1. Which of the following statements are true regarding portfolio management?

(1) The only way to lower portfolio risk is to add negatively correlated assets

(2) Portfolio diversification implies allocating assets among different asset classes (e.g., stocks, bonds, real estate)

(3) Rebalancing portfolios is an important aspect of asset allocation

(4) The financial planner needs to consider the client’s preferences and constraints when allocating assets

1, 2, 3, and 4

1 and 4

1, 2 and 3

2, 3 and 4

3 and 4

2. The principal goal of a financial manager is to maximize the wealth of the stockholders.

True or False