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HOW TO USE THIS SITE
Every person is different, and that means every investor is different. There is no one-size-fits-all solution to portfolio management. There are only examples. I created six different Core-4® Portfolios and 24 different allocations as examples of simple strategies. Use one or more to fit your needs, and modify them as you please for your unique situation.
There are over 5,000 mutual funds and 2,000 ETFs available to US investors. How to choose among these funds can be daunting. That’s why each portfolio comes with a suggested list of four representative mutual funds and ETFs. A simple portfolio design using these suggested investments makes the process easy. But perhaps you don’t have access to those funds, such as an employee retirement plan with limited fund options. Use the closest funds you do have available. Most of the time, a close broadly diversified low-fee fund in an asset class will work fine.
Start by selecting a Core-4 Portfolio™ that you like, then choose a risk level for that portfolio to fit your needs. Next, select from a list of suggested low-cost index funds and ETFs or use comparable funds that you have access to. View the past risk and return of that portfolio using Portfolio Visualizer, and if everything checks out, invest in your Core-4 strategy at any custodian.
I’ll provide advice if you desire professional help. Read about my Portfolio 2nd Opinion service on RickFerri.com.
STEP 1: SELECT A PORTFOLIO STRATEGY
Choose from one of several Core-4 Portfolio strategies. Click the “Portfolios” tab, read about the strategies, select one that interests you, then click to it. There you will find more information about that portfolio strategy. Past performance is not a guarantee of future results and most often not an indication of future results.
STEP 2: CHOOSE A STOCK AND BOND MIX
Finding your optimal asset allocation between stocks and bonds is as much personal as technical. It’s a mixture of your need to take risk for the purpose of earning a return and your ability to handle the portfolio volatility implied in the mix. Intuitively, the greater risk you take, the higher your long-term expected return, and the more variation you’ll have in short-term returns, including bigger losses in down markets. Your biggest risk you have is not sticking with your allocation during all market conditions, no matter how bad it gets. There are many free websites that can help you determine an appropriate stock and bond mix. Here is a link to a Vanguard Questionnaire.
STEP 3: SELECT YOUR FUNDS
Core-4 Portfolio models are created using four different asset classes and segments of asset classes. However, you cannot invest directly in any index. The investment is in a mutual fund or ETF that tracks an asset class. A sample list of appropriate funds and ETFs is available for each part of the portfolio by clicking through each asset class.
STEP 4: ANALYZE YOUR SELECTIONS
The Portfolio Visualizer online backtesting tool allows you to observe prior results on one or more portfolios based on the selected mutual funds, ETFs, and stocks to analyze and backtest portfolio returns, risk characteristics, standard deviation, annual returns, and rolling returns. The results include a visualization of the portfolio growth chart and rolling returns, CAGR, standard deviation, Sharpe ratio, Sortino ratio, annual returns, and inflation-adjusted returns. A periodic contribution or withdrawal can also be specified together with the preferred portfolio rebalancing strategy. Simply enter the funds you choose in the asset allocation you decide.
STEP 5: INVEST YOUR CORE-4 PORTFOLIO
Now that you’ve picked your Core-4 Portfolio and selected four funds, it’s time to implement your plan. You can do this yourself through your own custodian or contact an investment adviser for assistance and advice. If none of the portfolios suit your needs, I can help you create a custom portfolio. Licencing opportunities are also available for institutional investors.