How to write return objective for Individual IPS into, test, difficulty, statements, objective

transferpricing

I'm having difficulty figuring out how to write the return objective for individuals for IPS statements.

It seems like this has been on the test every year and I am not good at writing it.

I can usually come up with the return required but I can't seem to write out the return objective statement. Usually I say something along the lines of the following:

Achieve an after-tax return that preserves capital in relation to inflation and takes into consideration the constraints of the portfolio.

This seems to general/crappy to me. Anyone got a better method?

bodhisattva

Yeah often its to maintain the real value of the portfolio after all withdrawals.

I've also seen "maximise returns subject to risk tolerance" in a schweser solution.

I guess it often depends on what information they give you in the vignette.

jmh530

If you are asked to "calculate" then just calculate, if "formulate", then maybe say one or two sentences like: preserve the principal, meet the liability, meet the spending requirement, meet the expense requirement blar blar blar.

thommo77

CFAI should really never ask you to "calculate" a return objective. The exam will say "prepare" or "formulate" or "state" the return objectives. Look at the last 3 exams for how they ask the question and what the CFAI answer is. This is how you need to answer the question.

The exam WILL ask you to "calculate" the return requirement.

A key point that gets missed a lot is the difference between an return objective and a return requirement. The return objective is what they will use the portfolio for. The return requirement is what they need to earn in order to accomplish the objective.

Windjam

excellent, much thanks