The first major step in asset allocation is:
A) assessing risk tolerance.
B) analyzing financial statements.
C) estimating security betas.
D) identifying market anomalies.
E) none of these.

Question

Quizplus · Accepted Answer

Assessing risk tolerance is considered the first major step in asset allocation as it helps investors determine their willingness and ability to take on risk, which in turn can guide them in making informed decisions about the types of investments (such as stocks, bonds, or cash) that would be most suitable for their portfolio. Analyzing financial statements, estimating security betas, and identifying market anomalies are steps that may come later in the asset allocation process but are not as critical as understanding one's risk tolerance from the outset.

The First Major Step in Asset Allocation Is