Is it just me or is the Return Objective the hardest part to write on the IPS? For some reason, I always draw a blank on how to begin the Return Objective statement. I guess I think too hard. The return calculation is another story, but for some reason I feel like an idiot everytime I go to write one of these things… The constraints and Risk Obj are easier to write…but that’s just me.
yes… I feel the return objective (not the actual % figure) is like a recap. for example, is this good? “Joe Smith in concerned on a total return objective with emphasis on capital appreciation over a long time horizon. Joe should achieve a real return to cover his ongoing liquidity concerns which increase with the general rate of inflation” or am i just throwing too much Sh!t in there?
Never too much sh*t.
bigwilly Wrote: ------------------------------------------------------- > Is it just me or is the Return Objective the > hardest part to write on the IPS? For some > reason, I always draw a blank on how to begin the > Return Objective statement. I guess I think too > hard. The return calculation is another story, > but for some reason I feel like an idiot everytime > I go to write one of these things… The > constraints and Risk Obj are easier to write…but > that’s just me. I think he’s right. Most of the time I’ve seen the Return Objective is usually found within the body of the question expressing what goals the investor wishes to achieve.
I’m always stumped on how to begin it
yeah. I got schooled on the First question of the first practice exam because they wanted Return objectives for the next year, and I did after the dude retired. I was like WTF, they had a return objective well north of 8% by make calcs if I remember correctly… I just think it was sneaky and sly of Schweser, and they do this for each level, but CFAI will usually not be so cruel.
seriously… talk about writers block…
i had this problem so i just started listing the determinants of the return: the return objective is based upon: - the size of the portfolio / level of wealth (dictates risk tolerance and hence expected return) - spending needs (liquidity) - maintenance of principal (usually but maybe not if unique circumstances exist) - time horizon you’re right in that it is basically a recap. RRTTLLU is interrelated anyway (changes in one typically result in changes in others since they do not exist in a vacuum). i end up writing the same stuff twice sometimes, but i think it’s important to start off on the right foot in these IPS problems so that you don’t miss anything.
i like that… take each RRTTLLU bullet points and work it into a sentence… that’s as good as it’s gonna get for me…
i actually find the risk objective the hardest … wrt the ability to take risk - I am alway underestimating their ability …
Return objectives is always a # for me. I just say bla bla bla required return is 5% on after tax basis. That is it.
The Edge Wrote: ------------------------------------------------------- > i actually find the risk objective the hardest … > wrt the ability to take risk - I am alway > underestimating their ability … I mainly use return figs to determine ability. I am with you CSK, I basically just calculate a return for pre tax and go…not much else to do really. Do you guys normally show a pre and post tax return calc?
Yea I usually have drawn a blank on this but recently I have been better. I think obvisously if they want a calc do that but for the wording I usually just but the goals of the investor, i.e. they need to met blah blah spending requirements while protecting purchasing poewer… seems like that is what cfai past exams where looking for.
i know schweser grades return objectives based on these two parts: 1. a # 2. a sentence talking about the return objective…(similar to the recap I wrote in the post above) not sure if this CFAI protocol but this what Schweser was doing…
Return is the hardest part of the IPS question, Personally I am doing the CFAI method based upon past exams and the reading (i.e. inflow/outflow, with taking in to account TVM and inflation).
pretty much begin and end with a return calculation. btw, its the before tax figure thats important ? when selecting a suitable portfolio for example ??? … somehow i always end up working with the after tax fig and mess it all up
there are a variety of responses here and none of them seem particularly better than any of the others (except maybe james’ since it’s based on old answer keys). i’m still not clear how they handle this on the exam. when doing practice tests, i sometimes write a correct answer that correctly answers the question, only to see that it is not in the answer key–another suitable answer is listed as the only choice. there are all sorts of ways to do this on the IPS questions, for instance. so how do they grade the responses? how liberal is the answer key? i suppose no knows the exact answer to that question, but thoughts would be appreciated. i have been reading this forum for weeks and still have not been able to figure this out.
What scares me the most about the return requirement calculations is the double jeopardy situations I’ve seen when you are then asked to select the appropriate corner portfolios based on the return requirements (2005 CFAI exam). Or when you’re asked to select a specific asset allocation structure and you need to return requirements from the previous question that you had to calculate in order to rule out certain allocation proposals. It’s questions like these that make this a hard test. Not that the material is hard, but one small slip up and you’ve pouched the rest of the question and possibly the next.
bips Wrote: ------------------------------------------------------- > pretty much begin and end with a return > calculation. > > btw, its the before tax figure thats important ? > when selecting a suitable portfolio for example > ??? … somehow i always end up working with the > after tax fig and mess it all up I don’t see how it should be before…I can see a case for both, but ultimately you need to earn a real, which is post tax return that can meet your objective. I agree FlameFan, I got burned on the asset portfolio selection as I had to pikc the portfolio which was closest to the high return, even though I had a feeeling something was up with such a low risk tolerance, and the portfolio not being very good…
jamespucyk Wrote: ------------------------------------------------------- > Return is the hardest part of the IPS question, > Personally I am doing the CFAI method based upon > past exams and the reading (i.e. inflow/outflow, > with taking in to account TVM and inflation). Same, i really hope they will give question similar to olde xams