Reading 15: Managing Individual ....tor Portfolios －LOS h investment, creating, involved, process, policy

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CFA Institute Area 3-5, 7, 12, 14-18: Portfolio Management
Session 4: Private Wealth Management
Reading 15: Managing Individual Investor Portfolios
LOS h: Explain the process involved in creating an investment policy statement.

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Which of the following represents the process involved in creating an investment policy statement?

A) Evaluate capital market expectations and investment strategies.

B) Evaluate objectives, capital market expectations, and investment strategies.

C) Determine constraints and formulate investment strategies.

D) Evaluate objectives and constraints and combine them with capital market expectations.

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Answer and Explanation

Objectives and constraints are evaluated, and when they are combined with capital market expectations, the investment policy statement is created.

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Which of the following statements regarding the investment policy statement is FALSE? An individuals investment policy statement:

A) differs from an institution's in that time horizon plays a more prominent role.

B) is exactly the same as that of an institution's.

C) differs from an institution's in that taxes play a more prominent role.

D) includes planning, execution, and feedback.

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Answer and Explanation

An individuals investment policy statement differs from an institutions in that time horizon, taxes, and unique circumstances play a more prominent role. The overall process is the same.