Reading 15: Managing Individual ....tor Portfolios －LOS d 百度

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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 d: Explain the influence of investor psychology on risk tolerance and investment choices.

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Which of the following statements about appropriate investment planning is TRUE?

A) An appropriate investment objective for a typical 23-year-old investor is a low-risk strategy, such as capital preservation.

B) Individual investment planning could include the consultation of counsel.

C) Risk tolerance is exclusively a function of an individual's psychological makeup.

D) It is not a good idea to get too specific when constructing an investment policy statement.

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Answer and Explanation

Consultation with tax counsel could be recommended for complicated tax situations and an estate counsel for estate issues. A 23-year-old investor should be more concerned about capital appreciation, not preservation. Risk tolerance is a function of several factors, only one of which is psychological. Investment policy statements are more useful the more specific they are.

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Investor behavior and psychology allow classification according to risk preferences. The particular technique associated with this classification exercise is termed personality:

A) typing.

B) testing.

C) discussing.

D) assessing.

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Answer and Explanation

The particular technique is termed personality typing. Personality typing is an attempt to help both the investor and manager get a better understanding of an investors risk tolerance characteristics. Although no classification can accurately describe all investors, personality typing does give an indication to risk tolerance.

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Behavioral finance models of asset pricing take into account economic considerations and add:

A) security specific characteristics.

B) volatility parameters.

C) personal preferences.

D) individual selections.

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Answer and Explanation

In a world that accounts for behavioral factors, personal preferences are added to asset pricing models. Not only do basic economic relationships impact security prices but so do personal preferences. Investors likes and dislikes enter the pricing function.

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Investor psychology indicates investors will form portfolios via which method?

A) Triangulating.

B) Pyramiding.

C) Encompassing.

D) Integrating.

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Answer and Explanation

Pyramiding is the concept applied to investor portfolio formation in which portfolios are created by matching layers of assets to specific goals. Each layer of assets is not particularly evaluated within an overall portfolio context.