The objective for the __________ strategy is similar to that of capital appreciation; namely, the investors want the portfolio to grow over time to meet a future need.
Whereas the capital appreciation strategy seeks to do this primarily through capital gains, this strategy seeks to increase portfolio value by both capital gains and reinvesting current income.
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A. B. C. D.B
The correct answer is B. Total return strategy.
The total return strategy is an investment approach that aims to increase the value of the portfolio over time to meet a future financial need, such as retirement or education expenses. This strategy seeks to achieve this goal by both capital gains (i.e., selling securities for a profit) and reinvesting current income (i.e., dividends, interest, or other distributions).
In contrast to the capital appreciation strategy, which focuses solely on capital gains, the total return strategy takes into account the total return on the portfolio, including both capital gains and income. By reinvesting current income, the investor can benefit from compounding, which can accelerate the growth of the portfolio over time.
The total return strategy may be suitable for investors who have a long-term investment horizon and are willing to accept some degree of risk in exchange for potential higher returns. This strategy may involve investing in a mix of asset classes, such as stocks, bonds, and real estate investment trusts (REITs), to achieve a balanced portfolio that can generate both capital gains and income.
In summary, the total return strategy is an investment approach that aims to increase the value of the portfolio over time through both capital gains and reinvesting current income. It can be a suitable strategy for investors with a long-term investment horizon and a willingness to accept some degree of risk in pursuit of potential higher returns.