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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?

Show Suggested Answer Hide 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
2 months 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
2 months 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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Richelle
16 days ago
D) Interest rate risk
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Darrel
18 days ago
C) Overweighting
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Deonna
1 months ago
A) Inflation
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Yong
2 months ago
Marketability? Nah, that's not the primary risk here. Gotta keep those assets balanced, folks!
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Nancey
1 months ago
Gotta keep those assets balanced, folks!
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Genevive
1 months ago
C) Overweighting
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Alesia
2 months ago
A) Inflation
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Ardella
2 months ago
I'd go with interest rate risk. Failing to rebalance means your portfolio could get hammered when rates change.
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Gilma
2 months ago
Overweighting, for sure! Those asset models need constant attention, otherwise they'll spiral out of control.
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Annice
1 months ago
Interest rate risk is also a big concern when using asset allocation models without rebalancing.
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Helga
1 months ago
I think the primary risk is inflation, it can erode the value of your assets over time.
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Justine
1 months ago
I agree, overweighting can really throw off your portfolio balance.
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Trinidad
3 months ago
But wouldn't not rebalancing lead to a higher exposure to certain assets, causing overweighting?
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Dorathy
3 months ago
I disagree, I believe it's D) Interest rate risk.
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Trinidad
3 months ago
I think the primary risk is C) Overweighting.
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