2.20 Risk Mitigation & Asset Allocation
Asset allocation is the single most important determinant of long-term portfolio performance and volatility management.
Key FINRA Exam Takeaways
- Asset Allocation: Spreading capital across major asset classes (Equities, Fixed Income, Cash) to optimize risk vs return.
- Strategic Asset Allocation: Long-term target weights rebalanced periodically.
- Tactical Asset Allocation: Short-term shifts to capitalize on market conditions.
- Defensive Stocks: Companies that perform steadily regardless of economic cycles (utilities, consumer staples, pharmaceuticals).
Knowledge Checkpoint • Section 2.20
Which of the following stock sectors is considered DEFENSIVE and typically maintains stable revenues during economic recessions?