J.P. Morgan Asset Management - Principles for Effective Portfolio Construction

Discover seven key strategies and a systematic framework to build portfolios that help solve investor needs.

With lower return expectations, it has never been more important to build portfolios that have greater potential to capture opportunities, weather uncertainties and achieve long-term goals. Discover key strategies and a systematic framework to build stronger portfolios that solve investor needs.

1. START WITH AN ASSET ALLOCATION PLAN

Begin at the end—What’s the goal?

A portfolio should be a reflection of each investor’s goals:

• What are they trying to accomplish
• When will they need the money
• How much risk are they willing to take?

2. DIVERSIFY TO SMOOTH OUT THE RIDE

Diversification works

In the last 15 years, investors endured a global financial crisis, numerous geopolitical conflicts, a global pandemic and two major market downturns. Through it all, a well-diversified portfolio of stocks, bond and other uncorrelated asset classes delivered one of the smoothest rides for investors.

3. REBALANCE TO STAY THE COURSE

Stay on course; don’t “set it and forget it”

As markets shift, so do allocations. Without rebalancing, investors overtime can become overexposed to unwanted risks.

Create a rebalancing policy

It is important to create a formal rebalancing policy and follow it faithfully in order to keep assets on original targets.

4. USE THE 4 Ps FRAMEWORK TO SELECT INVESTMENTS

There are many factors to consider

5. CHOOSING THE APPROPRIATE INVESTMENT IS KEY

Big gaps between top and bottom performers

Given the wide array of approaches available, mutual funds and ETFs in the same category may deliver vastly different results Compounded over time, this gap can have a big impact on a portfolio’s dollar value.

6. LOOK BEYOND TOTAL RETURNS

Dig deeper into performance

Of the 4 Ps, focus most closely on performance. But evaluating performance involves much more than simply looking at recent returns. Other factors to consider include consistency, risk and performance relative to benchmarks and peers.

7. PUT IT ALL TOGETHER

The whole is greater than the sum of its parts

To build a portfolio that can withstand ups and downs, all six components in the process must work together to achieve the desired result.

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Important Information:

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.