Recommendations & StrategiesQuestion 55 of 110
An investor's asset allocation should shift toward more conservative holdings as which of the following changes?
a.Their risk tolerance increases sharply
b.They approach the time when they will need the funds
c.Interest rates fall to record lows
d.Their income rises substantially
Explanation
As an investor nears the point of needing their funds, such as retirement, reducing exposure to volatile assets protects accumulated wealth from a poorly timed downturn. A shorter time horizon reduces the ability to recover from losses. This is the rationale behind glide-path strategies in target-date funds.
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