ALPHA GROWTH CAPITAL
  • Home
  • Portfolio
  • Services
  • Free Resources
    • Macro Economic Models ​
    • S&P500 Performance Indicator
    • Historical Data
    • AGC Monthly Newsletter
  • Join Us
  • Articles
  • Contact Us
  • Terms & Conditions

Sharing Our Thoughts

Building the portfolio

10/11/2019

Comments

 
​After having written about FOMO and the importance of an entry/exit strategy, it is now time to talk about how to build a portfolio.

We all know that our portfolio should be diversified, but why? 
Fundamentally all of us are looking after maximizing the earnings while minimizing the risks. This can be effectively done by holding stocks, commodities and bonds. Easy, right? Yes, not a braniac. The question then become how much to allocate to each of the asset or strategy. We are now entering a trickier territory in which as investors we have to face the trade-off between risk and reward. We all want the strategy that in the long run gives the highest return (even knowing a priory the risk involved) but then in real life when we experience too much drawdown or a bad year we might rush into bad decisions such as revising our approach and thus ineffectively try to chase the tail.

When it comes to portfolio optimization, I personally use two approaches: risk parity and the Markowitz approach. I ll spare the post from the mathematical details, if you want to know more either ask or Wikipedia has good enough info. I find the approaches complementary mostly because the risk parity might not always give the risk-reward profile we are after (despite being very easy to compute, not quite the same for the Markowitz).

In the table below you can see how these two models are applied to a portfolio consisting of stocks (S&P500), gold and bonds (US medium term). The risk parity approach gives returns in between holding solely bonds or equities/gold while having low drawdown, higher Sharpe ratio and low correlation with the market. Using the Markowitz approach, while maximizing the Sharpe, the returns are as equities/gold while the maximum drawdown roughly half of what it is experienced in the last 15 years with these two assets. If on the other hand the drawdown is minimized then the results are very similar to the risk parity theory. 

Two approaches and three different answers: up to our risk appetite to decide what to follow.
Picture
Comments

    ​Join our monthly newsletter, it is free!

    At the beginning of the month, we send out an email reviewing the performances of NEXT-alpha, provide the S&P500 and Gold outlooks based on our proprietary models and reviewing the current economic environment. ​
Subscribe to Newsletter

Subscription*​

Suitable for individuals that would like to implement the strategy themselves in their brokerage account.
​
It is only 37.5 USD/month! To subscribe Contact us!
​

Separately Managed Account

Suitable for investors with at least $20,000 to invest that would like Alpha Growth Capital to manage the asset on the client behalf.

Trades and performances are reported in real time, the client has the intraday liquidity, the funds are held with Exante and there is no lock-up period.

​Want to know more? Contact us!
​
SMAs are only provided to certain countries. 

The information, analysis, data and articles provided in this and through this website are for informational purpose only. Nothing should be considered as an investment advice. Alpha Growth Capital LLC does not make any recommendation to buy, sell or hold any security or position. The website and information provided through it are marketed “as is”. There is no guarantee that anything presented and provided on this and through this website is complete, accurate and correct. Relying on the information provided on this website and through its communication channels is done entirely at the individual own risk. The owner of Alpha Growth Capital is not a registered investment advisor under any security law and nothing provided in this and through this website should be interpreted as a solicitation to buy, hold or sell any mentioned financial product or service. Past performance is not indicative of future results. Any financial decision is at the sole responsibility of the individual.
​

By navigating in this website, you agree to its Terms & Conditions
​
  • Home
  • Portfolio
  • Services
  • Free Resources
    • Macro Economic Models ​
    • S&P500 Performance Indicator
    • Historical Data
    • AGC Monthly Newsletter
  • Join Us
  • Articles
  • Contact Us
  • Terms & Conditions