Balancing the portfolio is much like determining what diet fits an individual.
There is no “no-one-size-fits-all” diet; diet types will depend on the individual’s objectives (build endurance, bulk up the muscles, lose weight, or others), body fat makeup, age, and lifestyle.
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In optimizing the portfolio, there is an encompassing goal of maximizing returns and minimizing the risks. There are many other factors to consider, however, including the investor’s net worth, annual income, family size, cost of living, aversion to risk, and more. As such, there is no blanket portfolio optimization strategy suitable for every investor.
Other elements that should not be neglected is the current investment climate and potential market storms in the horizon. Over the past century, there had been four instances of high volatility in the market, specifically in the 1910s, ‘30s, ‘80s, and the most recent one a few years back. A balanced portfolio will not ensure protection against losses, but it can smoothen the ride.
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An effective solution for portfolio diversification is investing in alternative asset classes and strategies. These provide a broader menu of investments that can optimize the risk-return dynamics of portfolios in ways that traditional investments cannot. The variety they bring fortifies the portfolio against.
Whitman Asset Management is a global macro tactical asset management firm providing alternative investment programs that target exceptional risk-adjusted returns. Under the leadership of its founder Charles F. Whitman, the company helps clients understand the investment climate, market forecast, and strategies for a well-diversified portfolio. Visit this website for more information.