For an investor with a time horizon of 8 years and higher risk tolerance,an appropriate asset allocation strategy would be
A) 100% stocks
B) 100% cash
C) 30% cash, 50% bonds, and 20% stocks
D) 10% cash, 30% bonds, and 60% stocks
E) 100% bonds

Question

Quizplus · Accepted Answer

An investor with a time horizon of 8 years and higher risk tolerance would benefit from some exposure to stocks to achieve long-term growth. Therefore, option A can be considered, but a portfolio with 100% stocks is very risky and volatile, which doesn't suit the investor's risk tolerance level. Option E, which suggests investing totally in bonds, would not provide enough growth to achieve the investor's financial goals. Option B recommends investing entirely in cash, which has low returns and offers no possibility of making a profit. The best choice is option D, which offers a well-diversified portfolio of 10% cash, 30% bonds, and 60% stocks. The investor can reap the benefits of investing in stocks while also cushioning their portfolio with bonds and cash to minimize risks.

For an Investor with a Time Horizon of 8 Years