CFA Level 3 | Goals-based Asset Allocation: Minimum Expectation Returns

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CFA Level 3
Topic: Asset Allocation
Reading: Principles of Asset Allocation
In a goals-based asset allocation process, the advisor will identify client's goals, then match the goals to the portfolio modules, select the discount rate, determine the assets needed to fund the module, and allocate the capital to the sub-portfolios.
This video illustrates the calculation of the minimum expectations and how to select a module to allocate assets to based on the goals-based asset allocation approach.
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[@mkbutinini3271]

thank you so much, you changed my life for this kind of knowledge

[@FabianMoa]

Happy to hear that, MK!

[@j787ploeder8]

shouldn't you convert the annual expected return like this?: (1+ annual return)^15 ? because now you are summing returns, which doens't give the same result as compounding.

[@simfinso858]

Very nicely Explained.You are a senior to me in knowledge I must admit that.Respect to Your work.A nice channel on Advance level of Finance. Keep doing Your work.we are following.Thanks

[@FabianMoa]

Thanks a ton, SIMFINSO. Keep up the good work with your channel too.

[@leonard04123]

Ya why is the returns not geomatrically compounded? e.g.(1+annual)^15 haha other den that very clear!

[@matthewgoh1236]

why do we find MER as a simple return instead of a compounded value? ie (1+0.56.7410)^(1/15) - 1?

[@alexh.4842]

Why can't we just directly use the annual mean& std, like (8.2%-1.65*10.4%) to get the 95% probability one-year MER?

[@FabianMoa]

Because the time horizon is more than 1 year, so you have to scale the return and std deviation based on the time horizon to get the minimum return that can be achieved 95% of the time, then you annualize it