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CFA Level 3
Portfolio Management and Wealth Planning

Managing Market Risk through Equity Exposure Reduction

Very Easy Risk Management Managing Market Risk

John is an individual investor who has built a diverse portfolio consisting of stocks and bonds. He is concerned about the potential impact of market fluctuations on the value of his investments. To mitigate this market risk, John is considering different strategies. One of his options is to reduce his exposure to equities during volatile market conditions.

What is the primary benefit of this strategy in managing market risk?

Hint

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