InvestmentPlanningWeek10 - FSU Certificate in Financial...

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FSU Certificate in Financial Planning Investment Planning © Florida State University Page 1 Lecture Title: Week 10: Portfolio Management Week 10: Portfolio Management Introd uctio n These are the lecture notes you've all been waiting for: the last ones! As the lyrics from the Grateful Dead song Truckin' state: "Lately it occurs to me what a long strange trip it's been." Last week the lecture notes were quite lengthy as we went into some detail about options and futures. This week we'll trim it down a good bit and allow you some time to begin preparation for the final exam. I'll hit the highlights and spend most of the lecture on portfolio management. Remember: There is an extra credit question this week which you'll find at the end of the Homework Assignment. Objectives At the end of this lecture, you will be able to: 1. Construct an individual's balance sheet and cash budget. 2. Creat an asset allocation model appropriate to meet stated financial goals. Lecture Presentation Now, after studying so very many aspects of investing, it's time to pull together all the knowledge gained and put it to work in an organized manner designed to meet the investor's goals. It's finally time to practice financial planning, from determining the investor's assets, liabilities, cash flows, investment horizon, and risk tolerance to conducting the asset allocation necessary to construct a diversified portfolio. As we delve into this final area remember the words of Yogi Berra: "Half this game is 90% mental." At Horsesmouth there is another article you may want to quickly review before reading further, "The 7 Personal Finance Truths." I want to let you in on a little secret. About fifteen years ago I discovered a pamphlet attainable through CFP Board that has greatly helped me in my practice. It very simply outlined the six steps of the financial planning process as developed by CFP Board. I ordered a number of these pamphlets and I show it to every prospective client I meet
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FSU Certificate in Financial Planning Investment Planning © Florida State University Page 2 with. I open it up, show them the six steps and state that decades of work have gone into developing this financial planning process. I further indicate that as a CFP® practitioner I'm held to a higher standard than other financial planners and that I follow this process. I then discuss the options they have in deciding how to compensate me for my services (transaction or fee based), show them the detailed questionnaire I use to gather data, the Investment Policy Statement I will create, the asset allocation model that will be customized for them, and some other tidbits. I have to tell you, no one has yet questioned the credibility of this process. The words of CFP Board carry a great deal of weight, so why not use them? Here's how you can print the six step process. : 1. Go to www.cfp.net.
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