Ace the AFP Exam 2025 – Boost Your Financial Wizardry!

An increased mix of equity in a capital market investment portfolio is promoted by lower short-term liquidity requirements. When an investor has lower liquidity needs, they are more comfortable allocating a larger portion of their portfolio to equity investments. Equities are generally more volatile and can have a longer time horizon for realizing returns compared to fixed-income securities. Therefore, if the investor does not require immediate access to their funds, they can invest in equities which may offer higher returns over time, thereby increasing their overall equity exposure.

In contrast, preferences for private equity, capital preservation goals, and shorter desired maturity typically lead to a more conservative investment strategy. A preference for private equity might suggest a focus on long-term investments rather than public equities. Capital preservation indicates a desire to maintain the initial investment value, favoring lower-risk assets like bonds. Lastly, a shorter desired maturity would generally point to a need for liquidity and security, which typically aligns more with fixed-income investments rather than equities.