How to build an investment portfolio. Managed by an individual broker

2-th principle of building a knapsack is to avoid investing in assets, which you are not good at. The more you stick to this rule, the best result you will see at the output.

60/40 - works or not

Let's analyze the construction of the knapsack using examples. A common asset allocation looks like this: sixty percent shares,40 % bonds. The elementary plan in this case would be to acquire the broad market index by sixty percent., and forty percent - the index of corporate and government-backed securities. With such a knapsack, rebalancing must be done 1 once a year. Despite that, that the strategy seems gullible and even clumsy, she works.

How to improve efficiency and reduce risk

Now let's try to complicate the contents of the backpack., to reduce hazards or increase efficiency. Long-term bonds should be inflated, as their holders are more likely to tempt fate. However, in reality, the effectiveness of bonds is weakly dependent on the term, therefore, long-term bonds can be easily swapped with short-term bonds.. So we will reduce the dangers of the knapsack.

Another option is to add more foreign stocks to the portfolio. For instance, not counting the index S&P 500 invest in the performance of companies in other advanced countries: Europe, Australia and Asia, so that the ratio of securities came out thirty percent / thirty percent. This way we will reduce the risk by expanding the range and increase the efficiency of the satchel.. This apparent miracle is explained by the low correlation of these indices with US stocks..

If we go further, you can dilute the shares of large organizations in advanced countries, of which indicators are composed, shares of small companies. For instance, bring the portfolio to this ratio: S&P 500 - fifteen percent, shares of small organizations from the USA - fifteen percent, shares of companies in other advanced countries - also fifteen percent, and fifteen percent of the shares of small foreign companies. This distribution improves the expansion of variability and increases efficiency..

The process of building a knapsack can be continued further, including emerging market assets or, for example, real estate. The usefulness of the added asset classes is determined by the, how they reduce the risk or increase the efficiency of your backpack.

Another time we will talk about portfolio strategies..

If you have a portfolio of securities with a price of 3 RUB million, we advise you to conduct an audit - it is free of charge. You will receive the professional opinion of an individual broker, which was based on analytics from Argus Research and BCS Global Markets.

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