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Level III
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Asset Allocation
Asset Allocation
Medium
An investor decomposes her traditional 60/40 equity-bond portfolio into factor exposures and discovers that 78% of portfolio risk comes from a single growth factor. Which approach would most effectively address this concentration?
A
Shift to a factor-based allocation that balances exposure across growth, inflation, real rate, and style factors
B
Increase the bond allocation from 40% to 60% to reduce equity dominance
C
Add emerging market equities and high-yield bonds for greater diversification
D
Implement a momentum overlay on the existing 60/40 portfolio
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Tags
#factor-based-allocation
#risk-concentration
#growth-factor
#portfolio-construction
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