How asset classes, allocation policy, asset location, and equity strategy fit together in portfolio design.
This chapter explains how portfolio policy is translated into an actual investment structure. It begins with the logic of asset classes and then moves through the asset allocation process, the main allocation approaches, tax-aware asset location, and the equity strategies most often used in practice.
For exam purposes, this chapter is about more than naming asset classes or strategies. Students should be able to distinguish long-term policy from shorter-term implementation, identify when tax considerations matter, and determine which approach best fits a client’s objectives, risk profile, time horizon, and account structure.
Read the pages in sequence. The later pages assume that the student already understands the difference between client facts, portfolio policy, and implementation choices. In particular, asset location and equity strategy selection make more sense once the student understands the broader asset allocation framework.
When reviewing for the exam, focus on questions such as these:
Candidates are often tested on distinctions that sound similar but are not interchangeable. Be ready to distinguish asset class from security type, asset allocation from asset location, and strategic policy from shorter-term implementation decisions.