In a world (and market) replete with uncertainty, there are a few investment themes we can count on. Portfolio performance is more of an art than it is a science. In many respects, optimal portfolio construction is a constant balancing act between risk and reward while creating a mathematical problem that aims to prove 1 + 1 = 3.
We assert that there are three factors that determine long-term portfolio performance:
1. The long-term asset allocation between stocks, bonds, and commodities
2. The funds and/or vehicles selected to represent various stock, bond, or commodity types
3. The total cost incurred to manage the portfolio
When an investor has the right asset mix, holds the right funds representing those asset classes, and keeps their total investment cost relatively low, they have a much higher probability of achieving long term capital appreciation. While fairly basic, the above assertions could provide hardship to the average investor. For example, the points above could erroneously be understood to mean that;
1. There is one ideal portfolio construction for all investors
2. The average investor has the ability and skill to isolate representative assets, and,
3. The average investor can appropriately factor in the cost of commissions and taxes while actively managing their portfolio
The good news is that, with professional coaching, a solid understanding and acceptance of risk tolerance, and patience, investors can effectively achieve solid returns and build time-tested portfolios. RGA Investment Advisors provides portfolio construction and investment management services. Please contact us today to Get Started.
