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Advanced Portfolio Management: Strategies And Techniques (CFA Course)


The Chartered Financial Analyst (CFA) Program offers a comprehensive curriculum that covers various aspects of finance, including portfolio management. The advanced portfolio management module of the CFA course equips candidates with the knowledge and skills necessary to design, implement, and manage investment portfolios. In this article, we will explore the strategies and techniques covered in the advanced portfolio management section of the CFA course. How to obtain certificate in finance accounting and business, here is valuable guide for you.

Portfolio management process:

The advanced portfolio management module introduces candidates to the portfolio management process. It covers topics such as setting investment objectives, defining risk tolerance, and establishing investment policy statements. Candidates learn how to develop strategic asset allocation plans based on understanding asset classes, risk factors, and capital market expectations.

Modern portfolio theory (MPT):

Modern portfolio theory is a cornerstone of portfolio management. It provides a framework for constructing diversified portfolios that optimize risk and return. Candidates learn about efficient frontiers, risk-free rates, and the trade-off between risk and return. They also explore the Capital asset pricing model (CAPM) and its application in determining asset expected returns.

Asset allocation strategies:

Asset allocation plays a critical role in portfolio management. Candidates delve into various asset allocation strategies, including strategic, tactical, and dynamic asset allocation. They learn to assess risk profiles, determine asset class weights, and rebalance portfolios based on changing market conditions and investment objectives.

Risk management and derivatives:

Effective risk management is a crucial aspect of portfolio management. To assess and manage portfolio risk, candidates learn about risk measurement techniques, such as Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR). They also study using derivatives, such as futures, options, and swaps, as risk management tools. Candidates gain insights into hedging strategies, portfolio insurance, and risk mitigation techniques.

Alternative investments:

The advanced portfolio management module covers the characteristics and strategies of alternative investments, including hedge funds, private equity, real estate, and commodities. Candidates learn how to incorporate alternative investments into portfolios to enhance diversification and potentially improve risk-adjusted returns. They explore the unique features and risks associated with each alternative investment category.

Portfolio rebalancing and monitoring:

Managing a portfolio involves continuous monitoring and periodic rebalancing. Candidates learn how to monitor portfolio performance, assess the need for rebalancing, and implement portfolio adjustments. They study the impact of transaction costs, tax considerations, and liquidity constraints when rebalancing portfolios.