The Perfect Portfolio

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Dec 20, 2005 2:21 am

I'm a sales assistant and I've been talking to the FC that I'm working with to come up with a "perfect portfolio" that covers most basis classes wtih low expenses/risk and good returns. I'm fairly new so I don't really know much funds out there besides the big ones like Fideltiy. American Funds, and Oppenhiemer. So if you can develop and "perfect plan" portfolio for long term money, what would you include? Any response would be greatly appreciated. Happy Holidays!

Dec 20, 2005 5:43 am

The one that does what the client needs it to do.

Dec 20, 2005 10:11 am

I would include lots of closed end funds purchased at the IPO.  Those are always GREAT for the client. 

Dec 20, 2005 10:34 am

And I would also throw in a healthy dose of VA... Gotta get that nice upfront pop you know???

Dec 20, 2005 11:43 am

Thebanker the question you ask is not as easy to answer as you might have expected.  Is it maximum return?  Well then do a search of mutual funds and the one with the highest average return over the last ? 1,5,10 years would be "your perfect portfolio."


Is it maximum return with the least risk?  The least volitility? Over what period of time? Then it is more complicated. 


It is like asking what is the perfect car to buy? How do you define that?  Fastest, least maintance, best crash test?  Cheapest? 


One way to quantify investments is to use the efficient horizon.  You may say, I want the maximum return for the least amount of risk.  Basically, that is what the efficient horizon helps you determine.   You also have to detemine what level of volitility you are good with first to then use the software that will help you achieve this with the least amount of risk possible.  Even then it only gives you data based on past information so I am dubious of using efficient horizon. 


I suspect you simply want a blend of mutual funds that has showed decent returns over the last ten years with out having a big loosing year.  If that is it, call American funds or Franklin or who ever and have them do some hypos for you with different MFD blends.  Just tell them what you want and they will advise.  

Dec 20, 2005 11:47 am

Capital Income Builder for everyone!!!

Dec 20, 2005 1:43 pm

With my luck the "perfect portfolio" would work as poorly as "the perfect club" I bought 

Dec 20, 2005 6:37 pm
Indyone:

Capital Income Builder for everyone!!!


Now that's funny.  I have feeling that Franklin Founding Funds may have taken the title as of late.

Dec 20, 2005 8:10 pm

The "perfect" portfolio is the one the client can live with.


I can modify a client's financial goals, but I can't modify their risk tolerance. Oh sure, the client will tell you that they can tolerate a "temporary" 35% drop in value of their portfolio, in the pursuit of their lofty financial goals. But if you've determined that they really have a "low risk" tolerance, either get them to modify (downward) their goals or fire them. Otherwise, they will worry you to death about their investments and/or take you to arbitration. 

Dec 21, 2005 10:37 am
doberman:

The "perfect" portfolio is the one the client can live with.


I can modify a client's financial goals, but I can't modify their risk tolerance. Oh sure, the client will tell you that they can tolerate a "temporary" 35% drop in value of their portfolio, in the pursuit of their lofty financial goals. But if you've determined that they really have a "low risk" tolerance, either get them to modify (downward) their goals or fire them. Otherwise, they will worry you to death about their investments and/or take you to arbitration. 



Well said!

Dec 21, 2005 9:00 pm

Tell them to invest in a Lifecyle fund like the Fidelity Freedom Funds. Let it ride baby. These are a brokers worst nightmare.

Dec 21, 2005 11:00 pm

You mean client's worst nightmare, huh?

Dec 22, 2005 7:57 pm

derekgaddy:

Tell them to invest in a Lifecyle fund like the Fidelity Freedom Funds. Let it ride baby. These are a brokers worst nightmare.


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Don't let it worry you. People who invest in these types of funds probably would not have done business with you, anyway. These types of investors are typically "do-it-yourselfers", who won't come to see you until they've managed to lose most of their money following "hot", new investments. Besides, these types of funds are a fad. In 2 or 3 years, it will be something else.


But your post reminds me of my rookie days, when discount brokers were becoming all the rage and I was worried sick. It forced me to focus on developing value for my clients, rather than just stock picks.


Think about it. If you could be replaced by a fund, then you're not providing value for your clients.

Dec 23, 2005 10:47 am

Nothing wrong (IMO) with using allocation funds.  I use Accessor Allocation funds often with accounts under $100,000.


Good allocation funds provide diversification, re-balancing, and simplification for you (the broker).  You will provide value by servicing these folks, calling them, and being proactive.


If you have a good allocation fund, then mix in a couple good families like American Funds and Franklin Templeton (lower cost and historically good performers)...you really don't not need a whole lot else in the way of mutual funds.