Asset
Allocation Software
Don't put all your eggs in one basket!
Yea, but what baskets should I use
and how much should I put into each?
There are a number of so called "asset allocation"
software programs on the market today. Some of these programs
are offered by mutual fund and insurance companies allowing
you to simply answer a questionnaire and their software
will determine what asset mix you should hold. At the same
time, these programs recommend their own products. Most
advisors realize this type of approach does not give credence
to a thorough and objective analysis.
The basis for asset allocation was first established by
Nobel Laureate Harry Markowitz. Markowitz, the innovator
of Modern Portfolio Theory, came up with theories and mathematical
formulas that allow securities to be mixed in the most efficient
way. "Efficient" meaning the highest rate of return
for any given level of desired risk.
The programs we represent are designed to help serious
advisors analyze the risk and return characteristics of
client and prospect portfolios while at the same time, giving
them a method of improving porfolio return and risk.
Why
should I consider using asset allocation software?
As an investment advisor or financial planner, you are
often asked to evaluate a person's existing portfolio. The
client or prospect has probably spent time with another
advisor or maybe they have been a do-it-yourselfer.
As a rule, most existing investment portfolios you will
run across have not taken into account the goals, objectives
and suitability of the investor. Without some kind of quantifiable
method of evaluation, it may be very difficult to illustrate
just how good or bad the client's portfolio is.
Enter asset allocation software that utilizes historical
data and Modern Portfolio Theory.
With Ramcap
or Power
Optimizer, you are better equipped to illustrate
the risk and return characteristics of a client's current
holdings or the portfolio you are recommending. You are
able to present an investment policy statement that takes
into account the client's investment objectives and tolerance
for risk. With the software, you are able to increase the
client's expected return while decreasing his expected risk.
The allocation you recommend will have had a method. This
method won't be some subjective process, but a process based
on actual data, practical application and a Nobel Prize
winning theory.
In 1986, Advisory World, Inc. (formerly Wilson Associates
International), developed software that used the Modern
Portfolio Theory algorithm. This software has progressed
and matured into two distinct programs, Ramcap
and Power
Optimizer. To learn more of how these programs
can help you attain the goals set for you and your clients,
visit each of these
