Finra Exam SIE Topic 3 Question 9 Discussion

Actual exam question for Finra's SIE exam

Question #: 9
Topic #: 3

[All SIE Questions]

Which of the following is the primary risk of using asset allocation models without periodic rebalancing?

AInflation

BMarketability

COverweighting

DInterest rate risk

Show Suggested Answer

Suggested Answer: C

Step by Step Explanation:

Rebalancing: Ensures that a portfolio remains aligned with its target allocation. Without rebalancing, outperforming assets can become overweighted, increasing exposure to specific risks.

Incorrect Options:

Inflation: Impacts purchasing power but isn't tied to rebalancing.

Marketability: Refers to liquidity and isn't linked to allocation models.

Interest Rate Risk: Relates to fixed-income investments and isn't directly addressed by allocation models.

SEC Investor Bulletin on Asset Allocation: SEC Asset Allocation.

by Myong at Apr 03, 2025, 01:19 PM

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Adelle

24 days ago

Hmm, I'd say overweighting is the culprit. Letting those asset proportions get out of whack is just asking for trouble.

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Lacey

25 days ago

Inflation! If you don't rebalance, your portfolio won't keep up with the rising cost of living. That's a recipe for disaster.

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Deonna

15 days ago

A) Inflation

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I think the primary risk is C) Overweighting.

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