How can I check if my portfolio is diversified?
What are the asset classes?
What is asset management?
What is an asset mix?
There aren’t many easy-to-find tools on the web or elsewhere to help an investor check how well diversified a portfolio is.
Tickeron is setting out to change that.
With our proprietary Diversification Score® tool, an investor can input each of their portfolio holdings, and our Artificial Intelligence (A.I.) will provide a score indicating how well diversified the portfolio is.
An investor generally wants to make sure that they do not have too many assets allocated to one region, style, or sector, and that they have sufficient exposure across asset classes if that is their goal.
For mutual funds, this task can be more difficult, since a mutual fund has hundreds and hundreds of positions within it. An investor that owns several mutual funds is likely to have more overlap in their portfolio than they might imagine.
Tickeron’s Diversification ® tool accounts for that as well.
What are the asset classes?
Asset classes are types of appreciable investments that can be grouped and distinguished from one another based on the correlation of their price movements and the structure of their cash flows.
Some of the most common asset classes are stocks, bonds, cash (and cash equivalents), commodities, and real estate. Many individual securities and sub-classes will fall into each of these.
Asset classes are a large consideration when creating a well-diversified portfolio.
Constructing and maintaining an asset allocation that suits an individual investor’s risk tolerance, time horizon, and goals has been found to be the single most influential mode of control that an investor can use to keep the results of a portfolio reasonably predictable.
The idea is that if you would expect returns within a certain range out of an asset class, and several asset classes only have a moderate degree of correlation to one another, that the dips and turns of the individual asset classes will not affect the entire portfolio, and that they will, as a whole, generate returns within the desired range while avoiding some of the risks inherent in each asset class.
This is known as modern portfolio theory. Asset types that deviate from these more traditional asset classes are known as alternatives.