If you have a portfolio of bonds and/or stocks, portfolio management services Canton, OH are something for you to consider. Portfolio management services is the process of selecting the appropriate mix of investments to be held in a portfolio and the percentage allocation of each of those investments.
Whether you have a trust account, corporate account, qualified account, or a regular brokerage account, a target allocation should be calculated and considered. TTG Financial Inc. utilizes sophisticated technical tools and asset allocation models in order to construct a target allocation for every investor.
What do Portfolio Management Services consider?
Portfolio management services are individualized, they are not a ‘one size fits all’ service. Various investor characteristics are taken into account such as the investor’s personal goals and expectations, the investor’s tolerance to market volatility, the investor’s tolerance to risk, and the general trends in the stock market and economy. The selection of investments choosen should be managed with the investor’s goals, time horizon and risk profile in mind.
Key Elements of Canton Portfolio Management Services?
- Asset Allocation
- Diversification
- Tax-Efficient Investing
- Rebalancing
Diversification
Diversification is the principal feature of portfolio management services. Diversification refers to choosing a combination of investments that are not correlated to each other in any way or to the general market. But, why is this necessary? Why not just choose the investments that are doing well and reap the huge gains? The answer to this question lies in what these investments do when there is an gerneral market downturn. The purpose of having investments with low correlation to other holdings within the portfolio, is to try to protect the entire portfolio from a substantial loss when this (unavoidable and evenivable) downturn occurs.
For example, bonds and stocks typically have a low correlation with each other. In some cases, this correlation is even negative. Due to this, economic and market factors that cause price movements in bonds will often have little to no affect on the price movement in stocks. Furthermore, in the case of negative correlation, the affect will be in the opposite direction.
Asset Allocation
Several studies over the years have named asset allocation as the key determinant of both the return and volatility of a portfolio. Therefore, simply saying asset allocation is vital to portfolio management services might be an understatement. Asset allocation refers to where the investor’s money is put to work in the market. Asset allocation is all about risk management of the mixture of assets within a portfolio. Allocation will keep in mind your personal financial goals and risk tolerance; this may be different from one investor to the next.
Rebalancing
While asset allocation is a good starting point, it does need rebalancing from time to time. Over time, the actual performance of investment holdings in the various asset classes will perform at different levels. Perhaps small cap stocks will lead the pack for a couple of quarters, but then technology stocks experience a period of relative outperformance. These differing returns, over time, will cause the asset allocation to deviate from the investor’s original target allocation. This can cause the portfolio to assume more or less risk than desired.
Periodically, the portfolio should be rebalanced back to the target allocation. This is done by buying and selling holdings as needed, or by using new money added to the portfolio if applicable. The quality of portfolio management services is only as good as the periodic rebalancing it undergoes.
Tax-Efficient Investing
This part of portfolio management services considers the tax liabilities of the assets held in the account. Portfolios often include investments in both tax-deferred (or tax-free in the case of a Roth account) retirement accounts and in taxable accounts.
Why does this matter? Well, long-term capital gains taxes as well as those on qualified dividend payments are often less for many investors than taxes on ordinary income from sources including interest. Investments held for more than a year qualify for preferential long-term capital gains rates on any gains from the sales of these investments. All that being said, these factors may favor holding more equity related investments, such as bonds and other fixed income vehicles, in tax-deferred accounts. This concept of tax-efficient investing should be integrated with an investor’s overall asset allocation as a part of the portfolio management process.
Why Are Portfolio Management Services Important?
Some investors accumulate several individual holdings without giving it much thought as to how their portfolio of investments work together. As a result, this may cause an individual to be over-allocated in a single area, which in turn may expose the investor to assume more risk than they may realize. A well thought out and tactically constructed portfolio is very important, and portfolio management services can accomplish this for you. Whether using the portfolio management approach yourself, or using a professional’s help, funding financial goals becomes more attainable.
A well-managed portfolio will provide investors with the diversification needed to help achieve their investment goals and is part of a good overall financial plan.
TTG Financial Inc. would be happy to discuss with you our portfolio management services in Canton, OH and how it might benefit you!
