We nurture the smallest seed
Experience has taught us that the way to build a portfolio capable of surviving bad markets and thriving in good markets is to diversify between stocks and bonds, have a core growth strategy in place and have the ability to take advantage of special situations as they present themselves . The incorporation of several investment styles lends flexibility to the portfolio and allows your money to accommodate change.
There are many styles an investor and the advisor can employ in order to manage money in an account. These styles include owning conservative CDs, buy and hold, momentum and hedging plays, etc. etc. None of these styles should be ruled out since the market is a level playing field in the sense that even the smartest and most well connected investors can lose money in the markets due to lack of flexibility.
With this in mind we strive to structure portfolios and place client dollars in three general categories. The percentage of total assets in each category is adjusted to meet the specific needs of the client with regards to such things as safety, desired income levels, and the need for longer term growth.
Part 1) Income. The investments here are such that they produce cash flow in the form of interest and/or dividends. They have some growth potential, but this is secondary to income and preservation of capital. The income can be paid out to the client or reinvested for growth. The types of investments in this category can include all types of bonds, dividend paying stocks, preferred stocks and money markets that are held in a mutual funds fund format. This category will generally be 1/3 of the total account balance unless the client is in need of maximum income or safety. In such a case this category will be a much larger portion of the account total.
Part 2) SAAR. This category contains the four basic sector mutual funds from the Greystone SAAR portfolio and is intended for capital appreciation. It will generally be 1/3 of the total account balance but will be adjusted to meet the investment needs of the client.
Part 3) Other. This category will be anything that falls outside of the other two areas. It will consist of investing in areas of the market which are perceived to be of good value and having what is believed to be a high growth or income generating potential. Some of these "other" investments can be short term in nature or very long term depending on each situation. Again, the ideal initial balance in this area is 1/3 of the initial account balance adjusted to meet the needs of the client.
Summary: This basic portfolio structure can be used in any type of account including IRA, Roth, SEP, 401K and Rollover retirement accounts, single or joint accounts and trust accounts. It offers flexibility and is simple to understand and monitor.