CFA^® Level I Portfolio Management Tips

By: Kaplan Schweser

August 15, 2024

CFA Level I Portfolio Management Curriculum Topic Tips

Investing ample time to comprehend Portfolio Management can yield substantial dividends in the long term. This topic holds significant importance for the CFA Level I exam and serves as a foundation for a successful candidacy.

TABLE OF CONTENTS

Portfolio Management: An Overview
Portfolio Risk and Return: Part I
Portfolio Risk and Return: Part II
Basics of Portfolio Planning and Construction
The Behavioral Biases of Individuals
Introduction to Risk Management
Technical Analysis
Fintech In Investment Management

How To Study for CFA Level I Portfolio Management Topic

Although Portfolio Management is one of the smallest areas of the Level I curriculum, it’s a fundamental topic as you move on to Levels II and III. The technical content mostly appears in Portfolio Risk and Return: Part I and Part II, so take these readings slowly and ensure you are happy with the differences between the various graphs presented.

Aside from those readings, the other readings help to concrete your understanding of the bigger picture so these should help to put it all into context.

CFA Level I 6-Month Study Plan

What is a Learning Outcome Statement (LOS) for the CFA Exam?

Learning Outcome Statements while studying for a CFA exam refer to specific skills and concepts you should possess within an exam topic whereas exam topics describe the broader body of knowledge you should have. For example, the Portfolio Management exam topic at Level I has lots of LOSs that you’ll need to learn.

An example of a CFA LOS for Portfolio Management is “describe mutual funds and compare them with other pooled investment products.”

Why CFA Candidates Need To Learn Portfolio Management

In real-life scenarios, the abilities and expertise acquired from other topic areas are implemented in Portfolio Management. This takes some of the content from theoretical to practical and helps you to understand the bigger picture of investment management.

It is absolutely crucial to get to grips with the fundamentals at Level I, to help you as you progress through to the later stages of the designation.

Assess your baseline knowledge of the Level I CFA Program curriculum with a free CFA diagnostic exam

How Much of the CFA Exam Tests Portfolio Management?

The Portfolio Management topic represents 8%-12% of the Level I exam, which is approximately 14-21 questions. The topic is tested in the afternoon session, within the Portfolio Management and Analysis Functional Area, alongside Corporate Issuers.

Is the CFA Level I Portfolio Management Topic Hard?

Most of the readings Portfolio Management are explanatory in nature so it’s not too challenging to grasp the concepts. However, it does get more technical in Portfolio Risk and Return: Part I and II. Take your time working through these readings in particular and schedule your question practice in order to start to understand how these areas are tested.

Try Today’s Featured Level I Practice Question

When Should CFA Level I Candidates Study Portfolio Management?

The default order would be working through the curriculum chronologically, which would put this topic towards the end of your studies. It is important to study this area after Quantitative Methods. If you have some experience practicing Portfolio Management then you may want to place this topic earlier in your timetable - just ensure you are focusing on the LOSs and what is required of you for the exam.

Best CFA Level I Study Order >>

2024 CFA Level I Portfolio Management and Wealth Planning Topic Readings

Below are overviews of each Level I Portfolio Management and Wealth Planning readings and what you are expected to learn.

Portfolio Management: An Overview

This introductory reading explores the idea of the portfolio approach to investing, the 3 steps involved in portfolio management (as well as active vs passive management), and the key characteristics of different types of investors (risk tolerance, income needs, etc).

There is a brief look at the different types of pensions, mutual funds, and other pooled investment products.

Portfolio Risk and Return: Part I

Many of the statistical and return measures covered in Quantitative Methods return here, and you are expected to be able to calculate and interpret risk and return measures. A key concept covered in Portfolio Management and Wealth Planning is the efficient- and minimum-variance frontiers.

Portfolio Risk and Return: Part II

This reading is fundamental not only for Level I but as you progress through the later levels. Here the focus is on combinations of risk-free and risky assets within a portfolio and introducing the capital allocation line (CAL) and capital market line (CML).

The second half of the reading differentiates between systematic and nonsystematic risk and looks at ways to analyze this across assets and portfolios (such as the CAPM and SML).

There are many measures in this reading, so take your time to understand the differences in them as you work through them.

Basics of Portfolio Planning and Construction

A shorter, less technical reading than the previous two but no less important. This introduces the investment policy statement (IPS) which is currently a large focus of Level III. Taking each component in turn, the reading covers the key factors that should be considered by the investment manager when producing an IPS with a client.

The Behavioral Biases of Individuals

Behavioral finance investigates the ways in which human behavior differs from the rationality assumed by traditional economic models. This reading introduces some of the key terminology and examples that demonstrate this in practice, such as loss-aversion bias and confirmation bias.

Introduction to Risk Management

This is a broad reading, covering a risk management framework that could be applied to corporations in general, financial firms and individuals, as well as the management of securities portfolios. It identifies some of the key risks these parties could face, both financially and non-financially, and how these could be measured and monitored.

Technical Analysis

What is the difference between technical and fundamental analysis? This reading delves into this, as well as how to describe and interpret different types of technical analysis. It finishes by considering how technical analysis can be applied to portfolio management.

Fintech In Investment Management

This introductory reading for Portfolio Management and Wealth Planning introduces terms such as:

Big Data
Blockchain
Algorithmic trading

Review Portfolio Management Concepts with Free Flashcards

Calculator Basics for the CFA Level I Exam

Improving your proficiency with the calculator functions utilized in Quantitative Methods can assist you in effectively addressing the topics of Portfolio Management too.

CFA Level I Exam Practice Questions

Answer these 5 questions to test your readiness for the Level I Exam.

Is the Portfolio Management Topic the Same for CFA Level I and Level II?

Portfolio Management and Wealth Planning is 10-15% of the Level II exam, and well worth noting 35-40% of Level III. Level II builds on the foundations learned at Level I, setting you up for your Level III exam where over one-third of the syllabus focuses on you demonstrating the skills and techniques learned into practice.

Every topic at Level I is important, but dedicating the necessary time to Portfolio Management will really pay off in the long run.

What Are the Best Notes for Studying Portfolio Management?

We would recommend starting off by reading the Schweser CFA Level I SchweserNotes for Portfolio Management, which also provides illustrative examples and Module Quizzes for you to test your understanding. Once you have covered the material, you should cover as many other questions as possible from our range of resources such as the Schweser CFA Level I QBank.

Ready To Start Preparing For Portfolio Management?

Looking for more guidance on how to prepare for Portfolio Management? Enroll in one of our CFA Level I Premium study packages to receive expert instruction, CFA Program study materials, and more. Give yourself the best chance to prepare, practice, and perform on the CFA exam.