The purpose of asset allocation is to
A) reduce commission charges.
B) increase investment risk.
C) reduce government fees associated with investing.
D) reduce taxes paid to the IRS.
E) reduce investment risk.

Question

Quizplus · Accepted Answer

The purpose of asset allocation is to reduce investment risk by diversifying one's portfolio across different asset classes such as stocks, bonds, and cash. By doing so, an investor can spread out their risk and potentially reduce the impact of any single investment's poor performance. Commission charges, government fees, and taxes paid to the IRS may be affected by asset allocation decisions, but they are not the primary purpose. Increasing investment risk would be counterintuitive to the goal of asset allocation.

The Purpose of Asset Allocation Is to