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Constant Ratio Plan |
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Constant ratio plan Maintaining a predetermined ratio between stock and fixed income investments through regular adjustments of distribution of funds into different investments. See: formula investing. Constant Ratio Plan An investment strategy in which the market value of stocks and bonds are kept at a predetermined ratio. That is, when compiling a portfolio, an investor may decide that 60% of its value will consist of bonds and 40% will be stocks. When prices rise or fall on the securities in the portfolio, the investor will buy and sell accordingly in order to maintain the ratio. A constant ratio plan is a form of active management and is done in order to reduce the risk in the portfolio.
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