Exam ICWIM Topic 1 Question 63 Discussion

Actual exam question for CISI's ICWIM exam
Question #: 63
Topic #: 1
When creating a portfolio for a risk-averse client, why would you select stocks with a beta of less than one?

Suggested Answer: C Vote an answer

Stocks with abeta of less than oneare less volatile than the overall market. Including such stocks in a portfolio helps reduce its overall volatility, aligning with the risk-averse nature of the client.
* Easier to understand (A): Simplicity is not a factor in beta selection.
* Moves in line with the market (B): A beta of less than one means the portfolio moves less than the market.
* High-volatility portfolio (D): This would involve stocks with a beta greater than one, contrary to the client's risk profile.
References:
* International Certificate in Wealth & Investment Management: Beta as a measure of systematic risk and its implications for portfolio construction.
* CAPM (Capital Asset Pricing Model) principles on beta and risk.

by Pamela at Sep 01, 2025, 01:57 AM

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