A portfolio consists of three index funds: an equity index, a bond index, and an international index. The portfolio manager changes the weights periodically according to forecasts for each sector.

This is an example of a passively managed core with an actively managed component.

True or False?

The correct answer is False, this is an example of active asset allocation with passive security selection.

Explanation:

An asset allocation is defined as the decisions handled by a portfolio manager where combinations and weights are related to the assets in an investment portfolio. These actions are applied considering the risk associated with the investor, in order to anticipate the potential returns of the investment portfolio.