Balancing Growth and Stability for the Future.
The Johnsons, with $2.1 million in retirement accounts and three children aged 8-15, face the dual challenge of maximizing retirement savings while preparing for substantial college expenses. Their current portfolio, while performing well, carries a beta of 1.2, indicating higher volatility than the market. This level of risk is concerning, particularly with college expenses looming and a desire to protect their nest egg from significant market downturns.
Using Golden Door Asset's Portfolio Beta Calculator, the Johnsons analyzed their portfolio's risk exposure. They identified high-beta holdings and strategically reallocated approximately 10% of their assets—around $210,000—into lower-beta investments such as bond funds and dividend-paying stocks. This adjustment successfully reduced their overall portfolio beta to 1.0, aligning it with the market average and decreasing potential downside risk.
The Johnsons inputted their asset allocation and individual security betas into the Portfolio Beta Calculator. They then experimented with different asset allocations to observe the resulting portfolio beta and identify an optimal balance of risk and return.
$100,000 reduction in potential portfolio losses during market downturns, based on historical simulations and the beta reduction from 1.2 to 1.0.
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