By: Sheila Morgan
Portfolio management, much like the creative process of painting, involves a careful selection of elements and arrangement in order to achieve a distinct and methodical outcome. At Diamant Asset Management, we believe in bringing a refreshingly human touch to this process. Imagine, just as an artist approaches a blank canvas with a vision, we begin the process by sitting down with our clients to under their risk tolerance and their financial goals. This initial planning phase is the canvas on which we sketch the path our clients will traverse.
Asset allocation, akin to an artist selecting a canvas and arranging elements for a balanced composition, involves deciding how to distribute investments across various asset classes. In this step, we carefully choose stocks and bonds to capture specific investment themes and opportunities, much like an artist selecting colors, brushes, and techniques to convey their vision.
Just as artists make refinements to their work as they progress, we as portfolio managers may choose to adjust our clients’ portfolios to improve risk-adjusted returns. Adaptation is crucial, with artists responding to changes in lighting and mood, we adapt to shifting market conditions and evolving with our client needs.
The final step involves monitoring and rebalancing the portfolio, mirrors an artist stepping back to assess the overall painting to ensures that the portfolio continues to align with the client’s objectives throughout their financial journey.
Much like artists have explored new artistic styles throughout history, investment strategies have also evolved. The traditional 60/40 portfolio, consisting of 60% equity and 40% fixed income, was a landmark development in portfolio construction introduced by Harold Markowitz in 1952. It aimed to maximize returns per unit of risk and proved effective in providing investors with a smoother investment experience compared to an all-equity portfolio. However, the financial landscape is constantly changing. In recent times, central bank actions and unprecedented market dynamics have challenged the effectiveness of the traditional 60/40 allocation.
While the 60/40 portfolio has its merits, it may no longer be suitable for all market conditions. The COVID-19 pandemic and its economic repercussions led to historically low interest rates and heightened inflation, making fixed income assets more attractive. Consequently, constructing portfolios with a higher allocation to fixed income, a deviation from recent norms, can provide a stronger buffer against potential equity losses.
Like colors on an artist’s palette that contribute to the overall risk/return profile of the portfolio: Like meticulous detailing in art, quality stocks focus on high returns on capital and accelerating revenue growth, with strong balance sheets and minimal debt, needless to say lower volatility These stocks maintain stability during market downturns, akin to a steady paintbrush stroke.
In the end, just as an artist’s muse guides the creation of a painting, our portfolio management style is guided by the unique needs and aspirations of our clients. It’s about tailoring portfolios to individual circumstances rather than adhering rigidly to theoretical constructs. Our portfolio management style is an art form that requires careful planning, adaptation to changing conditions, and a deep understanding of the factors that drive investment returns. Our aim is to ensure a harmonious and fulfilling financial journey, where the art of portfolio management becomes a Refreshingly Human Experience.
If you have any questions about portfolio advice and management, give us a call or email us at info@portfolioadvisor.com.
