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Get our FREE CFA Level 1 summaries: https://www.finquiz.com/cfa/level-1/summary Learning Module 4: Basics of Portfolio Planning and Construction 0:00 Basics of Portfolio Planning and Construction - CFA Level 1 Introduction 0:28 Why Portfolio Planning Starts with the Client 1:19 Investment Policy Statement IPS Overview 2:37 What an IPS Really Does 4:00 How the IPS Is Built 4:58 Major Components of an IPS 8:52 Risk and Return Objectives Introduction 9:20 Absolute Risk vs Relative Risk vs Liability Risk 11:47 Risk Tolerance - Ability vs Willingness 14:15 Aggressive vs Conservative Risk Profiles 17:03 Return Objectives Explained 18:10 Absolute Return vs Relative Return 19:07 Before Tax vs After Tax and Real vs Nominal Return 21:30 IPS Constraints Overview 21:59 Liquidity Needs 22:52 Time Horizon 23:39 Tax Concerns 24:28 Legal and Regulatory Constraints 25:04 Unique Circumstances and ESG Restrictions 26:48 Gathering Client Information 27:35 Why Good Portfolios Start with Good Questions 29:12 What Client Information Must Be Collected 30:52 Advisory vs Execution-Only Relationships 33:28 Portfolio Construction Overview 34:40 Capital Market Expectations Explained 36:27 How Expected Returns Are Estimated 39:30 Strategic Asset Allocation SAA 40:40 Why Asset Allocation Drives Long-Term Performance 43:33 What Is an Asset Class 45:29 CFA Criteria for Defining Asset Classes 47:48 Risk Return and Correlation in Asset Allocation 50:04 Utility Function and Risk Aversion 52:55 Efficient Frontier Explained 54:38 Optimal Portfolio and Strategic Asset Allocation 57:18 Portfolio Construction Principles 58:09 Risk Budgeting 59:04 Sources of Portfolio Return - SAA TAA and Security Selection 1:01:45 Active vs Passive Management 1:02:52 Rebalancing and Portfolio Drift 1:04:18 New Developments - ETFs Robo Advisors and Risk Parity 1:06:05 ESG in Portfolio Planning 1:07:46 Negative Screening Positive Screening and Impact Investing 1:09:07 Shareholder Engagement and ESG Benchmarks 1:10:43 Final Review and Exam Takeaways