Diversification, an important investment strategy, manages risk and increases potential returns. Sector caps, which limit exposure to a single industry to balance a portfolio, are critical to this. This blog will discuss the significance of sector caps and their benefits.
Rick Gonsalves
iQUANT pre-built portfolios use historical standard deviation as the primary risk measure instead of maximum drawdown or returns due to its higher repeatability. Standard deviation has a 0.9 correlation with future volatility, while maximum drawdown has 0.5 correlation with downside risk. Historical standard deviation explains 85% of future volatility, compared to less than 50% for return-based measures.
Portfolios are Traditional or Dynamic. Traditional portfolios have fixed stock-bond allocations, while Dynamic portfolios adjust based on targeted risk levels. Advisors choose between Target Risk portfolios, which maintain specific risk levels, and S&P 500 Directional portfolios, which track market movements.
Using data-driven models, iQUANT helps advisors manage risk with a time-tested and justified investment process.
Rick Gonsalves
Tired of chasing returns like a dog chasing its tail? Every year, the same pattern repeats—models get abandoned, strategies get swapped, and investors end up buying high and selling low (again). If market timing worked, we’d all be billionaires by now. But instead, the data keeps proving one thing: sticking to a well-constructed allocation beats emotional decision-making every time.
Yet we’ve witnessed advisors jump ship on solid strategies like the Recession 10 model in 2023 or International Titans last year, only to miss out on double-digit gains. So, if you’re looking for a surefire way to underperform, keep switching strategies. Otherwise, stick around—we’re about to break down why staying the course is the only real winning play.
Rick Gonsalves
Over the past decade, U.S. stocks have led the market, but history proves that international stocks—both in developed markets like Europe and Japan and emerging markets like China and India—have also had their moments of outperformance. The key question now: Are international stocks poised to take the lead again?
Rick Gonsalves
If your investment portfolio isn't mirroring the S&P 500's performance, it may be because your portfolio includes investments beyond domestic mega-cap stocks. The S&P 500 is a market-cap weighted index dominated by large tech companies, so comparing your portfolio to this index may not be realistic. To closely track the S&P 500, consider a portfolio composed only of domestic large-cap stocks. However, for long-term efficiency, a diversified portfolio may be a better choice, even if it doesn't always align with the S&P 500's short-term performance.
Rick Gonsalves
As an investment advisor, it’s your job to understand how a strategy works and ensure your clients do too. Focusing solely on growth can lead to confusion if an investment behaves differently from market expectations. By considering metrics like capture ratios, betas, and correlations, you can manage expectations, avoid surprises, and build trust, ensuring investments align with your clients’ financial goals.