Portfolio Management
The ongoing act of running a portfolio.
Once assembled, a portfolio must be managed. This course treats rebalancing, benchmarking, and attribution as the disciplines that separate long-run outcomes from short-run luck.
You will finish able to attribute one year of your own returns to allocation, selection, and timing.
- 01
Set and hold an asset allocation.
- 02
Rebalance without hesitation.
- 03
Measure a portfolio against a defensible benchmark.
- — 201 — Investing Foundations.
1–2 weeks · ~4 hours plus the Assignment.
- IModule · ~1.5 hours.
Allocation
The one decision that determines most of the return.
Asset allocation determines most of the return most of the time. This module makes the decision explicit.
What You Will Be Able To Do- — State a strategic allocation and its beliefs.
- — Decide when tactical deviations are allowed.
- — Write the allocation into the IPS.
Why hereThe allocation choice is the one decision worth thinking hardest about.
- IIModule · ~1 hour.
Rebalancing
The unglamorous act that captures the return.
Rebalancing is the mechanism that captures the return the allocation implies.
What You Will Be Able To Do- — Choose calendar vs. threshold rebalancing.
- — Rebalance tax-aware.
- — Automate what you can.
Why hereUndisciplined rebalancing is the most common way households give back their returns.
- IIIModule · ~1.5 hours plus the Assignment.
Measurement
Was the portfolio any good.
Was the portfolio any good? Only benchmarks and attribution can say.
What You Will Be Able To Do- — Choose a defensible benchmark.
- — Distinguish time-weighted from dollar-weighted return.
- — Attribute one year of returns.
Why hereWithout measurement, learning is impossible.
The unglamorous work of rebalancing is where most of the return actually lives.