Reading 51: Basics of Portfolio Planning and Construction

Which of the following documents is best described as the starting point of the portfolio management process?

Which component of an Investment Policy Statement typically contains the strategic asset allocation?

An objective to 'not decrease in value by more than 2 percent at any point over any 12-month period' is best classified as which type of objective?

Which of the following factors primarily determines an investor's ability to bear risk?

If a client has a high willingness to take risk but a low ability to take risk, the financial adviser should generally:

Which of the following best describes 'liquidity' as an investment constraint?

An investor has a 20-year time horizon. Compared to an investor with a 2-year time horizon, this investor can generally accept:

Which investment constraint encompasses ethical preferences, such as prohibiting investment in tobacco companies?

In the context of specifying asset classes, correlations of returns should ideally be:

Tactical asset allocation is best described as:

Which approach to ESG investing focuses on excluding specific companies or industries based on ESG factors?

What is 'security selection' in the context of active portfolio management?

According to the reading, risk budgeting helps an investor:

The 'core-satellite' approach to portfolio construction typically involves:

Which of the following is considered an 'investment constraint' rather than an 'investment objective'?

Which statement regarding 'willingness to bear risk' is correct?

An absolute return objective is best illustrated by which of the following statements?

Peer performance benchmarks suffer from which specific limitation mentioned in the text?

Which of the following represents a 'relative risk objective'?

In the context of 'responsible investing,' limiting investments in companies with poor human rights records is an example of:

Which section of the IPS typically describes the benchmark portfolio for evaluating investment performance?

For a bank, a return objective is often defined relative to:

Which of the following circumstances would suggest a *lower* ability to bear investment risk?

A restriction on investing in securities issued by tobacco producers is categorized under which constraint?

The asset allocation developed to meet the investor's long-term objectives is called:

Which of the following asset classes is typically classified as an 'alternative investment'?

According to the reading, which strategy might a tax-sensitive investor employ?

What is 'active ownership' in the context of ESG investing?

When an investor holds illiquid assets in a portfolio, they must generally be prepared to:

A 'best-in-class' approach to ESG investing is most similar to:

In the context of the IPS, what does 'R-R-T-T-L-L-U' represent?

Which section of the IPS would typically address how often the portfolio should be rebalanced?

An efficient frontier used in strategic asset allocation is constructed using:

Which activity involves deviations from index weights on individual securities?

If an investor has multiple managers engaging in active management, a potential risk is:

The 'Internet of Things' is mentioned in the text (Reading 55 reference, but conceptually linked to data) or implies sensors. *Wait, check source coverage.* Actually, R51 discusses ESG. Let's stick to R51. How does ESG integration differ from screening?

Which of the following is a potential drawback of using peer portfolios as a benchmark?

In a 'core-satellite' strategy, the 'satellite' portion is typically invested in:

An investor who receives an inheritance and segregates it into a safe account to 'not lose the money' is exhibiting:

Which type of risk objective is expressed as 'No greater than a 5 percent probability of returns below -5 percent in any 12-month period'?

A bank's return objective is often relative to its:

Which of the following is an example of a legal and regulatory constraint?

With respect to tax situations, a focus on which metric correctly accounts for differences in tax treatment?

An asset class should have which of the following characteristics?

Which statement regarding ESG investing constraints is most accurate?

What is the primary purpose of a 'Statement of Duties and Responsibilities' in an IPS?

When assigning an overall risk tolerance to a client with high willingness but low ability to take risk, the adviser should:

Risk budgeting sets an overall risk limit and allocates it to:

If a portfolio's investment universe is constrained by negative screening, the appropriate benchmark:

Strategic asset allocation is best described as: