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How good are you at picking winners?
That’s one of the key questions which any investor should ask themselves before putting their hard-earned money into a particular asset, whether that’s equities, bonds, funds or other forms of investment.
Advances in technology have made it quicker and easier for people to invest directly into things like stocks and shares, but how should you choose where to place your money?
Going with gut instinct or picking up a stock tip from a passing acquaintance is probably not the long-term investment strategy that most people would adopt.
Likewise, researching investments on the internet or leaving it to AI can also be fraught with potential problems and could lead you to invest in products that you don’t understand, and that don’t meet your investment needs.
This is where a model portfolio service (MPS) can help.
A model portfolio is a pre-constructed collection of investment assets – such as equities, bonds, mutual funds and cash – designed to achieve specific financial goals, and to align to a specific risk level.
In many cases, model portfolios are constructed by teams of investment managers who use their knowledge, experience and research to decide the best way to allocate assets. Portfolio managers are then given discretionary permissions that allow them to rebalance the portfolios on a regular basis in order to maintain alignment to the target asset allocation and adjust positioning in response to changes in market conditions.
Portfolios can be built to achieve a range of different objectives, including long-term growth, capital preservation, income generation and/ or sustainability related goals. Furthermore, portfolios will generally be available at a range of different risk levels, ensuring investors across the risk spectrum have access to robust investment solutions.
At Fairstone, we run a model portfolio service (MPS) comprising a broad range of solutions, each designed to meet a different set of financial objectives.
For example, our Flagship Portfolios are well-diversified portfolios designed for steady long-term growth or income while our Responsible Portfolios are designed for investors who want to avoid some of the more controversial sectors, while focusing on companies that have better societal and environmental footprints.
Opting to invest in an MPS can offer a number of benefits, including:
1. Simplified decision making – instead of researching and selecting individual investments, investors and financial advisers can instead access the expertise of investment professionals by putting money into ready-made portfolios that align with pre-stated objectives.
2. Alignment to risk – model portfolios are generally built to span the risk spectrum, meaning investors can choose a solution that matches their appetite for risk and investment time horizon.
3. Diversification – model portfolios are built to spread risk across various asset classes and sectors, as well as different geographic regions. This helps to reduce exposure to any single market, ultimately reducing overall portfolio volatility and boosting the opportunity for growth.
4. Ongoing management – MPS solutions are built to be updated and rebalanced on a regular basis, giving investors the peace of mind that their holdings will always be aligned to market conditions and their agreed risk level.
5. Improved consistency – when markets are volatile, an MPS can help you plot a consistent investment course, keeping a focus on long-term outcomes rather than short-term fears.
6. Cost efficiency – by pooling assets, model portfolio managers are able to leverage scale to drive down the cost of underlying investments, allowing investors access high quality solutions at attractive prices.
An independent financial adviser will be able to talk you through Fairstone’s suite of model portfolios and provide informed advice on the best fit for your overall financial goals, taking into account factors such as your appetite for risk, your retirement plans, personal goals and overall circumstances.
Our financial advisers are also in regular contact with portfolio managers and have access to a wide range of collateral covering market movements and portfolio changes – all of which can help you stay engaged with your investments and aware of how your assets are being adjusted to adapt to shifting global markets.
A model portfolio can provide a cost-effective and efficient way to invest, matching your risk appetite with your financial goals.
Consulting a financial adviser can help you decide whether an MPS suits your needs and which one offers the best fit for you.
It is important to note that as with all investments, the value of money invested in a model portfolio can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
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