IME study guide
IME · Work through your exam, one topic at a time.
The Investment Management Exam (IME) is a multiple-choice assessment of the knowledge and judgment expected of professionals who build and oversee client portfolios. It suits advisors moving from product sales into portfolio construction, paraplanners supporting investment committees, analysts who need a planning-side view of their work, and candidates preparing for more advanced wealth-management credentials. The IME study guide has 10 sections and about 2,993 words.
01Investment Management Fundamentals and the Investment Policy Statement
Every portfolio decision should trace back to a governing document. The Investment Policy Statement (IPS) records objectives (return requirement and risk tolerance), constraints (liquidity, time horizon, tax, legal/regulatory, unique circumstances - often remembered as RRTTLLU), and the governance rules for monitoring and rebalancing.
342 words, about 2 min02Client Discovery, Goals-Based Planning, and Risk Profiling
Discovery is structured fact-finding: financial position, goals with time horizons and priorities, attitudes, and behavioral biases. Goals-based planning converts each goal into a required funding level and a probability of success, then maps goals to sub-portfolios with different risk budgets.
324 words, about 2 min03Capital Market Expectations and Asset Allocation
Capital market expectations (CMEs) are forward-looking estimates of return, risk, and correlation for each asset class. Candidates must know the main building blocks: the risk-free rate plus risk premia; the building-block approach (cash yield, expected capital gain, valuation change); and the Grinold-Kroner decomposition of equity returns into income, growth, and repricing.
309 words, about 2 min04Equity Portfolio Construction and Analysis
Equity construction starts with a benchmark choice and an active-risk budget. Candidates must understand the spectrum from passive (index replication, full replication versus sampling) through enhanced indexing to active management, and the trade-off between tracking error and potential alpha.
287 words, about 1 min05Fixed Income Portfolio Construction and Analysis
Fixed income construction is driven by the mandate: liability-driven, index-tracking, or total-return. Candidates must know duration as the primary interest-rate risk measure, convexity as its curvature adjustment, and the distinction between modified duration and Macaulay duration.
294 words, about 1 min06Alternative Investments and Portfolio Diversification
Alternatives - private equity, private debt, real assets, hedge funds - offer diversification and return sources distinct from public markets, but with illiquidity, leverage, valuation uncertainty, and fee complexity. Candidates must understand the roles alternatives play: return enhancement, risk reduction, inflation hedging, and income.
290 words, about 1 min07Portfolio Risk Management and Performance Measurement
Risk management quantifies exposure and tests resilience. Candidates need variance and standard deviation, beta, tracking error, value at risk (parametric, historical, Monte Carlo), stress testing, and scenario analysis.
310 words, about 2 min08Tax-Aware and Retirement-Focused Investment Planning
Tax-aware investing treats taxes as a cost to be managed. Candidates must understand asset location (placing tax-inefficient assets such as taxable bonds in tax-deferred accounts and tax-efficient equities in taxable accounts), tax-loss harvesting and wash-sale rules, holding-period rules for long-term capital gains, and the tax drag of turnover.
282 words, about 1 min09Investment Products, Vehicles, and Manager Selection
Candidates must compare vehicles: separately managed accounts, mutual funds, ETFs, closed-end funds, and limited partnerships. Differences include liquidity, transparency, fee structures, tax efficiency, and access.
276 words, about 1 min10Ethics, Fiduciary Duties, and Regulatory Compliance
Fiduciary duty requires loyalty (acting in the client's best interest), care (competence and diligence), and candor (full and fair disclosure). Candidates must understand conflicts of interest, their disclosure and management, and the difference between suitability and fiduciary standards.
279 words, about 1 min