Question

Which of the following recommendations will protect assets if there's an impending large market decline?

A. Sell covered calls on all of the stocks in a portfolio
B. Buy an S&P 500 ETF
C. Move investments into cash and equivalents
D. Invest in a managed large-cap growth fund

Answer 1

The most effective strategy to protect assets in the face of an impending market decline is to move investments into cash and equivalents. This reduces exposure to market fluctuations and prevents significant losses. Hence, option (C) is correct.

Step-by-step explanation:

The question pertains to strategies that can protect assets during an impending large market decline. Among the options provided, the most effective strategy for asset protection in this context would be to move investments into cash and equivalents. This approach reduces exposure to market fluctuations and provides a safeguard against significant losses that may occur due to a market downturn.

Selling covered calls may provide some income but does not protect against a decline in the underlying stock value. Buying an S&P 500 ETF would not be protective in a market decline as it would still be subjected to the overall market movements. Investing in a managed large-cap growth fund would still leave the portfolio exposed to potential market losses, particularly if the decline affects large-cap stocks significantly.