Cfa Level 1 Portfolio Management

Front 1

steps in the portfolio management process:

Back 1

1.Write a policy statement that specifies investor's goals and constraints and itemize the risks the investor is willing to take to meet these goals.
2.develop an investment strategy designed to satisfy the investor's policy statement based on an analysis of the current financial and economic conditions.
3.Implement the plan by constructing the portfolio and allocating the investor's assets across countries, asset classes, and securities based on current and future forecasts of economic conditions.
4.Monitor and update the investor's needs and market conditions.Rebalance the investor's portfolio as needed.Rebalancing refers to shifting assets when the account allocations to different asset classes deviate significantly from the strategic asset allocation specified.

Front 2

Why investment objective must focus on both return and risk?

Back 2

1.if only return, investor may be exposed to inappropriate, high-risk investment strategy.
2.return only objectvies can lead to unacceptable behavio on the part of investment managers, such as excessive trading to generate commissions.

Front 3

Definition: capital preservation in return objectives.

Back 3

objective of earning a return on an investment that is at least equal to the inflation rate with little or no chance of loss.

Front 4

Definition: capital appreciation in return objectives.

Back 4

earning a nominal return that exceeds the rate of inflation over some period of time.

Front 5

Definition: current income in return objectives.

Back 5

the primary purpose of an account is to produce income as opposed to capital appreciation.

Front 6

Definition: Total return in return objectives.

Back 6

the objective of having a portfolio grow in value to meet a future need through both capital gains and the reinvestment of current income.

Front 7

risk rank: capital appreciation, current income and total return.

Back 7

large to small..
1.capital appreciation
2.total return
3.current income

Front 8

investment constraints include:

Back 8

1.liquidity
2.Time horizon
3.tax concerns
4.Legal and regulatory factors
5.Unique needs and preferences.