Appropriate Benchmarks
A valid benchmark should be unambiguous, investable, measurable and appropriate for the manager's style and experience, reflect current investment opinions, be specified in advance and exhibit the investment manager's ownership. The planner needs to choose an index carefully when attempting to measure the performance of an investment manager accurately. The construction of many benchmarks is often arbitrary. When improperly used, benchmarks may provide an incorrect and misleading metric for the analyst, resulting in an unduly optimistic or pessimistic view of a manager's performance.

Probability Analysis
Includes analytical tools and uses advanced software and mathematics applications to model possible outcomes for the investor. Monte-Carlo analysis is a widely used analytical tool that employs mean-variance optimization to product various outcomes for goal-based retirement investment planning or other goals. The end result should be an efficient portfolio for the client that maximizes return for a given level of risk with which the client is most comfortable. Such analysis gives the individual perspective on what s/he needs to do to attain their objectives, be it increase savings, avoid overconcentration of investments, etc.

Program Inputs include:

  1. Economic Variables
    1. Selection of asset classes.
    2. Expected returns for each asset class selected.
    3. Standard deviation (total risk) of each asset class.
    4. Degree of correlation amongst the asset classes chosen.
  2. Client Variables
    1. Risk tolerance/return objective.
    2. Time Horizon.
    3. Tax considerations.
    4. Legal constraints.
    5. Unique considerations.


Program Outputs:

    1. Asset allocation based upon the asset classes chosen.
    2. Expected before-return of the portfolio.
    3. Expected after-tax return of the portfolio.
    4. Expected standard deviation of the portfolio.
    5. The portfolio's efficient frontier.


Tax Efficiency

Related Articles
  1. Investing

    How to Select and Build a Benchmark to Measure Portfolio Performance

    How to select and build a benchmark to measure the performance of your investment portfolio
  2. Investing

    Diversification: It's All About (Asset) Class

    Frustrated stock pickers rejoice - asset class selection is simpler and safer.
  3. Financial Advisor

    Analyzing Investments in a Portfolio Framework

    Financial advisors need to consider many portfolio aspects when analyzing individual investments for a client's financial plan, including position liquidity.
  4. Financial Advisor

    How to Give Clients the Right Portfolio Perspective

    Clients' ability to access immediate information about the market is a blessing and a curse for financial advisors.
  5. Managing Wealth

    Achieving Optimal Asset Allocation

    Minimizing risk while maximizing return with the right mix of securities is the key to achieving your optimal asset allocation.
  6. Financial Advisor

    How Financial Advisors Measure Capital Market Expectations (WFC, BLK)

    Capital market expectations directly influence how a financial advisor allocates asset classes in a portfolio, resulting in a more favorable outlook.
  7. Financial Advisor

    An Introduction to Asset Allocation

    A portfolio is only as strong as its asset allocation. To create the right one, investors need to determine their risk tolerance, time horizon and goals.
  8. Financial Advisor

    How To Pump Up Your Portfolio With ETFs

    These funds trade like stocks, provide diversification, reduce risk and increase returns.
  9. Financial Advisor

    The Portfolio Planning Process, Step by Step

    Portfolio planning has never been more important or more daunting for investors. Find out the steps involved in the portfolio planning process.
  10. Financial Advisor

    What an Investment Policy Statement Looks Like

    The anatomy of an Investment Policy Statement.
Frequently Asked Questions
  1. What's the difference between IRS Forms 1040EZ and 1040A?

    Anyone can file Form 1040; however, you have to meet certain requirements to use 1040EZ or 1040A.
  2. Why would a company buyback its own shares?

    Learn about share buybacks and some of the many reasons a company may choose to repurchase its own stock, including ownership ...
  3. What is the difference between Magna Cum Laude and Summa Cum Laude?

    Learn what the terms "magna cum laude" and "summa cum laude" mean and how different universities determine which students ...
  4. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, and macroeconomics looks at higher up country ...
Trading Center