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What makes you different? |
 The Power of a Holistic Approach.
Our comprehensive and customized approach is designed to create a plan that achieves our clients short- and long-term goals, whether they seek fundamental investment management, need to ensure the orderly succession of ownership for a family business, are caring for an aging family member, or wish to establish a philanthropic community legacy.
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How is your approach different? |
Calculating the Required Rate of Return (RRR)
Traditionally, investment portfolios are built by the client's answers to only 10 to 20 risk profiling questions which determine the client's risk classification. Then the advisor selects the portfolio that matches up with the client's answers, and the portfolio is invested. We feel that this simplistic and unsophisticated approach is not the optimal method to determine and/or balance a client's ability and willingness to take risk, and, therefore, is insufficient in building robust portfolios which minimize risk and optimize return. At Synergy Financial Management, LLC, we take a different approach to constructing client portfolios by reverse engineering the return requirement a client’s your Life Style protection plan.
Here is how our process looks.
- Client specifies its minimum desired and sustainable level of spending.
- Client specifies its willingness to tolerate risk.
- We help client determine its ability to tolerate risk.
- We translate this into a minimum absolute return requirement.
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What is strategy optimization? |
Strategy optimization is similar to asset allocation in the sense that it seeks to optimize the relationship between expected returns, volatility (risk) and correlations; however, it is done at the strategy level instead of the asset allocation level. The purpose of this granularity is to determine combination of strategies that maximizes return and reduces risk at the strategy level. After we optimize at the strategy level, we then optimize within or at the investment level. This is commonly referred to as asset allocation.
The following example shows the optimization process and is representative of both strategy optimization and the benefits of asset allocation.
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Strategy 1
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Strategy 2
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| Expected Return |
11% |
25% |
| Standard deviation % (risk) |
15% |
20% |
| Correlation |
0.3 |
Weight of Strategy 1
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100%
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80%
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60%
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40%
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20%
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0%
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| Weight of Strategy 2 |
0% |
20% |
40% |
60% |
80% |
100% |
| Portfolio Expected Return |
11.0% |
13.8% |
16.6% |
19.4% |
22.2% |
25.0% |
| Portfolio Risk |
15.0% |
13.7% |
13.7% |
14.9% |
17.1% |
20.0% |
As seen here, the mix of 60% of strategy 1 and 40% of strategy 2 produces the optimum trade-off between risk and return. The return of 16.6% is the highest possible return with the lowest possible risk.
Our goal is to design custom portfolio strategies to minimize our clients’ probability of loss while maximizing their probability of protecting their preferred lifestyle.
We achieve this by executing a disciplined portfolio construction process. Based on the specifics of each client's situation, we provide exposure to an appropriate mix of traditional, core investment strategies as well as nontraditional assets when suitable. We also seek to provide diversification within each asset class — across sectors, industries and countries.
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