect of portfolio construction and involves dividing investments between different asset classes, such as stocks, bonds, and cash. The ideal asset allocation will depend on the individual's risk tolerance, investment goals, and time horizon. A well-designed asset allocation strategy can help to reduce risk and increase returns. Therefore, choice D is correct as it highlights the importance of finding the ideal asset allocation based on a specified level of risk. The other options are incorrect as they either suggest a one-size-fits-all approach (A), make incorrect assumptions about asset allocation (B and C), or downplay its significance in portfolio construction (E).

Which One of the Following Statements Is Correct Concerning Asset