How Are Portfolios Constructed?

We use principles of a Nobel prize-winning investment theory for optimal diversification. Although the return is the first thing on most investors’ minds, we evaluate the volatility of various investment options and their behavior when combined. The real goal of diversification is to combine assets and achieve the least amount of risk for an expected return. It may also be the opportunity for the optimum return given a level of expected risk.

Structural Analysis

Our disciplined process starts with identifying the range of portfolios that we will develop and what risk and return characteristics should apply to each. These portfolio strategies are suitable for both conservative and aggressive investors. These focus on attempting to reduce short-term volatility and chance of loss while allowing the investor to outpace inflation.

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Asset Allocation

This involves deciding how much money to invest in a particular asset class such that the combination of asset classes fits into each of the portfolio strategies identified in the structural analysis. Asset classes are categories of investments with common characteristics.

Asset Allocation

This involves deciding how much money to invest in a particular asset class such that the combination of asset classes fits into each of the portfolio strategies identified in the structural analysis. Asset classes are categories of investments with common characteristics.

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The Goal of Asset Allocation

It aims to identify the combinations of asset classes that maximize return for a given level of risk or minimize risk for a given level of return. The process requires forecasting future return-and-risk statistics. We develop forecasts using a combination of historical data and current market information. In our view, appropriate asset allocation decisions involve applying reasoning beyond that which historical numbers may imply.

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Security Selection Decisions

Our research team tracks and provides information on any of the securities available within your employer-sponsored plan. Incorporated into our selection analysis are the following:

  • The Investment’s Strategy (Is the Investment Staying True to Its Objective?)
  • Its People (Are Managers Frequently Changing?, What Is Their Track Record?)
  • Short and Long-Term Performance (Is the Investment Showing Value Above the Benchmark?)
  • Expenses (Are Costs Dragging Down Long-Term Performance?)
  • The Overall Role in the Portfolio (Does It Contribute to the Risk and Return Objectives of the Portfolio?)

Security Selection Decisions

Our research team tracks and provides information on any of the securities available within your employer-sponsored plan. Incorporated into our selection analysis are the following:

  • The Investment’s Strategy (Is the Investment Staying True to Its Objective?)
  • Its People (Are Managers Frequently Changing?, What Is Their Track Record?)
  • Short and Long-Term Performance (Is the Investment Showing Value Above the Benchmark?)
  • Expenses (Are Costs Dragging Down Long-Term Performance?)
  • The Overall Role in the Portfolio (Does It Contribute to the Risk and Return Objectives of the Portfolio?)
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Reallocation and Rebalancing

Regular rebalancing enhances a portfolio’s long-term results. The Investment Committee meets quarterly to analyze the portfolios and market conditions and decide to reallocate the portfolios by making adjustments to the asset class weightings according to each guideline. We regularly monitor and evaluate whether the following are met:

  • The Portfolio Stays in Line With Its Stated Objectives
  • The Investment Options Are Exceeding Benchmarks
  • The Market Conditions Are Influencing the Portfolio’s Behavior Beyond Expectations
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