Is it just me or are the charts provided completely wrong? I notice that they’ve been cooked up by Schweser alone (CFAI have none). I don’t buy any of it!

Buy and HOld should be a Linear line Constant Mix should be a concave line CPPI should be a convex line.

bigwilly Wrote: ------------------------------------------------------- > Buy and HOld should be a Linear line > Constant Mix should be a concave line > CPPI should be a convex line. How do you know a line is convex or concave ? By definition, convex is something that curves outward and concave curves inwards. The constant-mix and CPPI curves are not adding upto those definitions in my head.

Bigwilly thanks - you’re right of course, I just find that if I spend long enough thinking about correct axis labels, gradients, etc. I get a little frustrated that ones presented aren’t actually accurate. For example, they don’t mention that after any move in the stockmarket the gradient of a B&H will by definition change. Take an extreme - 60/40 portfolio (stocks/tbills). If stocks +10%, it’s a 6% contribution to portfolio value. Easy. A while later the equity portion has gone from $60% to $90 (Tbills remain at $40). Now a 10% move = $9 = 7% contribution to the B&H. SO much for that 60% gradient. It needs some artistic license. But in summary you’re right, and the risk/wealth conclusions make sense.

in one of the cfai old tests they mention that buy and hold has portfolio protection due to buying a treasury to provide downside risk. is that an old interpretation?

nope. You buy say $60 in stocks and $40 in t-bills and do nothing, so if stock goes to $0, you still have your t-bills.