Reading 15: Managing Individual ....tor Portfolios －LOS f including, across, investor, contrast

tycoon

CFA Institute Area 3-5, 7, 12, 14-18: Portfolio Management
Session 4: Private Wealth Management
Reading 15: Managing Individual Investor Portfolios
LOS f: Compare and contrast risk attitudes and decision-making styles across distinct investor personality types, including cautious, methodical, spontaneous, and individualistic investors.

tycoon

Which of the following statements about personality typing for individual investors is TRUE?

A) Broad classifications of investor types are difficult to derive.

B) Subjective assessments of investors are easy to standardize.

C) An ad hoc approach to personality typing is to administer a short questionnaire.

D) It is difficult to render precise categorizations of broad groups of investors.

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Answer and Explanation

As opposed to precise categories, broad classifications are easy to derive. The more subjective the assessment, the more difficult to standardize. An ad hoc approach would be a less formal approach based on the investment professionals interview with investors.

tycoon

Most of the short questionnaires used by investment professionals to determine client risk tolerance levels consist of:

A) comments about investment scenarios.

B) questions that focus on how the individual would deal with the professional if he/she lost their money.

C) exactly 30 questions.

D) comments about non-investment scenarios.

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Answer and Explanation

The questions tend to focus on self-evaluative statements and comments on different non-investment scenarios. There is no set number of questions as each professional may use his/her own questionnaire.

tycoon

Which of the following statements about risk and decision-making styles would least likely appear in a personality typing questionnaire?

A) My favorite subject in school was mathematics.

B) I would consider myself to be independent.

C) I typically lose sleep when the market is down.

D) I do not like contact sports, like football.

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Answer and Explanation

Most investor questionnaires focus on self-evaluative statements and comments on different non-investment scenarios.