Active Equity Investing: Portfolio Construction

Free CFA Level III: Portfolio Management lesson in Active Equity Investing. 16 min read, ~2,404 words.

Philosophy sets the universe, horizon, conviction, risk target, and constraints; construction must match it or the realized bet drifts. Active Share measures portfolio weights vs. benchmark (0 to 1); active risk measures tracking-error volatility. They are independent levers, not substitutes. Risk budgeting splits total active variance into factor and idiosyncratic...

What this lesson covers

• Content
• Example 1
• Example 2
• Common Mistakes
• Check Your Understanding
• Exam Shortcuts

Learning objectives

• active equity strategies
• active equity construction

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