About Me
Chartered Financial Analyst (CFA)
1 Ethical and Professional Standards
1-1 Code of Ethics
1-2 Standards of Professional Conduct
1-3 Guidance for Standards I-VII
1-4 Introduction to the Global Investment Performance Standards (GIPS)
1-5 Application of the Code and Standards
2 Quantitative Methods
2-1 Time Value of Money
2-2 Discounted Cash Flow Applications
2-3 Statistical Concepts and Market Returns
2-4 Probability Concepts
2-5 Common Probability Distributions
2-6 Sampling and Estimation
2-7 Hypothesis Testing
2-8 Technical Analysis
3 Economics
3-1 Topics in Demand and Supply Analysis
3-2 The Firm and Market Structures
3-3 Aggregate Output, Prices, and Economic Growth
3-4 Understanding Business Cycles
3-5 Monetary and Fiscal Policy
3-6 International Trade and Capital Flows
3-7 Currency Exchange Rates
4 Financial Statement Analysis
4-1 Financial Reporting Mechanism
4-2 Income Statements, Balance Sheets, and Cash Flow Statements
4-3 Financial Reporting Standards
4-4 Analysis of Financial Statements
4-5 Inventories
4-6 Long-Lived Assets
4-7 Income Taxes
4-8 Non-Current (Long-term) Liabilities
4-9 Financial Reporting Quality
4-10 Financial Analysis Techniques
4-11 Evaluating Financial Reporting Quality
5 Corporate Finance
5-1 Capital Budgeting
5-2 Cost of Capital
5-3 Measures of Leverage
5-4 Dividends and Share Repurchases
5-5 Corporate Governance and ESG Considerations
6 Equity Investments
6-1 Market Organization and Structure
6-2 Security Market Indices
6-3 Overview of Equity Securities
6-4 Industry and Company Analysis
6-5 Equity Valuation: Concepts and Basic Tools
6-6 Equity Valuation: Applications and Processes
7 Fixed Income
7-1 Fixed-Income Securities: Defining Elements
7-2 Fixed-Income Markets: Issuance, Trading, and Funding
7-3 Introduction to the Valuation of Fixed-Income Securities
7-4 Understanding Yield Spreads
7-5 Fundamentals of Credit Analysis
8 Derivatives
8-1 Derivative Markets and Instruments
8-2 Pricing and Valuation of Forward Commitments
8-3 Valuation of Contingent Claims
9 Alternative Investments
9-1 Alternative Investments Overview
9-2 Risk Management Applications of Alternative Investments
9-3 Private Equity Investments
9-4 Real Estate Investments
9-5 Commodities
9-6 Infrastructure Investments
9-7 Hedge Funds
10 Portfolio Management and Wealth Planning
10-1 Portfolio Management: An Overview
10-2 Investment Policy Statement (IPS)
10-3 Asset Allocation
10-4 Basics of Portfolio Planning and Construction
10-5 Risk Management in the Portfolio Context
10-6 Monitoring and Rebalancing
10-7 Global Investment Performance Standards (GIPS)
10-8 Introduction to the Wealth Management Process
10. Portfolio Management and Wealth Planning Explained

10 Portfolio Management and Wealth Planning - 10. Portfolio Management and Wealth Planning

Key Concepts

Asset Allocation

Asset Allocation is the process of distributing investments across various asset classes (stocks, bonds, real estate, etc.) to balance risk and return based on an individual's goals, risk tolerance, and investment horizon.

Example: A young investor with a long-term horizon might allocate 70% of their portfolio to stocks for growth potential, 20% to bonds for stability, and 10% to real estate for diversification.

Risk Management

Risk Management involves identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events.

Example: An investor uses stop-loss orders to limit potential losses on stock investments, ensuring that if the stock price drops below a certain level, the shares are automatically sold.

Performance Measurement

Performance Measurement evaluates the success of an investment portfolio by comparing its returns to a benchmark or other portfolios. Key metrics include alpha, beta, and Sharpe ratio.

Example: If a portfolio's annual return is 10% and the benchmark index returns 8%, the portfolio's alpha (excess return) is 2%, indicating superior performance.

Tax Planning

Tax Planning involves strategies to minimize tax liabilities by taking advantage of deductions, credits, and tax-advantaged accounts. It aims to optimize after-tax returns.

Example: An investor contributes to a Roth IRA, where contributions are made with after-tax dollars but withdrawals in retirement are tax-free, reducing overall tax burden.

Estate Planning

Estate Planning ensures the management and disposition of an individual's estate during their life and at death. It includes wills, trusts, and beneficiary designations.

Example: A person creates a will to specify how their assets should be distributed upon death, avoiding probate and ensuring their wishes are followed.

Retirement Planning

Retirement Planning involves setting financial goals, estimating income needs, and creating a strategy to accumulate sufficient assets to meet those needs in retirement.

Example: An individual calculates that they need $50,000 annually in retirement and saves accordingly, investing in a mix of stocks, bonds, and annuities to achieve this goal.

Behavioral Finance

Behavioral Finance studies the effects of psychological, social, cognitive, and emotional factors on financial decisions. It helps investors understand and mitigate behavioral biases.

Example: An investor avoids making impulsive decisions during market downturns by recognizing their tendency to panic and instead follows a pre-determined investment plan.

Wealth Transfer Strategies

Wealth Transfer Strategies involve methods to transfer wealth from one generation to another, such as gifting, trusts, and life insurance, to minimize taxes and ensure financial security.

Example: Parents set up a trust fund for their children, funded with life insurance proceeds, to provide financial support without incurring significant estate taxes.

Sustainable Investing

Sustainable Investing integrates environmental, social, and governance (ESG) criteria into the selection and management of investments, aiming for long-term financial returns and positive impact.

Example: An investor chooses to invest in a mutual fund that focuses on companies with strong ESG practices, such as renewable energy firms and socially responsible corporations.

Financial Planning Process

The Financial Planning Process involves six steps: establishing and defining the client-planner relationship, collecting client data, analyzing and evaluating financial status, developing and presenting financial planning recommendations, implementing the financial planning recommendations, and monitoring the financial planning recommendations.

Example: A financial planner meets with a client to understand their financial goals, assess their current financial situation, and create a comprehensive plan to achieve those goals, including regular reviews and adjustments.

© 2024 Ahmed Baheeg Khorshid. All rights reserved.