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6 secrets to crack Portfolio in CFA® Level I

November 24, 2012
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CFA portfolio management


We are very pleased to see the positive responses flooding in for this series. We thank each and every one of you for making the Commandments and Sins of the CFA Program Level - I Exam a success.

Now, so far, we have covered the topics weighing 50% of your actual exam i.e. Corporate Finance, Economics, Fixed Income and Financial Reporting and Analysis.

In this session we will look at the Six Commandments and Sins to Master the Portfolio Management Section which weighs 5% in your exam.

  1. Don't get confused between the different market lines! The CML uses Total Risk on the X-axis and SML uses Systematic Risk on the X-axis.
  2. Remember that a risk free asset has a Beta of 0 and the market has a Beta of 1.
  3. Don't get confused between Market Risk Premium (Rm-Rf) and Equity Risk Premium which is Beta* (Rm-Rf)
  4. If you were to decide which fund is performing better, the result using M-Squared and Sharpe Ratio will be exactly the same. They use the same risk factor - Total Risk
  5. If you were to decide which fund is performing better, the result using Jensen's Alpha and Treynor's ratio will be exactly the same. They use the same risk factor - Systematic Risk (Beta)
  6. Remember that investors are NEVER compensated for taking on unsystematic risk, the reason being is that they can be diversified away.

We hope that the above points were useful for your preparation. We will send you such useful information before the exam. If you want to know about a particular topic please write to us at

You can get some useful downloads for your CFA exams. You can also buy some recordings for the topic of your choice on our course page.

If you want to see what questions others are asking then please visit our forum.

Please feel free to write to us for any help regarding your CFA exams.


About the Author

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