- CFA Exams
- Dec. 2020 Level 1
- Study Session 19. Portfolio Management II
- Reading 54. Basics of Portfolio Planning and Construction
Reading 54. Basics of Portfolio Planning and Construction
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Learning Outcome Statements
| Reading 54. Basics of Portfolio Planning and Construction | |
|---|---|
| 1. The Investment Policy Statement and its Major Components a. describe the reasons for a written investment policy statement (IPS); b. describe the major components of an IPS; | |
| 2. Investment Risk and Return Objectives, and Risk Tolerance c. describe risk and return objectives and how they may be developed for a client; d. distinguish between the willingness and the ability (capacity) to take risk in analyzing an investor's financial risk tolerance; | |
| 3. Investment Constraints e. describe the investment constraints of liquidity, time horizon, tax concerns, legal and regulatory factors, and unique circumstances and their implications for the choice of portfolio assets; | |
| 4. Portfolio Construction f. explain the specification of asset classes in relation to asset allocation; g. describe the principles of portfolio construction and the role of asset allocation in relation to the IPS. |