The formula plan that requires maintaining a target dollar investment in the speculative portion of an investor's portfolio is the
A) most passive of all the formula plans.
B) target return plan.
C) constant ratio plan.
D) constant dollar plan.

Question

Quizplus · Accepted Answer

The constant dollar plan involves maintaining a fixed dollar amount in the speculative portion of an investor's portfolio. When the value of the speculative investments increases, some of the profits are taken and moved to more conservative investments to keep the dollar amount constant. Conversely, if the value decreases, additional funds are moved into speculative investments to maintain the target dollar amount. This approach aims to balance risk and return by keeping a steady amount of investment in higher-risk areas.

The Formula Plan That Requires Maintaining a Target Dollar Investment