Module 4 of 5 in Investing and portfolio management
Running a portfolio over time
Volatility, maximum drawdown, sequence of returns, rebalancing, benchmarks, performance measurement, investment policy statements and periodic reviews.
6 lessons in this module. Progress is saved in your browser as you go.
After a portfolio is built, the work is to keep it aligned with its plan. This module covers measuring risk and performance honestly, rebalancing, writing down the rules you will follow, and reviewing them without reacting to every market move.
By the end of this module you should be able to
- Calculate and interpret volatility, maximum drawdown and the effect of the sequence of returns.
- Explain when and how to rebalance and the costs involved.
- Choose an appropriate benchmark and measure portfolio performance including cash flows.
- Write an investment policy statement and review a portfolio against it.
Lessons in order
Module test
10 questions, chosen at random from a bank of 35 questions and balanced across this module's learning goals and difficulty levels. Every question comes with an explanation. You need 80% to pass, and you can retake it as often as you like with a fresh set of questions.
This module builds on
- Averages, spread and volatility: Volatility is the standard deviation of returns, explained there.
- Bull markets, bear markets, corrections and crashes: Drawdowns are the falls of bear markets measured for a portfolio.
- Asset allocation: Allocation is the main driver of a portfolio's volatility and drawdowns.
- Trading costs and taxes on shares: Rebalancing involves selling, which has costs and tax consequences.
- Index funds and ETFs: Index funds are the natural benchmark for most portfolios.
- Mutual fund fundamentals: Fund categories affect how gains on funds are taxed.