The optimal investment is a globally diversified, tax-managed, and small and value tilted, mix of
index funds (risk exposure) matched to your unique risk capacity.
IFA offers 100 Index Portfolios, which are individualized and indexed. The Index Portfolios are allocated among three broad asset classes: fixed income (bonds), U.S. stocks and foreign stocks. The stocks are further divided by size and value (book-to-market ratio).
This correlation of risk and return provides investors with the opportunity to invest in a targeted asset allocation that matches their Risk Capacity. It is important to understand how risk is measured and the correlation it has on an expected return.
IFA matches investors by carefully qualifying and quantifying Risk Capacity and matching it to the Risk Exposure of IFA’s Portfolios. This replaces speculation with science, employing a disciplined approach that emphasizes broad diversification and consistent structure.
Calculating risk capacity is the first step to deciding which portfolio will generate optimal returns for each investor.
Each investor has a unique risk capacity and can be identified by a risk capacity score — a measure of
how much risk one can manage.