Canadian Securities Course (CSC) Level 2 Practice Exam

Which accounts allow for the optimal mix of two or more models for investment?

1. Exchange traded wraps

2. Mutual fund wraps

3. Managed fee based accounts

4. Separately managed accounts

The correct answer is: Separately managed accounts

A separately managed account (SMA) allows for the optimal mix of two or more models for investment since it is a personalized investment account where the investor directly owns the securities. This provides the flexibility for the investor and the portfolio manager to tailor the investment strategy to the investor's specific needs, goals, and risk tolerance. SMAs offer more customization and transparency compared to other account types, making them suitable for investors who want a more personalized approach to their investments. Exchange-traded wraps and mutual fund wraps are pre-packaged investment products that may not offer the same level of customization as separately managed accounts. Managed fee-based accounts may provide some level of customization, but they typically do not allow for the same degree of personalization and control over specific investment models as separately managed accounts do.