There is only one way to properly develop a portfolio strategy: First and foremost you need to prepare a wealth forecast. Without doing so, without understanding the goals and objectives that you are trying to achieve and the time horizon over which you want to achieve them, you will not be able to consider all the variables that will go into building the portfolio strategy that is appropriate for you.
I have written about many folks that I have worked with or work with now who have had great success saving and growing their wealth. The common denominator amongst them all is that they had a plan that was turned into a strategy that was followed, monitored and amended (when necessary).
Few families have the exact same goals that they wish to fulfill over the course of their lives. Which means that very likely, they will not require the same investing strategy either.
Determining an appropriate asset allocation as part of your investing strategy comes down to a broad array of options, but the bottom line is finding the best (most appropriate) risk-adjusted returns for your specific situation.
It also needs to be re-visited when different asset classes become more or less volatile, because volatility is a determining factor in the risk adjustment. We have talked about preferred shares a good deal recently. They are no longer the safe and stable asset class that they once were perceived to be (see the chart below). Active portfolio management should and will make the appropriate adjustment to a specific asset class that now displays a greater degree of volatility. You may no longer have the appropriate weighting in your allocation (depending on your specific goals, risk tolerance and time horizon).
(click on the chart to enlarge)
This is what you pay a portfolio manager to look after for you. Ensuring that you have the best possible returns for the risk that you are taking (and there is always going to be risk if you are trying to get returns better than just putting your money in a Government of Canada issued t-bill).
And, always, please remember that any historical returns are in no way representative of future returns (although we are always working our very hardest to get the best possible and hopefully better than average risk-adjusted returns for our clients)!
Today is webinar Tuesday for our High Rock clients where we will discuss what is happening in the global economy, financial markets and the world of wealth management. Which includes developments that may lead us to make some important decisions in the management of our portfolios and asset allocation. It is part of why we are different and better.
We do post a recorded version on our website, for those who may be interested following the presentation, at or about 5pm EDT: http://www.highrockcapital.ca/current-edition-of-the-weekly-webinar.html
I would love your feedback:
And... if you would like to receive this blog in your inbox, please send an email to:
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist