What you will find here
Here you’ll find all that is needed to set up a professional asset allocation process or integrating missing part of an existing process. All the tools for building well diversified portfolios are here.
First step – choose the market of your interest
AdvisingTools.com offers forecasts on 114 financial markets, it’s up to you deciding which are interesting for you and which are not. You may decide to discard most volatile markets or specific geographic areas or particular asset classes like private equity or real estate. You can, obviously, consider our returns estimates as a filtering criteria. At this first stage we suggest to choose broad and uncorrelated markets. You will refine your asset allocation at step 3.
Second step – prepare to run a portfolio optimization
Once you have selected the broad markets of your interest you can run your first optimization. If you have your own estimates for asset returns, volatilities and correlations you can use them. If you only have a few you can use the ours as an integration. No matter the way you decide to proceed, the result will be an efficient frontier that plots all optimal portfolios for any possible level of expected return.
View this
8 minutes video and discover the key role palyed by volatility and correlation. You'll learn why they are essential
parts of a
good asset allocation process.
Third step – choose your portfolio
You now have an efficient frontier and can choose the risk/return profile that better suites your needs. Choose a point on the frontier, this will be the starting point for your final asset allocation. If you have followed our suggestion this initial portfolio will be composed by broad markets like “US Equity” or “EUR Corporate bond” and so on. It is now time to refine your portfolio in a further step.
Fourth step - refine your portfolio
Go deeper in each broad market and split its weight among several other sub-markets diversifying by sectors, countries, ratings or durations. A fully automated process will guide you in further refining your allocation maximizing global return/risk ratio for your final portfolio.
Fifth step – selection of investment instruments
You now have a fully detailed investment portfolio. You have all the weights and the asset classes; what you still miss are the instruments to buy. Whether you decide to use investment funds or ETF/ETC, AdvisingTools.com will help you to find the right instruments with a coverage of thousands funds and listed ETPs (
view our coverage). It is important that selected instruments are actually correlated with all relevant markets and, in the case of investment funds, they must offer a tangible added value in terms of generated alfa and conservative beta.
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Best 7 markets by 9m expected return:
| last update |
| Fri, 08-02-2019 |
| Market Name | Exp. return |
| Equity Em. Mkts - Brazil | 5.6 % |
| Real Estate - Global | 5.1 % |
| Equity Em. Mkts - Russia | 4.5 % |
| Bond USD - Gov. 1-3 | 4.3 % |
| Real Estate - USA | 3.8 % |
| Commodities - Livestock | 3.6 % |
| Real Estate - Asia | 3.6 % |
Worst 7 markets by 9m expected return:
| Market Name | Exp. return |
| Equity EUR - Basic Resources | -28.4 % |
| Equity EUR - Banks | -25.7 % |
| Equity EUR - Automobiles & Parts | -20.2 % |
| Equity EU - Austria | -17.8 % |
| Equity EUR - Construction and Materials | -14.9 % |
| Equity EU - Italy | -14.3 % |
| Commodities - Industrial Metals | -13.8 % |
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