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

Limited Time Offer

25%

Off

Get Premium SIE Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Dorathy

6 days ago

I disagree, I believe it's D) Interest rate risk.

upvoted 0 times

...

Trinidad

10 days ago

I think the primary risk is C) Overweighting.

upvoted 0 times

...