A portfolio manager first analyzes a variety of asset mixes to determine an optimal portfolio and then adjusts the mix by monitoring and rebalancing…

Strategic asset allocation is a long-term portfolio strategy where the investor sets target allocations for various asset classes and periodically rebalances the portfolio back to the original allocations. The process involves first determining the optimal mix based on the investor's objectives and risk tolerance. Then, the manager monitors the portfolio and rebalances it by selling assets that have performed well and buying those that have underperformed to maintain the desired long-term mix. This disciplined approach avoids making short-term, speculative market timing decisions.

B. Passive management involves tracking a market index, not determining and rebalancing an optimal, customized asset mix.

C. Market timing is an active strategy of shifting asset classes to capitalize on short-term market movements, the opposite of this long-term process.

D. Sector weighting is a decision made within an asset class (e.g., equities), not the overarching process of mixing asset classes.

1. Canadian Securities Institute. (2023). Investment Funds in Canada (2023 ed.). Chapter 5: Constructing Investment Portfolios, Section: "Asset Allocation."

2. Fabozzi, F. J., & Markowitz, H. M. (Eds.). (2011). The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies (2nd ed.). John Wiley & Sons. Chapter 1: "The Asset Allocation Decision."