CIC Investment Policy & Planning

Question 1

What is the primary objective of investment policy planning?

Accepted Answer

To align investments with client goals

Answer

To maximize short-term gains.

Answer

To ignore risk factors.

Answer

To reduce client involvement.

Question 2

Which document outlines investment objectives and constraints?

Accepted Answer

Investment policy statement

Answer

Financial plan.

Answer

Market analysis.

Answer

Risk assessment.

Question 3

What is asset allocation in investment planning?

Accepted Answer

Distributing investments across asset classes

Answer

Choosing individual stocks.

Answer

Timing the market.

Answer

Ignoring diversification.

Question 4

Why is diversification important in investment portfolios?

Accepted Answer

To reduce risk

Answer

To increase risk.

Answer

To focus on one asset.

Answer

To ignore market trends.

Question 5

What role does risk tolerance play in investment planning?

Accepted Answer

It guides investment choices

Answer

It ignores investor preferences.

Answer

It guarantees returns.

Answer

It limits diversification.

Question 6

Which strategy seeks to balance risk and return dynamically?

Accepted Answer

Tactical asset allocation

Answer

Buy and hold.

Answer

Random investing.

Answer

Ignoring market trends.

Question 7

What is the importance of periodic portfolio review?

Accepted Answer

To maintain alignment with goals

Answer

To ignore performance.

Answer

To increase transaction costs.

Answer

To avoid rebalancing.

Question 8

Which factor affects liquidity needs in investment planning?

Accepted Answer

Cash requirements

Answer

Investment returns.

Answer

Risk tolerance.

Answer

Tax rates.

Question 9

What is rebalancing in portfolio management?

Accepted Answer

Adjusting holdings to target weights

Answer

Buying more of the best performing asset.

Answer

Ignoring asset allocation.

Answer

Selling all investments.