The four review questions
Are all the goals still relevant; are the goals on target for achievement in the required time-frame; are the investments performing as expected; do the investments need to be changed if no longer suitable for the goal.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Asset allocationThe decision on how to distribute a client's wealth across asset classes — the first decision in building a portfolio, and the one that explains most of what the portfolio then does.
- DiversificationSpreading an exposure across holdings that do not move together, so that total risk falls by more than total return does — minimising risk per unit of return.
- Risk profilingEstablishing how much risk an investor should carry by weighing three separate things — the need to take risk, the financial ability to take it, and the psychological willingness to bear it.
- Strategic asset allocationThe long-term target split of a portfolio across asset categories, fixed from the investor's goals, time horizon and risk profile rather than from any view on markets.
- Tactical asset allocationDeliberately shifting a portfolio away from its strategic target to exploit conditions in particular markets, with the stated aim of improving risk-adjusted return rather than simply chasing return.
Where this is taught
Free preparation for NISM Series X-B← All terms