Choosing your portfolio

You should strive to find the portfolio with the highest return that satisfies your requirements. Defining and deciding on them should be your first step.

While you may have many more requirements, in the context of our platform, we believe there are three main factors to consider.

The three main portfolio characteristics

Risk level

Taking risk is essential to investing, as without risk there is no return. Whereas generally, a higher-risk portfolio has the potential to generate a higher return, you must know the risk level you are comfortable with.

1. Low: ~ 5% annual volatility
2. Medium: ~ 10% annual volatility
3. High: > 10% annual volatility

While volatility is a measure of average risk, metrics that focus on tail risk can also be considered. At pfolio, we use maximum drawdown, value at risk, expected shortfall and other metrics to measure tail risk.

Asset selection

At pfolio, by asset selection, we mean the universe of assets from which your portfolio can be constructed. Your asset selection should lay at the intersection between what you can invest in and what you want to invest in.

• Asset type: For example, you might only want to invest in ETFs or you additionally also in individual stocks
• Asset class: For example, you might want to invest in all asset classes except for cryptocurrencies‍
• Geography: For example, you might want to only invest in assets from developed markets

When deciding on your criteria, make sure to allow your asset selection to be sufficiently diverse. The easiest way to achieve this is to include a variety of asset classes, as there is typically a lower correlation between assets from different asset classes and a higher correlation between assets of the same asset class.

Portfolio turnover

At pfolio, portfolios rebalance every month. That means the assets in the portfolio change as well as the allocation to the assets.

Example: Change in portfolio allocation from one month to the next

• Low turnover: Slower reaction to changing market conditions, lower trading costs
• High turnover: Faster reaction to changing market conditions, higher trading costs

The portfolio turnover is mostly driven by the ratio of the number of assets in your portfolio to the number of assets in your asset selection. For example, if every month you are selecting 10 assets out of a pool of 100 assets, the turnover will be larger compared to selecting from fewer assets.

We provide 8 portfolios segmented by risk level and included asset types.

Our portfolios

While all our portfolios contain ETFs, some also contain individual stocks and/or cryptocurrencies. There are two ESG-conscious portfolios that only invest in assets with high MSCI ESG ratings.

We started by designing our low volatility, ETF-only portfolio and from there expanded our portfolio range by adding asset types and increasing the volatility.

Portfolios that include individual stocks have a higher turnover compared to the other portfolios as there are many more assets to choose from.

With just a few clicks you can explore a portfolio's configuration, analyse its performance, and understand its asset allocation.

This article provides more details about how to analyse a portfolio.

While we designed our suite of portfolios to offer a matching portfolio for most users, you can of course build your own, custom portfolio.

Understanding the portfolio-building process

1. Portfolio setup: Basic portfolio settings, such as a unique name and the base currency
2. Asset selection: Defines the universe of assets from which the portfolio can be constructed. Add asset lists of assets that you want to be included, then use filters to apply criteria (e.g. only ETFs from developed markets).
3. Asset allocation: Defines the rules for asset selection and allocation per rebalancing period (monthly). Select the number of assets you want in your portfolio and the lookback (i.e. the period over which asset data is evaluated).
4. Prepare portfolio: Calculates advanced asset allocation settings based on the provided settings. The advanced settings can be changed by you. Other Help Centre articles will explain the details of those settings.
5. Build portfolio: Calculates the portfolio based on all provided settings

Copying a portfolio

The easiest way to build a custom portfolio is to copy an existing portfolio and then adjust the desired settings.

Creating a new portfolio

To create a new portfolio, click 'Add Portfolio' in the Portfolios Overview page and follow the steps in the Portfolio Builder.

Once a new portfolio is created, it is added to the 'My Portfolio' table in the Portfolios Overview page. From there, it can be analysed or compared against other portfolios or assets.

Deleting a portfolio

You can delete portfolios you no longer need.

Saving a portfolio as 'My Portfolio' in the Portfolios Overview page creates an asset list named 'My Portfolio Allocations' with the selected portfolio's current allocations.

You can use this asset list, for example, to get an overview of the performance of assets in your portfolio in the Dashboard or to compare all assets currently in your portfolio.