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Asset allocation is

A) a personal and a financial decision.
B) objective.
C) the same for most people.
D) an easy and inexpensive thing to do

User Gozup
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1 Answer

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Final answer:

Asset allocation is a personal and financial decision that varies for each individual, considering factors like risk tolerance and financial goals. It is different from an index fund and often includes various assets like housing, which also offers non-financial benefits. The process is neither easy nor inexpensive due to complexities in managing risk and expected returns.

Step-by-step explanation:

Asset allocation is primarily A) a personal and a financial decision. While it includes quantitative elements, it is inherently subjective, as it involves individual preferences, risk tolerance, and future financial goals. Unlike an index fund which represents the overall behavior of the stock market, asset allocation is tailored to the individual. Housing and other tangible assets often play a role in one's asset allocation, as they not only have the potential for capital gains but also provide non-financial benefits such as a place to live.

Unlike the simplicity of liquidating mutual funds, creating a diversified portfolio that optimizes for expected returns without excessive risk can be complex and not an easy and inexpensive thing to do. It requires financial expertise to balance the tradeoff between expected returns and risk, making it a unique process for each person, debunking the idea that it is B) objective or C) the same for most people.

User Jibin Joseph
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