Portfolio Construction With Your Goals in Mind
The construction of an investment portfolio is critical to the success of any investment strategy. The investment strategy can be constrained by investment options available to the client. The portfolio construction is determined by an asset allocation model which is designed to provide the greatest likelihood (probability) of meeting the stated investment objectives. The client’s assets are allocated amongst, stocks, bonds, real estate, alternatives and cash, in a composition derived from statistical models based on historical performance data. The historical analysis creates a risk profile for each asset class and is used to formulate the composition of the investments made based on the following factors:
- Risk of each asset class;
- Expected return of each asset class; and
- Correlation of asset class with other asset classes.
The investment of client assets according to the asset allocation will provide an expected performance of the investment portfolio over the time horizon based on the statistical analysis. The specific asset allocations made into investment options may be limited by the type of investment account which holds the funds:
|
|
|
Academic Studies support the benefits of asset allocation with claims that 91.5% of the ultimate investment returns experienced by investors are determined by the asset class and not the specific security selected. The asset allocation strategy is static in nature which requires not only a continuous review of investment performance, but an assessment of the economy and the securities markets. This dynamic asset allocation over time will maximize investment returns while keeping your risk exposure consistent with your current circumstances. When is the last time you reviewed your asset allocation, in light of your True North?
