7 April 2012

Model portfolios - not perfect but better than alternatives

While the use of model portfolios by financial advisers may not be the best solution for all investors they often are a better choice than alternative solutions that are tailored to fit the particular needs of an investor. Asking about the past performance of the model portfolio allows to compare the achievements of each investment firm. After an investment has been made the investor can easily compare the performance of the portfolio and benchmark it against alternatives. If investors demand that their financial advisor contructs a portfolio that is subject to many constraints (risk tolerance for example) they will not be able to hold their advisor to account and properly measure his investment performance.