Investment Policy of Institutional Investors
The Investment Policy Statement is the governing document for managers working with institutional investors, just as it is with individual investors. The IPS outlines the goals and objectives of the institution and serves as a guide that predetermines how the…
Institutional Investors: Varieties and Typical Traits
Institutions include corporations, trusts, or other legal entities that invest on behalf of groups or individuals, including both current and future generations. Institutional investors carry considerable influence over the capital markets due to their size, scope, and structure. This reading…
Study Notes for CFA® Level III – Portfolio Management and Wealth Planning – offered by AnalystPrep
Reading 9: Risk Management for Individuals Los 9 a: Compare the characteristics of human capital and financial capital as components of an individual's total wealth Los 9 b: Discuss the relationships among human capital, financial capital, and economic net worth…
Asset Allocation and Risk Reduction Strategies
This is a cumulative LOS that combines all of the previous readings about insurance, asset allocation, and individual risk management. A few key points to take away are: Investors and managers must consider total wealth in the asset allocation decision…
Risk Characteristics of Human Capital
Asset allocation should consider total wealth. Remember that total wealth is comprised of both financial capital and human capital Total Wealth = Financial Capital + Human Capital Human capital tends to be static unless the investor were to head back…
Merits and Demerits of Fixed and Variable Annuities
Volatility of Payout Fixed annuities pay a predetermined benefit amount. That is, there is no risk in receiving lower payouts year to year. This is best for investors who need a high level of assurance in regard to spending. For…
Use of Annuities in Personal Financial Planning
Readers of the level three curriculum are likely already familiar with the basic mechanisms of an annuity. An annuity is a one-time payment in exchange for a series of future cash flows. The simplest example is a series of fixed…
Elements of Life Insurance Policy
Life insurance protects an individual's beneficiaries against a loss of income. Pricing a life insurance policy is a time value of money issue that takes some practice to get the handle on. Insurance companies use the law of large numbers…
Types of Insurance
Life Insurance Life insurance is designed to make a payout to beneficiaries after the death of a primary income earner. When beneficiaries are financially dependent on the earnings of the insured, this creates a risk to them of being left…
Individuals Risk Exposures
Typical Individual Risks Earnings Risk: Refers to loss of Human Capital. Certain professions are inherently riskier than others. Earnings risk can refer to either a complete loss of earnings or a diminution of earnings. Premature Death Risk: Occurs when the…
