Asset Allocation Dynamic Plan

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Recommendation

The Recommendation tab of the Asset allocation results section provides analysis of the Current Investment Portfolio and allows advisor to recommend a more suitable allocation by choosing from the list of model and custom portfolios or creating a brand new asset allocation.

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If the Risk Tolerance has not yet been determined in the Asset Allocation worksheet, you may click on the Questionnaire button and fill out the risk tolerance interview. NOTE: Risk tolerance questionnaire can also be filled out in the Investor Portal.

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You may review the Investment Holdings Analysis of the Current total investment allocation by clicking on the Holding Analysis button.

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To recommend a Model or Custom portfolio, simply select desired allocation from the Recommended Allocation dropdown list on the right. Click Create button to construct a new custom allocation for this plan.

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Historical Returns

The Historical Returns graph shows annual returns of the current and recommended portfolio over desired holding period.

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Moving the mouse over any of the bars in bar chart will show the average annualized return for the selected year in the legend on the right.

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Allocation details for current and recommended portfolios are shown in the respective sections below the graph.

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You may change the Holding Period from default 1 year period to up to 9 year holding period and see the impact of the longer portfolio holding on the average annualized return.

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Current Portfolio– historical returns for this portfolio are shown on the bottom chart. Select to view All retirement Savings, only Taxable Savings assets, or Tax-Advantaged Savings asset allocation from the Current Portfolio dropdown list. This will aggregate all assets in each respective category and update the corresponding allocation and historical returns chart above.

Recommended Portfolio– historical returns for this portfolio are shown on the top chart. You may select any previously created Custom or Model Portfolio from the drop down list and see the corresponding allocation details as well as the historical chart updated above.

Average Returns

The Average Returns graph displays average historical returns for various asset classes as well as current and recommended portfolio over a specific period of time. This graph is using monthly returns data provided by Morningstar. You may modify the time period used to calculate the returns in the Time Period section to the left of the graph. Changes to the start and end period assumptions will be automatically reflected in the Average Returns graph.

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Moving the mouse over any of the bars in bar chart will show the average annualized return for the selected year in the tracking legend at the top of the bar.

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Allocation details for current and recommended portfolios are shown in the respective sections below the graph.

Current Portfolio– historical returns for this portfolio are shown as the first bar on the chart. Select to view All retirement Savings, only Taxable Savings assets, or Tax-Advantaged Savings asset allocation from the Current Portfolio dropdown list. This will aggregate all assets in each respective category and update the corresponding allocation and historical returns chart above.

Recommended Portfolio– historical returns for this portfolio are shown as the second bar on the chart. You may select any previously created Custom or Model Portfolio from the dropdown list and see the corresponding allocation details as well as the historical chart updated above.

Performance

The performance tab of the Allocation Results shows the historical Growth of $10K values provided by Morningstar for the separate benchmarks associated with the 7 asset classes in the application versus the combined Growth of 10K for the current allocation and the recommended allocation.

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The Growth of $10,000 is a standard measure of performance which shows how an investment, of $10,000 would have grown over the last 10 years. The data set contains the month end value of the investment for each benchmark. In order to plot the Current and Recommended allocation, we take the historical values of the benchmarks and weight average them based on the allocation percentages of the current portfolio and of the recommended portfolio.

  1. If you so desire, you can remove a data line from the chart by deselecting the check mark next to it in the legend on the left side of the screen.
  2. Also, you can show the returns of all of the indexes and the portfolios adjusted for inflation.

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Choose different allocations from the controls below the chart to see how each model/custom allocation compares to the indexes.

NOTE: The data is updated monthly by Morningstar therefore the results of the chart are subject to change over time.

Efficient Frontier

The Efficient Frontier result page is made up of three sections. 1.The top left section is the Frontier Chart, 2. the top right section is the Optimization Panel, 3. and the bottom part is the Recommendation Panel.

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The Frontier Chart plots the frontier for a mix of investments. These investments are the benchmarks associated with the 7 asset classes available in the program. The benchmark indexes are the following:

Cash USTREAS T-Bill Auction Ave 3 Month
Fixed Income BarCap US Agg Bond TR USD
Large Cap S&P 500 TR
Mid Cap S&P MidCap 400 TR
Small Cap S&P SmallCap 600 TR
International MSCI World Ex USA Growth USD
Other MSCI World USD

Also on the chart are plots for corresponding to the current, optimized, and recommended allocation.

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The Optimization Panel allows you to view the Expected Return and Standard Deviation for the three allocations plotted on the Frontier. Also, you can enter a desired ROR and it will give you the optimized allocation for that ROR.

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The Recommendation Panel allows you to see where all of the model/custom portfolios fall on the frontier in relation to the current allocation and the optimized portfolio.

NOTE: The Efficient Frontier is plotted using the historical values for the aforementioned indexes over the last 30 years. The data is updated monthly by Morningstar therefore the results of the chart are subject to change over time.
Return values are based on quarterly returns.

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