STEP 1: SELECT A PORTFOLIO THEME
Choose from one of several Core-4 Portfolios. Click the “Portfolios” tab, read about the strategies, select one that interests you and click through to it. There you will find more information about the portfolio. The first site upgrade expected by January will include risk and return information for each portfolio. Past performance is not a guarantee of future results and most often not an indication of future results.
STEP 2: CHOOSE A RISK LEVEL
Portfolio risk is determined mainly by the mix between volatile assets like stocks and less volatile assets like bonds. Intuitively, the greater risk you take, the higher your long-term expected return. In the short-term, greater risk means living with downturns and potential large losses. There are many websites that can help you determine an acceptable risk level for your portfolio. Here is a link to the Vanguard Risk Tolerance-Asset Allocation Tool.
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, a Core-4 Custom Portfolio can be created for you by Rick Ferri. Licencing opportunities are also available for institutional investors.