As each asset class has varying levels of return and risk, investors should consider their risk tolerance, investment objectives, time horizon and available capital as the basis for their asset composition. Investors with a long time horizon and larger sums may feel more comfortable with high-risk, high-return options, while those with smaller sums and shorter time spans may prefer low-risk, low-return allocations.
To make the asset-allocation process easier, we construct a series of model portfolios — each comprising different proportions of asset classes — to satisfy a particular level of investor risk tolerance. In general, these range from conservative to very aggressive.
Model portfolios
Allocates a large percent of the portfolio to lower-risk strategies such as fixed-income and money-market securities. The main goal is to protect the principal value of the portfolio; the equity portion can be invested in high-quality blue-chip companies or an index fund, with less foreign-exchange exposure since the aim is not to beat the market.
Ideal for those who wish to preserve a large portion of the portfolio's total value, but are willing to take on a higher amount of risk to gain some inflation protection.
Often referred to as "balanced portfolios," with the asset composition divided almost equally between fixed-income securities and equities to provide a balance of growth and income. Best suited to investors with a longer time horizon (generally more than five years) and a medium level of risk tolerance.
The main goal is long-term growth of capital — often called a "capital growth" strategy. To provide some diversification, investors with aggressive portfolios usually add some fixed-income securities.
Consists of mostly equity strategies and aggressive foreign-exchange strategies. The main goal is aggressive capital growth over a long time horizon. Since these portfolios carry a considerable amount of risk, the value of the portfolio will vary widely in the short term.
Talk to our team to determine the model portfolio that best fits your objectives.
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