how are you people managing the IPS subtleties? a lot of the rationale seems to be so subjective. e.g. to assess liquidity need siginificance, CFAI calculates post-retirement spending $$ as a percentage of the portfolio value and then compares it to the expected returns projected by the advisor. 13% expected return y-o-y and spending 5% of portfolio value was deemed siginificant. so hard to assess this. comments?
bump
I am also having a hard time in understanding the logic behind it. It is like ethics and corp governance, very theoratical.
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agree with a guys, it would be great if we had kind of benchmarks to assess that stuff …
These things are a total pain if you ask me. In the limited number of questions I’ve done it seems you should first consider liquidity and then time horizon. At least this has worked for me so far… all of the other factors they mention seem to be secondary to these two. I guess it’s kind of like ethics where you just have to do lots of problems until you build some kind of intuition about it. If you’re using Schweser I think the library has a volume on IPS, I haven’t checked it out but it might be worth the time.
focus on liquidity and time horizon - sounds good. also, if tax bracket is 30-35% then tax factor is significant. to assess liquidity risk, gotta calc post-retirement expense $$ as a % of total portfolio.
also every investor should have IPS drafted on his own requirement (time horizon, tax, liquidity, strategic asset allocation, investment constraint (he doesn’t want to invest in tabbaco company etc etc)
Tobacco - unique constraints. What abt if the investor is a mountaineer and indulges in risky sports-activities and speculates on real estates in florida - what’s his time horizon? … haha
swaptiongamma Wrote: ------------------------------------------------------- > Tobacco - unique constraints. > > What abt if the investor is a mountaineer and > indulges in risky sports-activities and speculates > on real estates in florida - what’s his time > horizon? … haha According to Schweser, this is his risk ability. WTF, he has 50K to invest with 5 kids and works as a teacher somewhere in Ohio and makes 30K. He also has 60K credit card debt. But still he has a great risk ability and his willingness is there as one of his friends thinks that if you hold stock for more than a week, you will never make money on that. He also reads Wall street journal and visits CNN money often and shows good interest in financial market.
One investor having a ball-bearing production line, reads in Economic Times that Govt has put tariffs on import of ball-bearings and he gets all excited, that he is set for life. - can he handle more risk now?
yeah he has …(s) bearing his weight he…he…
You know what the freaking answer was - that the jerk was unnecessarily excited about tariffs being put on the imports of the products he produced domestically. As tariffs do no good.
Wouldn’t tariff help him in getting less competition from abroad?
^ exactly - I thought so. But the answer was otherwise in one of the Qbank questions.
Hey niraj_a, Once, we compute the post-retirement expense $$ as a % of total portfolio, for which % are we expected to say whether it is significant or not? Thanks! M.
malek_bg Wrote: ------------------------------------------------------- > Hey niraj_a, > > > Once, we compute the post-retirement expense $$ as > a % of total portfolio, for which % are we > expected to say whether it is significant or not? > > Thanks! > M. liquidity needs / risk.
cfaboston28 Wrote: ------------------------------------------------------- > swaptiongamma Wrote: > -------------------------------------------------- > ----- > > Tobacco - unique constraints. > > > > What abt if the investor is a mountaineer and > > indulges in risky sports-activities and > speculates > > on real estates in florida - what’s his time > > horizon? … haha > > > According to Schweser, this is his risk ability. > WTF, he has 50K to invest with 5 kids and works as > a teacher somewhere in Ohio and makes 30K. He also > has 60K credit card debt. But still he has a > great risk ability and his willingness is there as > one of his friends thinks that if you hold stock > for more than a week, you will never make money on > that. > > He also reads Wall street journal and visits CNN > money often and shows good interest in financial > market. I wanted to rip up the schweser book after I read this question and the answer…this guy should have very little ability to take risk with 5 kids and a measely job…
niraj_a, what do you mean by liquidity needs / risk? still don’t get it, sorry:( Thanks! M.
BlueCollarHero Wrote: ------------------------------------------------------- > cfaboston28 Wrote: > -------------------------------------------------- > ----- > > swaptiongamma Wrote: > > > -------------------------------------------------- > > > ----- > > > Tobacco - unique constraints. > > > > > > What abt if the investor is a mountaineer and > > > indulges in risky sports-activities and > > speculates > > > on real estates in florida - what’s his time > > > horizon? … haha > > > > > > According to Schweser, this is his risk > ability. > > WTF, he has 50K to invest with 5 kids and works > as > > a teacher somewhere in Ohio and makes 30K. He > also > > has 60K credit card debt. But still he has a > > great risk ability and his willingness is there > as > > one of his friends thinks that if you hold > stock > > for more than a week, you will never make money > on > > that. > > > > He also reads Wall street journal and visits > CNN > > money often and shows good interest in > financial > > market. > > > I wanted to rip up the schweser book after I read > this question and the answer…this guy should have > very little ability to take risk with 5 kids and a > measely job… BCH, long time? Where have you disappeared?