What are the Elements of Portfolio Construction?
Are you looking to find a wealth management advisor? Wealth management advisors provide investment advisory service and other specialized services that involve personal retail banking, legal and tax advice, estate planning, and investment management. Aside from sustaining your long-term wealth, their goal is to grow it. Furthermore, they can help you understand the basic elements of portfolio construction.
The Basic Elements of Portfolio Construction
The investment strategy that seeks to distribute an investor’s assets based on his goals, time horizons, and risk tolerance is called asset allocation. This involves three asset classes including stocks or equities, bonds or fixed income, and cash and cash equivalents. Each of these carries specific levels of risk and potential for return.
Aside from these three asset classes, other alternatives are also used to construct a portfolio. These include private equity, real estate, precious metals, and other commodities. Likewise, these levels also come with their fair share of chance.
Once the investor has identified the best way to allocate their assets, the next step is to choose what goes where. Before buying, a thorough evaluation of each investment’s quality and return potential has to be done. Next, the investor decides the percentage of funds they intend to dedicate to bonds and the right bonds they should invest in.
Several asset subclasses have to be considered and they each hold a level of uncertainty. These include large-cap stocks, mid-cap stocks, small-cap stocks, and international or domestic stocks.
An investor’s financial portfolio’s long-term success highly depends on ongoing portfolio management. This allows them to recognize the time to re-examine and update their investment portfolio based on a variety of forces. The signals that they need to watch out for include market fluctuations, life occurrences, and a changing interest-rate environment.
Looking for Wealth Management Advisors?
The financial experts at 1879 Advisors can help you construct a portfolio you can be proud of. Request an appointment for a free portfolio evaluation today. Expect to receive a comprehensive analysis of your current portfolio holdings and specific recommendations on how your portfolio allocation and investment choices should be updated to better reflect the current environment.