Passage

Asset allocation is the most important investment decision we will ever make, and sadly, most of us do not give that decision the importance it deserves. We are adamant about seeking predictability with our future. We tend to think of investing in risky assets as extremely volatile and value eroding. We also dislike fluctuating returns and the loss of control of investment. We think our money is best left idle, unproductive but safe. There is no asset that is risk free. We could lose our jobs, our homes can lose value, our banks can go bankrupt, our bonds can default, the government can collapse and companies we chose fondly may cease to exist. But we cannot live life assuming that all these extreme events are waiting to happen, and all at the same time. All these extreme forms of risks we know will not manifest at the same time.

QUESTION

CSAT

Medium

Comprehension

Prelims 2020

Which one of the following statements best implies the suggestion given by the author of the passage?

Select an option to attempt

Explanation

Option A is correct. The passage clearly emphasizes that asset allocation is the most important investment decision one will ever make. Additionally, the author links asset allocation to predictability and risks throughout the passage. This aligns with the main point of the passage.

Option B is incorrect. While the statement in Option B about wealth generation is valid, the passage does not focus on wealth generation specifically. Instead, it focuses on asset allocation and the risks involved.

Option C is incorrect. The passage does not mention or refer to an asset management company. In fact, the tone of the passage suggests that individuals are making their own investment decisions rather than relying on asset management companies.

Option D is incorrect. Although Option D reflects a valid observation, the correct answer is Option A, which more accurately captures the central theme of the passage — the importance of asset allocation in managing investment risks.

Trusted by 2L aspirants