Portfolio Construction

Retirement

Investment selection

Background

The first three steps in the process are the most critical components to building a retirement portfolio as they establish the risk/return parameters.

Lonsec believes that a sound strategic approach to constructing retirement portfolios will be the main driver of portfolio outcomes, with product selection being the vehicle for executing the strategy.

 

Several factors

Investment selection should take into account several factors, including:

1) Applicability to investor circumstances and objectives

2) Quality of the investment e.g. product research

3) Role within the portfolio e.g. yield generating, risk control, capital growth

4) How the products blend with each other – understanding of factor risks within the portfolio, strategy diversification, style, market cap bias, sector concentration

5) Position sizing – how much exposure should the portfolio have to factors such as credit versus duration exposure, large cap versus small cap etc

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