If remaining HC is risky, why should we take more risk with the FC we have. Same for, when remaining HC is low risk, take less risk with FC?
When HC is risky or equity type, FC will be invested in bond type/ low risk investment.
theCFA book disagrees
Depends on the stage of life the investor is in. If he is young with equity-like HC, he probably has higher risk tolerance, so his FC can be invested in equities as well.
General rule though is equity like HC, FC invested in bonds and vice versa.