A portfolio constraint is some sort of limitation that affects how the portfolio can be executed. A $1,000,000 in an IRA at a brokerage firm has almost no limitations compared to that same amount spread out over multiple IRAs, a 401(k), a joint account, and stock options. Constraints must be considered first before any other personalization because they can affect the overall design of a portfolio. Here are the constraints we consider:
Once we know what constraints we are working with, we can design around them, and move on to other portfolio personalization.