Sample interview questions: How do you approach assessing the performance of a client’s investment portfolio and making necessary adjustments?
Sample answer:
Assessing Investment Portfolio Performance
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Define Investment Objectives: Determine the client’s financial goals, risk tolerance, and time horizon, as these will influence the assessment criteria.
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Gather and Analyze Data: Collect historical and current portfolio data, including asset allocation, performance metrics (e.g., returns, volatility), and relevant economic indicators.
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Evaluate Risk-Adjusted Returns: Assess the portfolio’s returns in relation to its level of risk. This can be measured using metrics such as Sharpe Ratio, Sortino Ratio, or Max Drawdown.
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Compare to Benchmarks: Benchmark the portfolio’s performance against relevant indices or peer groups to determine its relative performance.
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Identify Diversification: Analyze the portfolio’s diversification across asset classes, sectors, and geographical regions to assess the level of risk mitigation.
Making Necessary Adjustments
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Rebalance the Portfolio: Adjust the asset allocation to bring it back to the target weights. This helps manage risk and optimize returns.
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Replace Underperformers: Identify underperforming assets and consider replacing them with more promising investme… Read full answer