Reading 15: Managing Individual ....tor Portfolios －LOS i between, required, investor, investment, individual

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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 i: Distinguish between required return and desired return and explain the impact these have on the individual investor's investment policy.

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Return requirements are those return levels associated with returns needed to meet:

A) secondary goals.

B) educational goals.

C) vacation home goals.

D) major goals.

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Answer and Explanation

Return requirements are returns needed to attain major goals.

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Desired return objectives are those return levels associated with:

A) major goals.

B) educational goals.

C) secondary goals.

D) vacation home goals.

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Answer and Explanation

Desired return objectives are associated with secondary goals. Desired returns may be lowered if there is a disconnect between risk tolerance and return objectives.

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Risk objectives should be evaluated during which stage of the investment policy statement process? Concurrently with the:

A) capital market expectations formations.

B) investment strategy decision.

C) return objectives.

D) asset allocation decision.

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Answer and Explanation

Discussions of risk objectives should occur simultaneously with those of return objectives.