SaxoWealthCare has multiple ways in which we allocate our clients' assets. Each way is tailored towards a client's needs.
Asset allocation involves distributing your money across stocks and fixed income in a way that optimises the chances of you achieving your life goals. Each allocation is chosen for you based on the answers you provide us in the personalisation steps (suitability profile). We have the following asset allocation methods:
Fixed Mix
Fixed mix means you receive a constant distribution between stocks and bonds based on your risk appetite. We will rebalance your portfolio when the distribution is not in line with the original distribution. For example, if you have a fixed mix involving an allocation of 60% to equities and 40% to fixed income, this is defined as a balanced risk profile. Therefore, if equities perform strongly, you may have 65% exposure in equities. The SaxoWealthCare allocation engine will then reduce your equity exposure in line with the original allocation of 60%. Thus ensuring, your portfolio stays on track and you are not investing in a life plan which does not match your risk appetite.
Portfolio Protector
Portfolio protection means your investment plan will have a dynamic allocation between stocks and bonds based on market opportunities and conditions.
Within the SaxoWealthCare engine, your risk appetite determines your floor which is the amount of portfolio which Saxo will strive to protect. For example, if your floor is set to 85%, you are not comfortable losing more than 15% of your initial investment. The percentage will be adjusted for deposits and withdrawals too.
If you are approaching your floor of 85% due to poor market performance, SaxoWealthCare, increases your exposure into fixed income. This steadies your portfolio and limits larger losses from happening. Once markets recover, SaxoWealthCare will increase the exposure to equities to allow your account to grow. Remember, the key to asset management is to grow and protect assets over the long term.
Every 12 months we will automatically re-calculate your new floor and adjust your equity/bond exposure.
Risk Reduction
Risk reduction ensures you do not miss achieving your goal at the last minute due to a sudden drop in the market. Experts call this timing or sequencing risk. We combat this risk by determining a maximum stock exposure for your plan based on your risk profile and as you move closer to your financial goals, we reduce the risk by decreasing your stock exposure and moving more funds into bonds. This will reduce any unpleasant surprises from major losses just before you have reached your goal
Also note, that if you have more than 50% of your SaxoWealthCare account assigned to one goal, risk reduction will take place automatically.
Risk Reduction with Portfolio Protector
For investors with significant goals (which require more than 50% of the investment portfolio) and an aversion to loss SaxoWealthCare can implement both Risk Reduction and Portfolio Protector. So it can maximise your chance of achieving your goals while helping you to sleep at night when markets are very volatile.