lifestyle protection strategies protection, investing, please, really

cjs238

can anyone please help me with an explanation of lifestyle protection strategy in the chapter: goal based investing. m confused and i dont want to mug it up! CFA book explanation is an array of words and makes no sense to my mind at all.

wud really appreciate ur help
thanks!

canadiananalyst

I am also confused ! What are the focal/key points and conclusions ?

Analti_Calte

I think the key takeaway is that managing a portfolio against a benchmark is pretty moot from the viewpoint of the beneficiary. A portfolio manager can beat the S&P 5 years in a row but if the ending portfolio doesn't meet individual's objectives, what good is that? Absolute return > relative return.

NO EXCUSES

infinitybenzo

Anyone have a brief summary of the contrast among Lifestyle Protection Strategies, Cash Flow Matching and Fixed Horizon Strategies ?

mcmc

So just so we're on the same page, you're not talking about a brand of contraceptives, right?

liangfeng

mik82,

Thanks for your response ! What I don't understand well is the applications (in what scenarios) of Lifestyle Protection Strategies, Cash Flow Matching and Fixed Horizon Strategies respectively.

bboo

CFAI actually explains that well.

Lifestyle protection strategies are applicable to individuals that need portfolios to fund certain general expenses. A portfolio that will "sustain" a given a given spending (therefore "lifestyle"). So create an asset allocation that will be able to fund withdrawals from clients (spending) over a certain time frame and not run out of capital.

CF matching is similar but adequate for a client that knows exactly what her spending will be (for example every 15th of the month he/she has a mortgage pmt to make).

Fixed Horizon Strategies are for somebody that is planning for retirement or for college education. So it sets a minimum portfolio value at horizon that MUST be met and invests now accordingly with combo of zero coupon + risky portfolio