Section 1: Principles of investing

• Understand the concept of a diversified portfolio and its significance for investors, including risk reduction and enhanced returns.
• Explore the challenges of managing diversified portfolios and how technology can aid asset allocation.
  

This module will also enable the reader to understand and implement the four principles for investment success:

• Setting clear and appropriate investment goals based on client objectives, time horizons, risk profiles and investable assets.
• Creating a suitable asset allocation using broadly diversified funds to manage risk in portfolios.
• Recognising the impact of investment costs on long-term returns and striving to minimise expenses.
• Instilling discipline and perspective in clients, helping them remain committed to their long-term investment strategy through market fluctuations.

Further objectives:

• Understand the significance of diversification in creating and managing a well-rounded portfolio.
• Define investment goals and constraints, establishing a sound investment plan, sub-asset allocation within classes, and the allocation to indexed or actively managed funds.
• Explore the importance of regular rebalancing to uphold a consistent risk profile.

 

 

• Ability to explain the importance of a diversified portfolio and its benefits, and understanding of how key factors like risk tolerance and correlations will help construct portfolios aligned with investor goals.
• Recognise common mistakes in diversified portfolio construction and adopt strategies to overcome them.
• Knowledge of Vanguard’s proprietary models – the Vanguard Asset Allocation Model (VAAM) and Vanguard Capital Market Model (VCMM) to enable optimised portfolio management in different market environments.
• Understand how to guide clients in establishing measurable and attainable investment goals, tailored to their individual circumstances, risk tolerance and objectives.
• Understand the uses of lower-cost solutions to enhance potential returns.
• Understand the necessity of encouraging clients to maintain discipline and perspective during market fluctuations.
• Understand the significance of diversification in portfolio construction.