The first and most significant part of the investment management process is asset allocation. This involves strategically targeting a percentage of a client’s portfolio to be invested in the three major asset classes: equities (stocks, stock mutual funds or stock ETFs), fixed income (bonds, bond mutual funds or bond ETFs) and cash (money market funds, t-bills or short term CDs). Generally, these targets are based on age, risk tolerance and income requirements.

The portfolio strategy is further developed by allocating within asset classes to various sectors. Since these sectors exhibit different risk and return characteristics, when prudently combined, they tend to reduce overall risk while improving returns in the long run. Examples within the equity asset class includes the following stocks: value, growth, middle capitalization, small capitalization, international and emerging markets. Within fixed income, there are bonds: treasury, inflation protection, mortgage pools, corporate, international, high-yield and municipal.

The implementation of the portfolio strategy involves the buying and selling of various investment vehicles to create a well-diversified portfolio. These could include direct stocks and bonds, as well as mutual funds, exchange-traded funds, or a combination of these investments. As always, our portfolio construction process aims to build portfolios for client’s personal financial goals.