LUTCF Course 3 Practice Questions - LUTCF Course 3 Wealth Management, Retirement Planning, And Estate Planning Exam

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A client is comparing rebalancing strategies. What is the primary purpose of periodically rebalancing a portfolio back to its target allocation?

To maintain the intended risk profile by trimming overweight assets and adding to underweight ones To maximize short-term gains by chasing winners To eliminate the need for diversification To avoid all transaction costs

Correct Answer:

To maintain the intended risk profile by trimming overweight assets and adding to underweight ones

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