Question 2
Every investor has certain preference or in other words has different approval towards assets.
Some have a low tolerance towards risky assets while some have high and as risk drives returns hence based on the investor tolerance towards risk, the return will be calculated.
Investor Policy Statement specifies the investment plan clearly stating clients' risk preferences and investment needs. The risk involved and the assets included clearly matched with the investment needs in the policy statement.
Hence portfolio returns should not be compared for portfolio performance rather the guidelines should be compared which will give better understanding of client needs and performance accordingly.
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