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Broad range of investment Choices
The first benefit of privately managed accounts is access to a wide variety of investment choices. At WrapManager, we recommend a diversified portfolio of managers representing a blend of styles and strategies. We have programs with access to managers with over seventy strategies. Virtually every asset class is represented in the pool of managers we draw from. This range of choices is critical to building a well diversified portfolio.
These asset classes may include large and small capital common stocks, growth and value stocks, government, municipal or corporate bonds, and foreign investments. Most managers will specialize in a particular strategy or style such as Large Cap Value Equities, Emerging Markets Growth Stocks, or High Yield Corporate Bonds.
Customized Asset Allocation
Many sophisticated institutional investors, such as pension funds and large foundations use this approach to investing. They use Modern Portfolio Theory to manage their risk. According to Modern Portfolio Theory, to adequately diversify your portfolio, investments should be spread among different classes of assets whose returns are not highly correlated. Based on the Nobel Prize winning work of Harry Markowitz and William Sharp, Modern Portfolio Theory asserts that investors should allocate their investments among different asset classes and match their asset allocation to their risk tolerance.
Deciding how much risk you are willing to accept, while taking into account such factors as your age, income level and financial objectives, is a key factor in developing your investment philosophy. Clearly, an investor with a longer time horizon can usually afford to assume greater short-term risk in exchange for potentially greater long-term returns than an investor will need income from their investments immediately or in the near future.
This strategy helps to reduce the effects of market volatility, manage risk, for a given level of overall return. Your risk tolerance, investment objectives, time horizon and available capital will provide the basis for the asset composition of your portfolio. The possible variations of asset allocations range from conservative or low risk to aggressive or high risk and many allocations in between.
The process of developing a customized asset allocation for you may seem involved and complicated at first, but its main goal is wealth protection and production, through a strategy that’s built carefully around your personal risk tolerance, time horizon and investment goals. Our Wealth Strategists make it easy.