Your investment portfolio is constantly changing to take advantage of the changing economic environment, fund manager changes and new opportunities that regularly materialise.
The current low interest rate environment is necessitating a further change to portfolios with equities on the ascendency and bond yields on the decline.
Portfolio changes occur at multiple levels these being:
- Strategic asset allocation changes: Milestone subscribes to the strategic asset allocations of Morningstar which is one of the largest research houses and asset allocators in the world. Morningstar has a team of international analysts who research the markets and provide advice on strategic changes that may be required. These strategic asset allocation changes are normally minor and will usually remain in place for three or more years.
- Tactical asset allocation changes: Milestone, in conjunction with Morningstar experts, will periodically make tactical asset allocation changes. This is to take advantage of changes that may be more short term in nature and relate to issues such as interest rates, market cycles, currency movements and various sector advantages. Over recent years, we have been under weight in international assets and overweight in Australasian assets - in particular fixed interest. However, as the world’s economies start to show a glimmer of recovery and interest rates are at historical lows, we are increasing portfolio weightings to equities and reducing exposure to fixed interest.
- Fund manager allocations: Milestone tends to recommend ‘active fund managers’. These managers operate within a pre-defined mandate but have the flexibility to alter their fund allocations to take advantage of trends and opportunities they see. These managers will overweight or underweight individual companies, they will move into or out of investment sectors depending upon their perceived return and riskiness, and they will also increase their weighting to cash if they perceive the market is risky and they want to accumulate capital for a move into a more opportune area.
Milestone monitors and discusses all these changes with the various parties and distils these into appropriate strategies for your investment portfolio. Depending upon the situation, it may appear that your portfolio is static but within the individual funds, there are multiple activities occurring every week.