Preview Questions Portfolio Manager | Role Specific Skill

Question 1: What is the most important consideration when transitioning a client's portfolio to a new investment strategy?

Which action should you take?

Choose only one option

Ensuring the strategy aligns with the client's updated goals and risk tolerance

Focusing on high-return assets regardless of risk

Consulting only with internal stakeholders

Minimizing short-term tax liabilities

Question 2: How does correlation between asset classes impact an asset allocation decision?

Which action should you take?

Choose only one option

High correlation between assets increases diversification opportunities

Low correlation increases volatility and risks of the portfolio

High correlation ensures that all assets move in the same direction, lowering volatility

Low correlation between assets reduces risk, allowing for better diversification

Question 3: When it comes to creating a personalized portfolio, which aspect is most critical to understand about a client?

Which action should you take?

Choose only one option

Their current market position and a willingness to take high risks

The current performance of their portfolio without considering future goals

Their long-term financial goals, including retirement, education, or legacy planning

The general market conditions without considering client-specific needs

Question 4: How does an increase in interest rates typically impact a fixed-income portfolio?

Which action should you take?

Choose only one option

No change to portfolio

Portfolio value increases

Portfolio value decreases

Enhanced yield due to reinvestment

Question 5: Why is the Sortino Ratio preferred over Sharpe Ratio in downside risk analysis?

Which action should you take?

Choose only one option

Focuses on downside deviations

Incorporates benchmark returns

Measures both upside and downside risk

Excludes portfolio volatility

Question 6: How does diversification help mitigate the effects of market downturns?

Which action should you take?

Choose only one option

By focusing on assets with high expected returns

By spreading risk across uncorrelated assets

By avoiding riskier asset classes

By concentrating investments in low-risk assets