Modern Portfolio Construction and the Benefits of Portfolio Stress Testing

For years, advisors have used backward-looking performance data to illustrate to a client how a current or proposed portfolio behaved in the past.  In recent years, big institutions have been using portfolio stress testing (PST) analytics to assess how various investments in a portfolio might behave under certain positive and negative stress environments.  That technology is now available to the retail investor through advisory firms like Brookhaven Wealth Management.

Think of it this way:  Driving a car is a lot easier through a foggy windshield than looking through the rear-view mirror.  PST doesn’t predict future returns, but it can give a client and an advisor an idea as to how a portfolio might behave under certain stress.  This is extremely helpful uncovering hidden risks in one’s portfolio.

We can evaluate your current portfolio’s risk score and determine how it aligns with your financial personality and the risk required to meet your long-term goals. From there we can discuss any inconsistencies and how to best resolve them.

Finally, we’ll discover through a short discussion what investment style preferences you have- passive, active, or dynamic- which will ultimately lead us to an asset allocation and investment model portfolio(s) most suitable for you and your goals.

If you’re interested in a complimentary portfolio stress test, please complete the contact form at the bottom of this page and we’ll follow up with you shortly.