Picking a Portfolio

When it comes to choosing a portfolio, there are a lot of options out there, appropriate to different levels of investor risk tolerance and therefore ranging from conservative to more aggressive. It can be confusing to tell which is the right one for you. To help you out, we have outlined some of the more common portfolio models.

Conservative Model Portfolio

Conservative model portfolios, or “capital preservation portfolios”, are designed for the investor interested in preserving and protecting principal value, capital. The objective of this portfolio is to grow it in such as way as to receive a reasonable rate of return with low volatility.  The conservative model portfolio ensures this low volatility by distributing the largest percent of the portfolio to low-risk securities like fixed-income.

Moderate Model Portfolio

Moderate model portfolios are a step above conservative, ideal for the investor who wants to achieve growth from their investment while still preserving a tight hold on their portfolio’s capital. The moderate model can give inflation protection, though this requires a willingness to take on a slightly higher amount of risk. Capital gains are enhanced by choosing securities which pay high levels of dividends, option premiums or coupon payments. Moderate portfolios can lean to one side or the other: there are moderately-conservative portfolios and ones that have a higher amount of risk and so are moderately-aggressive portfolios. Portfolios that are more moderately-aggressive are also known as “balanced portfolios” as they provide a balance of growth and income by dividing assets equally between fixed-income securities and equities.

Blue-chip Portfolios

For the conservative to moderate investor, there are often portfolios which allow you to invest equity portions into blue- chip dividend-paying stocks. This portfolio is right for you if you’re willing to accept some fluctuation in the portfolio, but want to keep the volatility on the low end of the spectrum.

Aggressive Model Portfolios

Like moderate model portfolios, there is a range of options within the category of ‘aggressive’: you can have moderately-aggressive, as detailed above, aggressive or very aggressive portfolios.

The goal behind aggressive portfolios is to obtain long-term growth on your capital; for this reason they are also known as “capital growth” portfolios. The value of capital growth portfolios fluctuates as they are composed mostly of equities. Some investors will add some lower-risk securities such as fixed-income securities, but for the very aggressive investor, the portfolio is almost just equities. The goal of this investor is to achieve capital growth over a long period of time.  Obviously, the more aggressive the portfolio, the higher the risk.

Retirement Portfolio

As you explore investing options, you may see the offer of retirement portfolios. These portfolios are, as indicated by the name, designed for retirees who are seeking to obtain an income while preserving capital.  Often these portfolios are based on conservative to moderate models, or take a combination of strategies from both types.

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