Balancing Aggression with Prudent Volatility Management
Dr. Sharma's portfolio, valued at $750,000 across various brokerage accounts and retirement funds, has exhibited higher-than-average returns but also significant volatility. Her current allocation includes a mix of growth stocks, emerging market funds, and real estate investments, leading to a weighted average beta that exceeds her comfort level, especially given her $280,000 in student loan debt and the unpredictable nature of her medical practice’s cash flow.
By utilizing the Portfolio Beta Calculator, we were able to quantify the risk associated with Dr. Sharma's existing portfolio, revealing a beta of 1.3. We then modeled several alternative asset allocations, adjusting the mix to include lower-beta investments like dividend-paying stocks and bond funds. This resulted in a revised portfolio with a target beta of 0.9, reducing overall portfolio volatility by approximately 30% while still maintaining a projected annual return of 8%.
The Portfolio Beta Calculator allows for seamless input of asset allocations and individual security betas, providing an immediate and transparent view of the portfolio's overall risk profile. We used historical data and market indices to refine the beta calculations and ensure accurate projections.
$8,000 reduction in potential portfolio losses during market downturns
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