Strategic Asset Allocation Recommendation

Hard Asset Allocation Strategic Asset Allocation

Investors create strategic asset allocation plans to align their investment portfolios with their risk tolerance and long-term financial goals. John is a portfolio manager at a large investment firm and is tasked with advising a client on the optimal asset allocation strategy. The client has a moderate risk tolerance and a long-term investment horizon of 20 years. In preparing the asset allocation strategy, John considers both historical return data and expected market conditions.

In determining the strategic asset allocation, John has to consider different asset classes including equities, fixed income, and alternative investments. The client is particularly interested in achieving growth while minimizing risk through diversification.

Which of the following options best describes the strategic asset allocation that John should recommend to his client?

A portfolio heavily weighted towards high-yield bonds to achieve high returns with low volatility.

A diversified mix of 60% equities and 40% fixed income, focusing on broad market indexes.

An aggressive allocation of 80% equities and 20% alternatives to maximize capital appreciation.

Hint

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