Which of the following portfolios will most likely provide the greatest amount of downside protection? A) 55% U.S. stocks, 35% U.S. bonds, and 10% TIPS. B) 55% U.S. stocks, 35% U.S. bonds, and 10% commodities. C) 55% U.S. stocks, 35% U.S. bonds, and 10% foreign stocks.
B, diversification of commodities given the lack or corr between commodities and equities help limit risk and losses. All TIPS do is adjust to the inflation index, IR can rise without much inflationary pressure and the value of the TIPS wont provide an offset
A is certainly wrong -> Bonds and TIPS go up and down together . B seems appropriate
B. Bonds and TIPS move together, and if equities go down, stocks go up (generally) and vice versa.
correct answer is B.