Question

The reasons for creating a Strategic Asset Allocation for retail investors based on allocating risk rather than on allocating returns include all of the following, except:

A) Retail investors better understand their desired level of volatility rather than their desired required returns.

B) Risk Parity based SAA are better diversified than equal $ allocated SAA.

C) Creating an SAA based on optimising returns against risk may not allocate to investments that are important in a portfolio

E) Historical returns of each asset in the portfolio is not a good predictor of future returns of each asset in the portfolio

F) Historical volatility is a good measure/predictor of future volatility of each asset in the portfolio

Answer 1

The reason for creating a strategic asset allocation for retail investors based on allocating risk rather than on allocating returns include all of the following except:

(A) Retail investors better understnd their desired level of volatility rather than their desired required return : because most of the retail investors fails to understand the importance of allocation of risk and select mutual funds based on their recent performance.

whereas,

Part B, C ,D,E,F are all the reasons for creating a strategic asset allocation for retail investors based on allocating risk rather than on allocating returns.

Therefore the Answer of given question is part (A)