FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsEasy
A client, age 30, has a stable job, no dependents, and a high disposable income. They are eager to invest and express a desire for aggressive growth, stating they are comfortable with significant market fluctuations and potential loss of capital for higher long-term returns. Which of the following asset allocations would be most suitable for this client?
- A90% Equities, 10% Alternative Investments
- B60% Equities, 30% Bonds, 10% Cash
- C50% Equities, 50% Fixed Income
- D80% Bonds, 20% Equities
Show answer & explanationAnswer & explanation
Correct answer: A. 90% Equities, 10% Alternative Investments
A client with a long time horizon, high-risk tolerance, and aggressive growth objective is best suited for an asset allocation heavily weighted towards equities and potentially alternative investments, which offer higher growth potential but also higher risk.
Why the other options are wrong
- B. This is a moderate allocation, not aggressive enough for the client's stated objective.
- C. This is a balanced allocation, not aggressive enough for the client's stated objective.
- D. This is a conservative allocation, unsuitable for an aggressive growth objective.
Aggressive Growth Asset Allocation
An investment strategy characterized by a high allocation to equities and potentially alternative investments, designed for investors with a long time horizon and high-risk tolerance seeking maximum capital appreciation.
- High equity exposure (70-100%)
- May include alternative investments
- Suitable for long time horizons
- High risk tolerance required
Memory trick: Risk and reward are scales; aggressive means tipping towards growth.