Portfolio Planning & Construction

Investor Facts

You will be given facts about yourself, a hypothetical investor. You will incorporate these facts into the IPS and the hypothetical portfolio you will build. These facts will includes investor objectives and constraints.

Investable Securities

You will be given 15 investable securities. These funds plus cash is your entire investable universe for this project. You will be given investment data and research on the 15 securities. Utilize this research, plus anything else you find online in your analysis. You will be given a correlation matrix on the 15 securities. Utilize this as you consider risk in constructing your hypothetical portfolio. Assume there are no minimum dollar amount necessary to invest in any of the 15 securities provided.

IPS

Introduction

i.This section describes the investor. Use investor facts to flesh out this section.

ii.This section should be about a paragraph.

Statement of Purpose

i.This section states the purpose of the IPS.

ii.This section should be about a paragraph describing the objective of creating and utilizing this IPS in guiding your investment decision making.

Investment Objectives & Constraints

i.This section explains the investors objectives and constraints in investing. Use information from Investor Facts and your Risk Profile Questionnaire as inputs.

ii.Return objectives

Describe the investors return objectives in absolute or relative terms. Explain why you picked the investment objective that you choice.

iii.Risk constraints

Characterize the risk objective of the investor as relative or absolute. Explain why you picked the choice you did. Describe the investors risk in terms of ability to take risk as well as willingness to take risk.

iv.Other constraints; describe any other constraints to the investor, including:

Liquidity Time Horizon Tax Concerns

Consider using https://www.dinkytown.net/java/TaxMargin.html to estimate take home pay after taxes. Asset Location - What are the tax ramifications of holding certain types of investment in various types of accounts?

i.https://www.fidelity.com/viewpoints/investing-ideas/asset-allocation-lower-taxes

Unique Circumstances

v.See page 311 in the book for an abridged example. This section should be a few paragraphs. You can also use a bullet point layout to list out the relevant facts.

Investment Guidelines.

i.This section provides information about how policy should be executed and which specific types of assets are excluded from investment, if any.

ii.Will you be investing only towards the Strategic Asset Allocation or will you implore a Tactical Asset Allocation? Why? Describe your Strategic Asset Allocation and why you chose it. Describe your Tactical Asset Allocation and why you choose it.

iii.Describe your security selection for your Tactical Asset Allocation (or Strategic Asset Allocation if you did not use a Tactical Asset Allocation.) Why did you choose the securities you did? What is your estimation for return for the portfolio? What is your estimation for risk? How would you describe the expenses of your portfolio? What else did you take into account for your security selection?

iv.This section should be a few paragraphs. You can refer to your appendices, which will be Microsoft Excel Spreadsheets.

Evaluation and Review.

i.This section provides guidance on obtaining feedback on investment results. Consider how will you evaluate the portfolio and make adjustments? Over what time horizon?

ii.Rebalancing

How frequently will you rebalance and what will trigger a rebalance? Calendar rebalancing? Target band rebalancing?

iii.This section may be a paragraph or two.

Appendices (required)

i.Strategic Asset Allocation

What is the ideal long-term mix of assets for the investor? Include target weighting of the assets in the portfolio as well as tolerance for asset drift. This should be done in Microsoft Excel.

ii.Tactical Asset Allocation

How will the current portfolio deviate from the Strategic Asset Allocation (if at all) given your current capital market expectations? What capital market expectation lead you to deviate the current portfolio from the strategic asset allocation? This should be done in Microsoft Excel.

iii.Security Selection

Provide the proposed security allocation for each account for the investor. This should be done in Microsoft Excel.

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