Displaying items by tag: model portfolio

What firm doesn’t need a pick me up; you know, from time to time? Well, you might want to try on a model portfolio for size, according to investmentnews.com.

Addressing part and parcel of the financial picture of a client’s key to helping advisors erect a business. 

Streamlining the management of the portfolio process – yet not to the detriment of client trust or the performance of a portfolio is an approach. One way to make it click is through the use of a model portfolio.

A few ways to go about it:

MODEL PORTFOLIOS FOSTER MORE EFFICIENT RELATIONSHIPS

MODEL PORTFOLIOS OFFER CONSISTENT ANALYTICS

MODEL PORTFOLIOS IMPROVE RELIABILITY

MODEL PORTFOLIOS PROVIDE BLENDED STRATEGIES TO IMPROVE CUSTOMIZATION

Consequently, probably not surprisingly, increasingly, model portfolios are finding their mojo, gaining greater popularity, according to smartasset.com.

The proof’s in the bottom line. According to Morningstar, as of March of last year, assets following model portfolios swelled to $349 billion. Between June 30 of 2021 and March 31 of last year, that’s a hopscotch of an estimated 22%.

In an article for Advisor Perspectives, Scott Welch and Kevin Flanagan of WisdomTree shared some strategies that can be used to generate income in the current market whether using model portfolios or ETFs.

Of course, this is a big change from the last decade when the Fed’s dovish policies meant that dividend yields on equities exceeded bond yields for the most part. This is no longer the case as the Fed is waging an aggressive hiking campaign to curb inflation even at the cost of a bump in the unemployment rate or a recession.

Thus, the Fed has already hiked rates to 5% and is forecast to hike two or three more times before the current cycle is terminated. More important, the Fed is ‘data-dependent’ and willing to change course depending on inflation and/or financial stability concerns.

This uncertainty and elevated rates mean there is a plethora of opportunities for investors to find income. For those who are comfortable with duration risk, high-yield bonds and equities are an option in addition to ETFs. For those not comfortable with duration risk, shorter-term notes and floating rate options are a good fit.

Finsum: After more than a decade of a paucity of options for income investors, the current market is offering a variety of opportunities.

Put it this way: research analysts and model portfolios don’t go hand in hand. Meaning, of course, an analyst can’t provide model services, according to cskruti.com. Nope. None. Nada.

"I have been asked this multiple times by the advisers and my answer has always been “NO!”

In other words: zip.

But why, you might ask. Well, no buy/sell recommendation in a specific security exists, the site continued. While advice on a “portfolio of securities” is covered under Investment Advisers Regulations, that’s not the case under research analyst regulations.

Those existing research analysts dispensing model portfolios must alter the product offering and discontinue offering portfolios. What’s more, when it comes to a specific security where clients can determine the action on a specific security, analysts are able to provide buy/sell recommendations.

Further driving home the point, based on the terms of a settlement order passed by the Securities and Exchange Board of India in May, sebi-registered research analysts are unable to offer either the portfolios or advisory services, according to livemont.com.

It’s expected the settlement will have reverberations on the platform Smallcase. It offers investors curated portfolios and was created by research analysts and investment advisors.

Drop in the, um, bucket list? The performance of a number of model portfolios that leverage the bucket strategy recently was put under a microscope by Christine Benz, Morningstar’s director of personal finance, according to smartasset.com. While the year’s been unkind to the portfolios given their bottom line’s have taken a hit, nevertheless, they’ve outperformed the traditional 60/40 portfolio. That, of course, is an asset allocation retirees commonly use. Further, they’ve outpaced the S&P 500. Through the first six months of 2022, it was down – and by a considerable margin.

The strategy’s a way to spread your assets across different groups of investments that will be tapped at various points.

“[T]he Bucket system has delivered by keeping the faucets open,” Benz wrote. “Retirees using a Bucket system can draw upon their cash reserves without having to disrupt their long-term investments, which have likely experienced price declines so far this year.”

So, is the bucket list holding up in light of the difficulties of the year’s market performance? That would be a resound yes, as it does what it was designed to, according to Morningstar.com.

"True, all of my Model Bucket Portfolios have lost money this year -- and my guess is that most retiree bucketers are seeing red ink for the whole of their portfolios, too,” said Benz.  (As of late June, a 60% U.S. equity/40% bond portfolio would be down about 16% for the year to date.)

But the Bucket system has delivered by keeping the faucets open: Retirees using a Bucket system can draw upon their cash reserves without having to disrupt their long-term investments, which have likely experienced price declines so far this year.”

Very few investment trends have caught on as rapidly as model portfolios which have seen widespread adoption, but this could be lowering asset flexibility. Model portfolios seek a variety of metrics for assets to be added to the fund. Assets may be excluded for categorical or qualifying reasons which can lead to a lack of adoption and lower returns. The selection bias in models leaves meat on the bone for investors and can keep them from getting exposure to products like covered calls or other investments.

Finsum: Model portfolios have their place, but they could create an inefficiency where some products are given their proper value.