Which of the following guidelines are appropriate for inclusion in a portfolio management policy?
I. Diversify among different types of securities and across industry and geographic lines.
II. Determine the risk level and financial situation of the individual investor.
III. Utilize beta to help align the portfolio to the risk level of the investor.
IV. Minimize the standard deviation of each security in the portfolio.
A) I, II and IV only
B) II, III and IV only
C) I, II and III only
D) I, II, III and IV

Question

Quizplus · Accepted Answer

I, II, and III are appropriate guidelines for a portfolio management policy. Diversification, assessing the investor's risk level and financial situation, and using beta to align the portfolio with the investor's risk tolerance are standard practices. Minimizing the standard deviation of each security is not practical or necessary for portfolio management, as the focus should be on the portfolio's overall risk, not just the risk of individual securities.

Which of the Following Guidelines Are Appropriate for Inclusion in a Portfolio