CFA Practice Question

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CFA Practice Question

Which of the following issues does a policy statement not address?
A. Existing knowledge that the investor has in investments and capital markets
B. Additional capital or income sources available to the investor
C. Emotional reactions and risks associated with a positive financial outcome
Explanation: The policy statement does not address the emotional reactions or risks related to exceptional or strong performance (the investor should be so lucky!). The policy statement should address the following issues:
  • What are the risks of an adverse financial outcome?
  • What are the emotional reactions to an adverse financial outcome?
  • How knowledgeable is the investor about investments and markets?
  • What other capital or income sources does the investor have? How important is the portfolio to the overall financial position?
  • What legal restrictions may affect investment needs?
  • What unanticipated consequences of interim fluctuations in portfolio value may affect investment policy?

User Contributed Comments 2

User Comment
iceluke in the policy statement: emotional reactions to an ADVERSE financial outcome
Shelton policy:objective, emotional:subjective
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