Asset allocation is the driving force in returns for investors. The successful investment philosophy is one that properly allocates clients assets based on their risk profile. Modern portfolio theory and the Efficient Frontier are some of the key tools used to measure client portfolios. This allows for the desired balance of risk and return necessary for achieving the objectives in the investment plan. Investor accounts also include measurement tools that limit portfolio concentration and risk. Portfolios will be adjusted in response to investor’s investment policy statements, correlation of asset classes, and economic and market conditions.
Cost effective and tax efficient implementation also plays an important role in the long-term results achieved by individuals and organizations. The investment portfolios include index products, exchange traded funds, mutual funds, separately managed accounts, individual bonds and alternative investment classes. This is achieved through an asset mix of domestic and international stocks, large and small capitalization growth and value stocks, different bond types and real estate investment trusts. Manager selection is particularly important within international portfolios and small to mid-size company portfolios where the markets are less efficient than in large capitalization stocks.
Asset ownership is an important and often overlooked aspect of investment planning. Once the asset allocation is confirmed, the least tax-efficient investments in the overall portfolio can be identified and optimally owned in a tax-differed account or retirement plan.
Re-balancing. Take advantage of market conditions and keep the risk of a portfolio in check by rebalancing existing portfolios. 20% bands are set around each position to effectively manage the return/risk objectives.