NASAA Series 66 Uniform Combined State Law ExaminationClient Investment Recommendations and StrategiesMedium
A client, a 30-year-old software engineer, has a high-paying job, no immediate need for funds, and a high tolerance for risk. They are seeking advice on constructing an investment portfolio primarily focused on aggressive long-term growth. Which of the following asset allocations would be most appropriate for this client?
- A80% fixed income, 20% equities
- B60% equities, 40% real estate
- C50% equities, 50% fixed income
- D90% equities, 10% fixed income
Show answer & explanationAnswer & explanation
Correct answer: D. 90% equities, 10% fixed income
A client with a long time horizon, high risk tolerance, and a goal of aggressive long-term growth should have a portfolio heavily weighted towards equities, as stocks historically offer the highest growth potential over long periods.
Why the other options are wrong
- A. This is a very conservative allocation, suitable for capital preservation and income, not aggressive growth.
- B. While real estate can offer growth, a 60% equity allocation is not as aggressive as 90% equities, and adding 40% real estate without fixed income might not be the most diversified aggressive growth strategy compared to a high equity/low fixed income mix.
- C. This is a balanced allocation, suitable for moderate growth and risk, but not aggressive growth.
Asset Allocation for Growth
Prioritizing a higher proportion of growth-oriented assets (like equities) in a portfolio to maximize long-term capital appreciation, typically for investors with long time horizons and higher risk tolerance.
- Higher equity exposure (e.g., 70-100%).
- Lower fixed income/cash exposure.
- Suitable for young investors or those with long-term goals.
- Higher potential for volatility and short-term losses.
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