After The Financial Crisis: New Approaches To Building Client Portfolios
The events of 2008 showed that diversification does not always mean that different asset classes will remain non-correlated. How can advisors take that lesson into account without abandoning modern portfolio theory?
At the recent Business & Wealth Management Forum in Chicago, three industry leaders discussed how they have changed their approaches to portfolio construction since 2008.
Jerry Miccolis, principal and chief investment officer at Brinton Eaton Wealth Advisors, Bill Bengen, president of Bengen Financial Services, and Harold Evensky, president of Evensky & Katz, offered specific recommendations to take into account the new realities of investing, Advisor Perspectives reports.
Miccolis has added new statistical and analytical tools designed to enhance strategic focus, natural hedging, risk exploitation and catastrophe protection.
Bengen has put renewed emphasis on macroeconomic considerations and capital preservation, and is investing more by asset class rather than choosing individual investments.
Evensky said buy-and-hold is still the best approach but pointed out that the financial crisis highlighted the importance of managing through rigorous rebalancing. He also said it reinforced the importance of understanding how taxes and inflation affect portfolios, and brought immediate annuities and reverse mortgages back into consideration.