Tatiana is following a fixed weighting approach to managing her portfolio, which on January 1 consisted of 45% common stock, 40% bonds, and 15% short-term securities
Because stocks had a good year, at the end of the year, it consisted of 55% common stock, 35% bonds and 10% short-term securities. As a result,
A) Tatiana should leave her portfolio as it is to take advantage of momentum in stocks.
B) she should sell stock and buy bonds and short-term securities to restore the original weightings.
C) she should sell stock index futures to protect herself from falling prices.
D) she should sell stock and increase the proportions of bonds and short-term securities because she is now one year older.
Answer: B
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