Select your location

  • Japan
  • International - other
  • Asia - other

Who are you ?

Select another location

Wer bist du ?

Wählen Sie einen anderen Ort

Qui êtes vous ?

Sélectionnez un autre emplacement

Qui êtes vous ?

Sélectionnez un autre emplacement

Who are you ?

Select another location

Qui êtes vous ?

Sélectionnez un autre emplacement

Wer bist du ?

Wählen Sie einen anderen Ort

Who are you ?

Select another location

Who are you ?

中國香港特別行政區

Who are you ?

Select another location

Wer bist du ?

Wählen Sie einen anderen Ort

Wer bist du ?

Wählen Sie einen anderen Ort

Qui êtes vous ?

Sélectionnez un autre emplacement

Who are you ?

Select another location

Wer bist du ?

Wählen Sie einen anderen Ort

Qui êtes vous ?

Sélectionnez un autre emplacement

Who are you ?

Select another location

Who are you ?

RETIREMENT PLAN INVESTOR

Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:

IF YOUR PLAN ID BEGINS WITH IRK, BRK, 754, 1 OR 2

Visit americanfunds.com/retire

IF YOUR PLAN ID BEGINS WITH 34 OR 135

Visit myretirement.americanfunds.com

Who are you ?

Select another location

Who are you ?

Select another location

Categories
Portfolio Construction
A new recipe for portfolio construction
Sunder Ramkumar
Quantitative Analyst

New research shows successful client outcomes from portfolios can be enhanced by selecting investments that target real-life objectives, not just try to control for expected market volatility. Sunder Ramkumar, senior vice president of Capital Group’s client analytics team, shares his findings that highlight the investment metrics that matter most to clients when looking at long-term results of their portfolios.



Video


 


Transcript



Sunder Ramkumar:
 Engagements with clients often start the same way, with a focus on portfolio volatility. And, while that’s important, our research shows that portfolios that are also built to meet real-life objectives can demystify portfolio construction and improve client outcomes. I’m Sunder Ramkumar in the client analytics team at Capital Group.


As an industry, we built a bit of a recipe around portfolio construction. Let’s start by measuring how much volatility an investor can handle and match a client’s appetite for volatility with a well-diversified portfolio of stocks and bonds. There’s just one problem. What about client goals? Risk isn’t just volatility but, really, the client who fails to meet their goals. This sounds very simple, but the focus on goals has profound implications, I think, for how we build better portfolios. This really is the subject of our paper: “Which Fund Attributes Matter for Goals-Based Investors?”


I’d perhaps highlight three key findings. First, ingredients matter. While advice is often focused on the right amount of equities to match a client’s risk tolerance, changing the type of equities [and] the type of fixed income can materially change outcomes and create better alignment with client goals.


Second, expand conventional views of risks. While standard deviation is important, advisors can also use downside capture, evaluate the potential for large losses in retirement or use long-horizon risk. What happens over longer holding periods to better align with long time horizons that investors have when building wealth?


Finally, bottom-up flexibility can provide more precision in asset allocation. While traditionally we tend to be prescriptive and rigid, flexibility on size, on style and domicile provide portfolio managers with the tools they need to achieve investment objectives.


To learn more, download the entire research paper.



Sunder Ramkumar is a quantitative analyst with 19 years of industry experience (as of 12/31/2022). He holds a master’s degree in management science and engineering from Stanford University.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

Use of this website is intended for U.S. residents only.

American Funds Distributors, Inc.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Use of this website is intended for U.S. residents only.