Canadian Securities Course (CSC) Level 2 Practice Exam

Which step in the asset allocation process involves comparing performance to industry benchmarks and emphasizing long-term consistency?

1. Step 5 - monitor

2. Step 6 - evaluate

3. Step 7 - rebalance

4. Step 8 - reallocate

The correct answer is: Step 6 - evaluate

The focus on comparing performance to industry benchmarks and emphasizing long-term consistency clearly aligns with the evaluation phase of the asset allocation process. During this step, an investment portfolio's performance is assessed by measuring it against predefined benchmarks, which helps in determining how well the investments are performing relative to market standards. This process is crucial as it allows investors to identify whether their strategies are effective over an extended period, ensuring that the investment approach remains aligned with their overall financial goals and risk tolerance. In this context, the evaluation step is all about analyzing performance data comprehensively rather than just making adjustments to the portfolio or reallocating assets. It emphasizes a systematic review of the investment results, which is necessary for making informed decisions in the future. Ultimately, this ongoing evaluation is essential for long-term investment success.