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CSAT 2020 paper

UPSC CSE CSAT 2020 · Question 4 · Reading comprehension

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

Passage—4

Asset allocation is the most important investment decision we will ever make, and sadly, most of us do not give that decision the importance it deserves. We are adamant about seeking predictability with our future. We tend to think of investing in risky assets as extremely volatile and value eroding. We also dislike fluctuating returns and the loss of control of investment. We think our money is best left idle, unproductive but safe. There is no asset that is risk-free. We could lose our jobs, our homes can lose value, our banks can go bankrupt, our bonds can default, the government can collapse and companies we chose fondly may cease to exist. But we cannot live life assuming that all these extreme events are waiting to happen, and all at the same time. All these extreme forms of risks we know will not manifest at the same time.

CSAT 2020 · Q4

Reading comprehension Easy

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

Answer & explanation

Answer: (a) Distribute your wealth across different kinds of assets so that your risks would be minimized.

The author opens with asset allocation as the key decision, says no asset is risk-free, and ends by noting that the extreme risks will not all strike at the same time. The practical suggestion is to spread money across different assets so that one failure does not wipe out everything.

  • ✓ (a) Asset allocation is 'the most important investment decision', and since the risks 'will not manifest at the same time', spreading wealth across assets lowers overall risk.
  • ✗ (b) The author wants informed allocation, not risk-taking as a personality trait; 'necessary component' goes beyond the passage.
  • ✗ (c) Handing money to an asset manager is never mentioned; the author even notes our dislike of losing control of investment.
  • ✗ (d) This is only the starting fact ('no asset that is risk-free'), not the author's suggestion about what to do.

Remember · When a passage says 'every option is risky, but not all fail together', its advice is diversification.

Question and answer: UPSC's official GS Paper II (2020, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·

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