Authentic CSI Certification Exam IFC Questions Answers

Dale is using his mutual fund portfolio for income, is comfortable with variable payouts, and accepts market fluctuations.

A ratio withdrawal plan pays out a fixed percentage of the fund’s value each year. Since the percentage is applied to a fluctuating fund value, the payouts vary with market performance. This makes it suitable for investors who can tolerate variability.

In contrast:

Life withdrawal plans and annuities provide more predictable income.

Fixed-period plans are designed to exhaust the investment over a set period, which may not align with Dale’s needs.

Thus, the best option is the Ratio withdrawal plan, which matches Dale’s comfort with variable payouts and fluctuating markets.

Market risk, or systematic risk, arises from factors affecting the entire market, such as changes in inflation or interest rates, and cannot be fully eliminated through diversification. The feedback from the document states:

"Once a portfolio becomes well diversified, the only remaining risk to be concerned about is market risk. Market risk is defined as the variability of a stock or a portfolio in relation to the market as a whole. The process of diversification cancels out much firm-specific risk, so market risk is less than the total risk you would calculate if you looked at each stock separately. Market risk is also referred to as systematic risk and arises from such things as inflation, the business cycle, and interest rates."