PORTFOLIO MANAGEMENT
A more comprehensive approach to investment
Portfolio management is both an art and a science of making decisions about your investment mix, asset allocation and balancing risk with performance.
Ongoing monitoring and constant review is an essential part of our investment and wealth creation program. Our unique modelling techniques and analysis allow us to maximise your returns whilst minimising the risk associated with investment markets.
Risk Profiling
Risk profiling is a process for finding the optimal level of investment risk for your client by balancing their risk required, risk capacity
and their individual risk tolerance.
There is often a mismatch between risk required, capacity and tolerance.
We help you to identify mismatches and resolve them.
Asset Allocation
The key to effective portfolio management is the long-term mix of asset classes. Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. The process of determining which mix of assets to hold in your portfolio is a very personal one. Asset allocation seeks to optimise the risk/return profile by investing in a mix of assets that have low correlation to each other. Investors with a more aggressive profile can weight their portfolio toward more volatile higher growth investment where as, investors with a more conservative profile can weight their portfolio toward more stable conservative investment.
Diversification
The only certainty in investing is it is impossible to consistently predict the winners and losers!
Diversification is the spreading of risk and reward within an asset class. Because it is difficult to know which particular subset of an asset class or sector is likely to outperform another, diversification seeks to capture the returns of all of the sectors over time but with less volatility at any one time. Real diversification takes into account different classes of securities, sectors of the economy and geographical regions.
Tactical re-balancing and Active monitoring
This is a method used to return a portfolio to its original target allocation at set intervals.
It is important for retaining the asset mix that best reflects an investor’s risk/return profile. Otherwise, the movements of the markets could expose the portfolio to greater risk or reduced return opportunities. For example, a portfolio that starts out with a 70% equity and 30% fixed-income allocation could, through an extended market rally, shift to an 80/20 allocation that exposes the portfolio to more risk than the investor can tolerate. Rebalancing almost always entails the sale of high-priced/low-value securities and the redeployment of the proceeds into low-priced/high-value or out-of-favor securities. The annual iteration of rebalancing enables investors to capture gains and expand the opportunity for growth in high potential sectors while keeping the portfolio aligned with the investor’s risk/return profile.
Taking a proactive approach to investing encourages investors to actively plan, and (as much as possible) anticipate change and take control of situations, rather than only adjusting to change. Of course, this isn’t easy, but often it can be very beneficial to investors. Being proactive also requires discipline, objective thinking, responsibility and strategy. Whereas, a reactive style brings out emotions and may allow investors to be overly influenced by the media when making decisions. If not careful, this can be unsettling for investors.
