Portfolio Investing

From a GDA Plus+ Partner, tips on maintaining a diversified portfolio.
UBS group

A well-performing investment portfolio is about more than just having good investment ideas, and in a low yield world, investors increasingly need to consider new means of portfolio construction to deliver sufficient returns. This is why the diversified portfolio approach to investing is so critical.

“An investor’s goals and objectives, not market forecasts, should be the primary factor in determining an appropriate investment strategy.”
–Michael Crook, Head of Investment Planning, UBS CIO Research

Diversified portfolio approach

Avoiding concentration risk, avoiding behavioral traps, and reducing short-term volatility are why the concept of the diversified portfolio is at the core of our approach to investing. By diversifying, investors can improve their returns without commensurately increasing the risk in their portfolios. A long-term strategic asset allocation should be a central component of their overall investment strategy, in our view.

Using a goals-based approach for portfolio selection

The standard approach to portfolio selection focuses on an investor’s inherent “risk tolerance” and willingness to accept volatility on a day-to-day basis. A so-called moderate investor might hold 50% in equities, whereas a conservative investor might only hold 10% in equities. Problematically, narrowly defining risk as short-term volatility means that this approach doesn’t address whether or not the portfolio matches the investor’s short- and long-term goals.

Focusing on after-tax returns

Our research indicates that the average taxable equity investor pays about 1% of the value of their equity portfolio in taxes per year. Minimizing that tax drag can directly increase after-tax returns. There are two components to reducing tax drag: First, postpone realizing gains in order to receive long-term tax treatment; and second, offset realized gains by actively harvesting losses as they occur throughout the year.

Proactively rebalancing

A Trump presidency might bring stimulative, pro-growth policies, like infrastructure spending, lower personal and corporate tax rates, and deregulation. Alternatively, the new administration’s focus might create economic turmoil by focusing on issues like trade barriers and foreign ownership of Treasury debt. We could experience both outcomes at various times. A proactive portfolio rebalancing strategy helps create outperformance by taking advantage of market declines when they occur. Our re-search concludes that proactive rebalancing has added 0.8% per year to portfolio performance since World War II.
To learn more about our endorsed services, please visit our website www.ubs.com/team/wile or contact our group WileConsultingGroup@ubs.com

Save the Date

11th Annual Family Forum | Friday, July 28 | 8 am–2 pm

The forum is a half day of customized educational sessions for each generation of your family and friends. Please save the date and invite family & friends for a day of learning together.

Wile Consulting Group | 404.760.3239