Recommendations & StrategiesQuestion 51 of 110
Rebalancing a portfolio back to its target allocation after a strong stock rally typically involves which action?
a.Buying more of the asset class that rose the most
b.Selling some of the appreciated asset class and buying underweighted classes
c.Moving the entire portfolio to cash
d.Doubling the equity allocation to ride the trend
Explanation
Rebalancing restores target weights by trimming the asset class that has grown beyond its target and adding to those that have fallen below it. This enforces a disciplined 'sell high, buy low' behavior and controls risk. Chasing the winning asset would increase concentration and risk.
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