The big picture, literally

John Osbon - September 25, 2012

When we ask what your portfolio looks like, we mean it literally. We find that a visual representation of a few critical metrics can tell us a lot about your portfolio and how it can be expected to perform.  Let’s take a look at a hypothetical portfolio, in pictures.

We know that the risk and return of an investment portfolio is overwhelmingly determined by a few simple metrics of asset allocation. First, the distribution of assets across the four primary asset classes – stocks, bonds, alternative investments, and cash. As these four asset classes typically perform differently in any given investment environment, owning a mix of assets reduces overall portfolio volatility. For instance, inflation may be bad for bonds, but good (in small amounts) for stocks.

How much in each basket?

Last week we discussed how we use Windham software to set specific allocations to different asset classes based on client goals and needs. There’s a lot of science behind portfolio optimization, but it all starts with the high level allocation that is depicted in the first pie chart. Watching this chart over time also easily identifies when it’s time to rebalance.

Dollars, euros or yuan?

Markets are global. Is your portfolio? The US/non-US pie chart captures a portfolio’s level of international diversification, but also indicates exposure to currency risk. That dollar/non-dollar split should be set by design, not default, and is unique to each investor.

Get a visual check-up

Thanks to the spreadsheet tools created by Max Osbon for our clients, we can provide an excellent graphical analysis of your portfolio, and we’d be happy to do so, without obligation. It’s a great starting point for fine tuning the risk and return characteristics of your portfolio, or building a new portfolio that better matches your goals and needs.

One quick picture is worth a thousand words.  If you’d like us to take one for you, click here and we’ll respond.

 

Print Friendly, PDF & Email

Disclaimer

  • This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
  • “Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
  • Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
  • Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
  • This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
  • While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
  • Adviser does not endorse the statements, services or performance of any third-party vendor.
  • Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.