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May 7, 2026
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Investing ample time to comprehend Portfolio Construction can yield substantial dividends in the long term. This topic holds significant importance for the CFA® Level I exam and serves as a foundation for a successful candidacy.
Although Portfolio Construction is one of the smallest areas of the Level I curriculum, it’s a fundamental topic as you move on to Levels II and III. The technical content mostly appears in Portfolio Risk and Return: Part I and Part II, so take these readings slowly and ensure you are happy with the differences between the various graphs presented.
Aside from those readings, the other readings help to concrete your understanding of the bigger picture so these should help to put it all into context.
Learning Outcome Statements while studying for a CFA exam refer to specific skills and concepts you should possess within an exam topic whereas exam topics describe the broader body of knowledge you should have. For example, the Portfolio Construction exam topic at Level I has lots of LOSs that you’ll need to learn.
An example of a CFA LOS for Portfolio Construction is “describe mutual funds and compare them with other pooled investment products.”
In real-life scenarios, the abilities and expertise acquired from other topic areas are implemented in Portfolio Construction. This takes some of the content from theoretical to practical and helps you to understand the bigger picture of investment management.
It is absolutely crucial to get to grips with the fundamentals at Level I, to help you as you progress through to the later stages of the designation.
The Portfolio Management topic represents 8%-12% of the Level I exam, which is approximately 14-21 questions. The topic is tested in the afternoon session, within the Portfolio Management and Analysis Functional Area, alongside Corporate Finance.
Most of the readings Portfolio Construction are explanatory in nature so it’s not too challenging to grasp the concepts. However, it does get more technical in Portfolio Risk and Return: Part I and II. Take your time working through these readings in particular and schedule your question practice in order to start to understand how these areas are tested.
The default order would be working through the curriculum chronologically, which would put this topic towards the end of your studies. It is important to study this area after Quantitative Methods. If you have some experience practicing Portfolio Construction then you may want to place this topic earlier in your timetable - just ensure you are focusing on the LOSs and what is required of you for the exam.
Below are overviews of each Level I Portfolio Management readings and what you are expected to learn.
Many of the statistical and return measures covered in Quantitative Methods return here, and you are expected to be able to calculate and interpret risk and return measures. A key concept covered in Portfolio Management is the efficient- and minimum-variance frontiers.
This reading is fundamental not only for Level I but as you progress through the later levels. Here the focus is on combinations of risk-free and risky assets within a portfolio and introducing the capital allocation line (CAL) and capital market line (CML).
The second half of the reading differentiates between systematic and nonsystematic risk and looks at ways to analyze this across assets and portfolios (such as the CAPM and SML).
There are many measures in this reading, so take your time to understand the differences in them as you work through them.
This reading explores the idea of the portfolio approach to investing, the 3 steps involved in portfolio management (as well as active vs passive management), and the key characteristics of different types of investors (risk tolerance, income needs, etc).
There is a brief look at the different types of pensions, mutual funds, and other pooled investment products.
A shorter, less technical reading, but no less important. This introduces the investment policy statement (IPS) which is currently a large focus of Level III. Taking each component in turn, the reading covers the key factors that should be considered by the investment manager when producing an IPS with a client.
Behavioral finance investigates the ways in which human behavior differs from the rationality assumed by traditional economic models. This reading introduces some of the key terminology and examples that demonstrate this in practice, such as loss-aversion bias and confirmation bias.
This is a broad reading, covering a risk management framework that could be applied to corporations in general, financial firms and individuals, as well as the management of securities portfolios. It identifies some of the key risks these parties could face, both financially and non-financially, and how these could be measured and monitored.
Improving your proficiency with the calculator functions utilized in Quantitative Methods can assist you in effectively addressing the topics of Portfolio Construction on CFA exams.
Answer these five CFA practice questions to test your readiness for the Level I Exam.
Portfolio Construction is 10-15% of the Level II exam, and well worth noting 35-40% of Level III. Level II builds on the foundations learned at Level I, setting you up for your Level III exam where over one-third of the syllabus focuses on you demonstrating the skills and techniques learned into practice.
Every topic at Level I is important, but dedicating the necessary time to Portfolio Construction will really pay off in the long run.
We would recommend starting off by reading the Schweser CFA Level I SchweserNotes for Portfolio Construction, which also provides illustrative examples and Module Quizzes for you to test your understanding. Once you have covered the material, you should cover as many other questions as possible from our range of resources such as the Schweser CFA Level I QBank.
Looking for more guidance on how to prepare for Portfolio Construction? Enroll in one of our CFA Level I Premium study packages to receive expert instruction, CFA Program study materials, and more. Give yourself the best chance to prepare, practice, and perform on the CFA exam.
Written by Kaplan Schweser experts, reviewed by Craig Prochaska, CFA.
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