Q: 5i Team,
I hope all is having a great 'workation'.
I have a market strategy question relating to portfolio balancing. For most investors, maintaining a balance portfolio is the best way to hedge market risk / volatility (for the purpose of this question, lets ignore the quality and size of companies being purchased, obviously that is extremely important in any scenario). Theoretically, take 11 sectors and try to maintain relative equal weighting (recognizing that it’s impossible to do so perfectly given daily market fluctuations), hence, a ‘perfectly balance’ portfolio would look like:
Utilities – 9.1%
Consumers Staples – 9.1%
Capital Goods / Industrials – 9.1%
Energy – 9.1%
Financials – 9.1%
Health Care – 9.1%
Consumer Cyclical – 9.1%
Transportation – 9.1%
IT – 9.1%
Materials – 9.1%
Telco – 9.1%
Questions:
1. For a client who is willing to go up on the risk curve, are you ok positioning a portfolio overweight / underweight in sectors that you think will outperform / underperform?
2. Given today’s macro economic backdrop, what sectors do you think will be outperforming / underperforming over the next 1-3 years?
3. Finally, I am a 30 year old investor maintaining a small, relatively balance, six figure portfolio. I will be transferring over additional cash to deploy within the coming weeks equal to about 50% of my current portfolio size and am trying to determine how best to position myself in the 11 sectors. I have time on my side, and future cash to invest in coming years, so I’m not overly worried about taking on more risk if I think it can lead to higher returns, but don’t want to be stupid either. As such, assuming I maintain a relative balance of small cap and large cap companies, what weightings do you think I should aim for? How would you position a portfolio TODAY within the 11 sectors for a more ‘risk on’ investor?
Utilities – ?
Consumers Staples – ?
Capital Goods / Industrials – ?
Energy – ?
Financials – ?
Health Care – ?
Consumer Cyclical – ?
Transportation – ?
IT – ?
Materials – ?
Telco – ?
Sorry for the long question.
I hope all is having a great 'workation'.
I have a market strategy question relating to portfolio balancing. For most investors, maintaining a balance portfolio is the best way to hedge market risk / volatility (for the purpose of this question, lets ignore the quality and size of companies being purchased, obviously that is extremely important in any scenario). Theoretically, take 11 sectors and try to maintain relative equal weighting (recognizing that it’s impossible to do so perfectly given daily market fluctuations), hence, a ‘perfectly balance’ portfolio would look like:
Utilities – 9.1%
Consumers Staples – 9.1%
Capital Goods / Industrials – 9.1%
Energy – 9.1%
Financials – 9.1%
Health Care – 9.1%
Consumer Cyclical – 9.1%
Transportation – 9.1%
IT – 9.1%
Materials – 9.1%
Telco – 9.1%
Questions:
1. For a client who is willing to go up on the risk curve, are you ok positioning a portfolio overweight / underweight in sectors that you think will outperform / underperform?
2. Given today’s macro economic backdrop, what sectors do you think will be outperforming / underperforming over the next 1-3 years?
3. Finally, I am a 30 year old investor maintaining a small, relatively balance, six figure portfolio. I will be transferring over additional cash to deploy within the coming weeks equal to about 50% of my current portfolio size and am trying to determine how best to position myself in the 11 sectors. I have time on my side, and future cash to invest in coming years, so I’m not overly worried about taking on more risk if I think it can lead to higher returns, but don’t want to be stupid either. As such, assuming I maintain a relative balance of small cap and large cap companies, what weightings do you think I should aim for? How would you position a portfolio TODAY within the 11 sectors for a more ‘risk on’ investor?
Utilities – ?
Consumers Staples – ?
Capital Goods / Industrials – ?
Energy – ?
Financials – ?
Health Care – ?
Consumer Cyclical – ?
Transportation – ?
IT – ?
Materials – ?
Telco – ?
Sorry for the long question.