NASAA Series 66 Uniform Combined State Law ExaminationClient Investment Recommendations and StrategiesEasy
A client, aged 55, is planning to retire in 10 years. They have a moderate risk tolerance and are interested in supplementing their company pension. Which of the following investment strategies would be most appropriate for this client?
- AAggressive growth portfolio focused on emerging market equities.
- BBalanced portfolio with a mix of equities, fixed income, and alternative investments.
- CIncome-focused portfolio primarily consisting of short-term government bonds.
- DSpeculative investments in high-volatility cryptocurrencies and penny stocks.
Show answer & explanationAnswer & explanation
Correct answer: B. Balanced portfolio with a mix of equities, fixed income, and alternative investments.
A balanced portfolio is appropriate for a client with a moderate risk tolerance nearing retirement, providing both growth potential and stability. It diversifies risk across different asset classes.
Why the other options are wrong
- A. Aggressive growth is too risky for a client nearing retirement with moderate risk tolerance.
- C. An income-focused portfolio solely on short-term government bonds would likely not provide sufficient growth for a 10-year horizon.
- D. Speculative investments are too high-risk for a client with moderate risk tolerance planning for retirement.
Balanced Portfolio
An investment portfolio that combines different asset classes, typically equities and fixed income, to achieve a balance between risk and return.
- Aims for growth and income.
- Suitable for moderate risk tolerance.
- Diversifies across asset classes.
Memory trick: Balance your portfolio, balance your future.