As you get older, you decide to reduce the risk level of your retirement portfolio because your portfolio is nearing your minimum acceptable level. As the portfolio does better, you reallocate funds into higher-risk categories. You are practicing a form of ________.

Question

Quizplus · Accepted Answer

The given scenario describes the practice of dynamic hedging, which involves adjusting the risk level of a portfolio based on market conditions and performance. In this case, the individual is reducing risk as they approach their minimum acceptable level, but will reallocate funds into higher-risk categories as their portfolio does better. The other options listed (manipulating tax shelters, involuntary intergenerational transfers, and excessive savings) are not applicable to the scenario described.

As You Get Older, You Decide to Reduce the Risk