CORE and EXPLORE
There are many factors that influence how a portfolio is constructed. Some of these factors are time horizon, income need, past experiences, client involvement, accredited investor qualifications, risk tolerance, size of portfolio, and tax bracket.
Once these factors have been discussed, a risk target will be established.
While clients have the ability to customize their portfolio, each portfolio will typically have exposure to what we feel are core asset classes. Once a base allocation is determined, we will adjust our target allocation and overweight or underweight the various asset classes based on the current cycle we are in. We ideally are looking to overweight those asset classes that are in favor and underweight those that are not.
Once the final target allocation is determined, we fulfill each asset class by selecting funds, passive ETFs or managers that employ a strategy within the asset class. Various strategies exist and our goal is to select a few that are in favor based on the current market environment and will adjust as needed.
We may utilize liquid alternative funds rather than traditional equity fund for a portion of the portfolio. Funds with additional flexibility can possibly help with lowering the volatility in a portfolio. We have observed that these type of funds are most valuable in bear markets and may use them opportunistically.
Rebalancing is a process in which the hottest asset classes are reduced and the out of favor investments are purchased in order to keep the portfolio diversification in check. We will review the portfolio’s allocation any time a new investment is introduced or target allocations change.
And finally, we will continually explore for additional opportunities that may help round out a portfolio. These may include sectors, real estate, and private debt, and hedge funds.
To learn more detail, please be sure to reach out.