Chapter 14

Question 1

Concentrated Portfolio

Answer 1

No legal definition. Majority of the portfolio is in one or few holdings.

Question 2

Tactical Asset Allocation

Answer 2

Tactical asset allocations move within the strategic allocation range, but are based on short term capital market expectations.

• More categories than strategic
• Change more frequently
• Designed to beat the market

Question 3

Strategic Asset Allocation

Answer 3

• Limited number of categories
• Broad percent ranges
• Rarely change the percentages
• Designed to align the risk tolerance of the client with an investment group. Based on long term capital market expectations.

Question 4

9 step investment process

Answer 4

1) understand the client goals
2) identify a target rate of return
3) agree on time horizon
4) understand the client tolerance and and capacity for risk
5) define asset classes
6) determine an appropriate asset class
7) create the investment policy statement
8) select the investment
9) monitor and adjust as needed