For an investor with a time horizon of 15 years and moderate risk tolerance, an appropriate asset allocation strategy would be
A) 100 percent stocks.
B) 40 percent cash and 60 percent stocks.
C) 30 percent cash, 50 percent bonds, and 20 percent stocks.
D) 50 percent bonds, and 50 percent stocks.
E) 20 percent bonds and 80 percent stocks.

Question

Quizplus · Accepted Answer

An appropriate asset allocation strategy for an investor with a 15-year time horizon and moderate risk tolerance is to allocate 20 percent of the portfolio in bonds and 80 percent in stocks. This allocation allows for potential growth through investing in stocks while providing some diversification and stability through the bond allocation. A higher weighting in bonds may not provide enough growth potential over a 15-year time horizon while a higher weighting in stocks may be too risky for an investor with moderate risk tolerance. Thus, a 20/80 bond-stock allocation is the best choice for this type of investor.

For an Investor with a Time Horizon of 15 Years