UPSC Prelims 2020 · CSAT

Question 4: Reading Comprehension

Passage beginning “Asset allocation is the most important…” — Passage—4 · as printed by UPSC

Which one of the following statements best implies the suggestion given by the author of the passage?

aDistribute your wealth across different kinds of assets so that your risks would be minimized.

bRisk-taking behaviour should be a necessary component of your personality if you want to generate wealth.

cWhile making investments, find a trustworthy asset management organization which would manage your wealth for you.

dYou should know that investing your money is a risky business.

AnswerUPSC’s answer is (a).

The author says asset allocation is the most important investment choice, that no asset is free of risk, yet all the feared extreme events will not happen together. The practical suggestion is therefore not to park money idle in one supposedly safe place but to spread it across assets so that one failure cannot sink everything. Remember: diversification reduces risk when risks do not strike together.

Why each option is right or wrong

(a) Right: since risks will not all strike together, spreading wealth across assets is the implied advice.
(b) The passage does not ask for a risk-taking personality; it says leaving money idle is not truly safe.
(c) Handing wealth to a manager is not suggested anywhere.
(d) Risk in investing is the premise, not the author's suggestion; the suggestion is how to respond to it.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2020, General Studies Paper II (CSAT), Series A. The paper on upsc.gov.in.