Investors have access to an overabundance of information about investing, sometimes making it more difficult to navigate portfolio construction — and with good reason. Every investor has a unique set of investment needs that require special consideration.

Here to provide modern investors with considerations for portfolio construction are a few industry-leading asset managers that offer an array of investment products for all of life’s ventures.


Three Considerations for Today’s Portfolio Construction

Consideration #1 – Cover Your Bases.
-Invesco

From a historical standpoint, active and passive product performance swings back and forth cyclically. Because of this natural flux, it’s helpful to create a balanced portfolio through a blended approach.

Driving this point home is Invesco, saying, “We at Invesco believe in creating a high-conviction portfolio tailored to your unique circumstances and needs. Such a portfolio can include both active and passive strategies, providing the potential to benefit from each without chasing trends.”

Consideration #2 – Have Flexibility.
- Thornburg Investment Management

When the pendulum swings in the market, active managers’ ability to sell over-bought, exceedingly pricey shares before they collapse is advantageous.

This investment strategy gives these same active managers the opportunity to buy over-sold shares on the cheap, enabling them to potentially outperform through down and up markets, Thornburg Investments explains.

With this in mind, it’s important to note that past performance does not guarantee future results.  That said, a manager’s history can be indicative of their instincts for opportunistic investing, so don’t overlook this factor.
-Fidelity Investments

Building on the concept of flexible portfolio construction is the integration of passive investments.

In addition to what Fidelity describes as their ability to typically offer market-like returns, favorable liquidity, transparency, low costs, and relatively more efficient capital gain taxation, passive investments complement active ones in times of volatility.

While active investments offer the potential for larger capital gains, otherwise inaccessible by the very nature of passive investments’ design, there’s always an accompanied risk for capital losses. With these factors in mind, investors are encouraged to build a blended portfolio.

“Financial markets need a combination of both active and passive approaches to remain reasonably stable and liquid, and to drive the economy forward via the efficient allocation of financial capital,” says Fidelity Investments.

Consideration #3 – Determine WHO Is Building Your Portfolio (and WHY).
-Mutual Fund Education Alliance (MFEA)

The Mutual Fund Education Alliance identifies three types of investors: the Self-directed, the Assisted and the Delegator Investor. The difference between the three investors lies in their approach to portfolio construction. It’s important to make this distinction because who is constructing your portfolio will directly affect investment outcomes.

Just as the name implies, the “Self-directed Investor” ascribes all investment responsibilities to oneself.  This includes research, decision-making, and implementation and tracking. “Assisted Investors,” on the other hand, handle implementation aspects, while deferring to a paid consultant about research and investment advice. This leaves the “Delegator,” an investor who takes a more hands-off approach to investment management completely, allocating all investment responsibilities – as well as a percentage of portfolio value – to a paid professional.

While there is no formula for a perfect portfolio, there are steps you can take toward reaching your financial goals with ease. With these considerations top of mind, investors can better plan for all of life’s journeys.

For more information and education on mutual fund investments, visit www.MFEA.com.