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
#1 – Cover Your Bases.
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.
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.”
#2 – Have Flexibility.
pendulum swings in the market, active managers’ ability to sell over-bought,
exceedingly pricey shares before they collapse is advantageous.
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
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.
the concept of flexible portfolio construction is the integration of passive
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.
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.
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
#3 – Determine WHO Is Building Your Portfolio (and WHY).
Fund Education Alliance (MFEA)
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
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.
information and education on mutual fund investments, visit www.MFEA.com