W12 CFA - W12 CFA Stage 1 Planning Defining investors...

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W12 CFA Stage 1: Planning - Defining investor’s objective and constraints - Formulating an Investment Policy Statement - Developing capital market expectations - Determining the strategic asset allocation Stage 2: Execution - Asset allocation and portfolio optimization - Security selection - Implementation and execution Stage 3: Feedback - Monitoring - Rebalancing - Evaluating portfolio performance Objectives Typically ascertain: return requirements and risk tolerance by asking investors to complete a questionnaire Constraints on investment - Liquidity How readily investments can converted to cash - Investment horizon How long the investor plan to hold the assets - Regulations Which serve to limit the behavior of investment professionals and institutional investors - Taxation Income (eg: coupons; dividends) and capital gains (price increase) [different tax rate] on investments can give rise to tax liabilities and investment performance is measured after tax - Other investor-specific needs
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