can anyone please help me with an explanation of lifestyle protection strategy in the chapter: goal based investing. m confused and i dont want to mug it up! CFA book explanation is an array of words and makes no sense to my mind at all.
wud really appreciate ur help
thanks!作者: canadiananalyst 时间: 2011-7-11 19:01
I am also confused ! What are the focal/key points and conclusions ?作者: Analti_Calte 时间: 2011-7-11 19:01
I think the key takeaway is that managing a portfolio against a benchmark is pretty moot from the viewpoint of the beneficiary. A portfolio manager can beat the S&P 5 years in a row but if the ending portfolio doesn't meet individual's objectives, what good is that? Absolute return > relative return.
NO EXCUSES作者: infinitybenzo 时间: 2011-7-11 19:01
Anyone have a brief summary of the contrast among Lifestyle Protection Strategies, Cash Flow Matching and Fixed Horizon Strategies ?作者: mcmc 时间: 2011-7-11 19:01
So just so we're on the same page, you're not talking about a brand of contraceptives, right?作者: liangfeng 时间: 2011-7-11 19:01
mik82,
Thanks for your response ! What I don't understand well is the applications (in what scenarios) of Lifestyle Protection Strategies, Cash Flow Matching and Fixed Horizon Strategies respectively.作者: bboo 时间: 2011-7-11 19:01
CFAI actually explains that well.
Lifestyle protection strategies are applicable to individuals that need portfolios to fund certain general expenses. A portfolio that will "sustain" a given a given spending (therefore "lifestyle"). So create an asset allocation that will be able to fund withdrawals from clients (spending) over a certain time frame and not run out of capital.
CF matching is similar but adequate for a client that knows exactly what her spending will be (for example every 15th of the month he/she has a mortgage pmt to make).
Fixed Horizon Strategies are for somebody that is planning for retirement or for college education. So it sets a minimum portfolio value at horizon that MUST be met and invests now accordingly with combo of zero coupon + risky portfolio
