WEIGHING CONSTRAINTS:
The last stage in determining portfolio policies is to establish the constraints on the portfolio. This involves weighing each constraint individually and determining its importance by using a ranking scale.
We can use a ranking scale of one to five for each constraint.
A low ranking (1 or 2) would mean that the particular constraint is not that important. A high ranking would mean that the constraints are quite important. Once the checklist is completed, it becomes a matter of weighing the trade off among the various constraints to determine the appropriate portfolio objectives.
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