Basics of Portfolio Planning & Construction

What is the primary purpose of an Investment Policy Statement (IPS)?

Which of the following is considered a major component of an IPS?

In the context of IPS Risk Objectives, which of the following is an example of an absolute risk objective?

How is a 'relative' return objective best described?

The 'willingness' to take risk is primarily based on what factor?

Which of the following suggests a greater 'ability' to take risk?

If an investor has a high willingness to take risk but a low ability to take risk, how should the investment advisor proceed?

Which IPS constraint involves the need to turn investments into cash quickly without significant loss of value?

How does a longer time horizon generally affect an investor's risk profile?

A client refuses to invest in companies that produce alcohol due to religious beliefs. Under which IPS constraint does this fall?

What is 'Strategic Asset Allocation'?

Ideally, how should correlations relate to asset classes in Strategic Asset Allocation?

What is 'Tactical Asset Allocation'?

What characterizes the 'Core-satellite approach' to portfolio construction?

In the IPS, where is the Rebalancing Policy typically located?

Which of the following describes a 'Legal' constraint in an IPS?

An investor states they need $50,000 in six months for a house down payment. This need primarily impacts which IPS constraint?

Which statement best describes the relationship between the IPS and the client's tax situation?

Evaluation of performance in an IPS is typically measured against what?

What is the assessment of an investor's 'willingness' to take risk usually done with?

A wealthy client with a long time horizon is terrified of stock market volatility. What limits their risk objective?

Which of the following is a potential benefit of the Core-satellite approach?

If an IPS includes a constraint stating 'No investment in competitor's company', which category does this fall under?

Which part of the IPS typically outlines how often the policy will be updated?

Absolute return objectives are best illustrated by which example?

Tactical asset allocation is described as a:

Which of the following is NOT a reason for having a written IPS?

What does the 'Description of client' section in an IPS typically include?

In the context of Asset Allocation, if two asset classes have high correlation with each other, what is the implication?

Which component of the IPS defines how the policy will be executed?

A 'Relative' risk objective might be stated as:

The 'Ability to take risk' depends largely on:

If a client has a short time horizon, their risk capacity is generally:

Why must an investment advisor typically prioritize the lower of willingness or ability to take risk?

What defines the 'satellite' portion of a Core-satellite portfolio?

Which section of the IPS would define the responsibilities of the custodian?

In the context of the IPS, 'Appendices' typically contain:

If a client has a 'Secure job' and 'Insurances', how does this impact their risk ability?

Which IPS constraint is concerned with 'Regulatory' requirements?

A return objective stating 'Returns should exceed S&P 500 Index by 2 percent p.a.' is an example of:

When choosing asset classes for Strategic Asset Allocation, what is a key criterion regarding correlation?

Which of the following is NOT a standard IPS constraint category (LLTTU)?

In a Core-satellite approach, the 'Core' is typically:

Procedures to respond to contingencies are found in which part of the IPS?

Which scenario best describes a 'Liquidity' constraint?

How does 'Unique Circumstances' differ from 'Legal' constraints?

What is the consequence of low correlation between asset classes in Strategic Asset Allocation?

A client is 25 years old with a high income. This suggests:

Which of the following is NOT a component of the 'Statement of Duties and Responsibilities'?

The Investment Policy Statement helps specifically to: