RFC Study Guide 2026

Diversification is a strategy that involves investing in a variety of assets across different asset classes, industries, and geographies. The goal is to reduce overall portfolio risk by ensuring that a poor performance in one investment does not severely impact the entire portfolio. It helps smooth out returns over time, as different assets may perform well at different times.

Black-Litterman blends the investor's subjective views with implied equilibrium returns derived from market capitalization weights to produce more stable portfolios.

A DTI above 36-43% is considered high by most lenders and signals the client is over-leveraged relative to income.

Under IRC Section 121, married couples filing jointly can exclude up to $500,000 of gain from the sale of a primary residence if they meet the ownership and use tests.

Real-time or near-real-time documentation in Estate Planning & Wealth Transfer ensures accuracy, provides a contemporaneous record, and is considered the gold standard for professional accountability and legal defensibility.

Risk budgeting allocates the portfolio's total risk capacity across asset classes, and can explicitly incorporate drawdown constraints into the construction process.