This model helps finalize a sound investment strategy to meet the ultimate goal of a stress-free life in retirement, while suggesting specific investments you can directly execute through your home banking, saving money on fees. Up to 32 currencies supported.
This is primarily achieved by:
• establishing an adequate asset allocation methodology based on age and current net worth;
• projecting your current saving capacity, estimating how earnings, operating and capital expenditures will evolve during your lifespan, using built-in assumptions;
For this purpose, the model uses a set of built-in assumptions:
• average return of equity, bonds, and real estate portfolios, based on last 10 years performance of relevant benchmark indexes;
• expected inflation development, based on last 10 years history;
• age at which earnings and expenses are expected to peak (based on broad statistical data);
• estimated evolution of capital expenditures (calculated by default, if no specific input provided)
• estimated capital gains tax (average based on Country of the investor);
• estimated life expectancy
Financial projections are also available on a net present value basis.
The allocation process:
1.determining investable assets
2.creation of an emergency fund (kept in checking and savings accounts) equal to your annual expenses plus a proportional margin
3.determining expected cash requirements for the next 5 years, to be invested in safer instruments with maturities matching your future disbursements
4.allocation of remaining funds to higher-risk instruments (Equities, Bonds, Real Estate)
Altogether, the model incorporates 3 key functionalities, each one generating a specific asset allocation proposal:
• PORTFOLIO STRUCTURING plus REBALANCING (main feature)
• LUMP-SUM INVESTMENT (excess liquidity invested all in one go)
• ACCUMULATION PLAN (younger people, lower net worth, periodically investing the same amount)
For private investors, fees paid to banks and mutual funds managers can significantly impact portfolio performance. To build a well-diversified portfolio keeping costs down the model assumes the majority of investments in Exchange Traded Funds (ETFs).
For a full explanation of the terminology used and model specifics, it is recommended to go through the Glossary sheet as a first step.
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