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Indices you can measure your portfolio against


The Wealth Management Association, the trade body for many of the stockbrokers and wealth managers working in the UK, has launched a series of indexes for use by financial advisers and wealth managers. The indexes are meant to provide an overview of five distinct investment strategies and have been developed by the WMA in conjunction with index provider MSCI, and can also provide a useful measurement tool for private investors.

The objective of the indexes is to provide wealth managers and private investors with indexes that can better replicate the performance of a diversified portfolio of assets, including bonds and funds. These portfolios use asset allocation weightings that are reviewed on a quarterly basis by the WMA’s Private Investor Indices Committee.

The underlying strategies themselves can be tracked back as far as 1997. They are fully replicable in that they provide full historical data and market prices should investors or fund managers wish to copy them.

The indexes represent a better indication of the performance of a model portfolio – i.e. a combination of different assets like shares and bonds, combined into a portfolio that is designed to achieve certain objectives for investors. They include the Private Investor Conservative Index, the Private Investor Income Index and the Private Investor Growth Index.

The indexes are composed of equities, bonds, real estate, cash and alternative investments like hedge funds and private equity funds. They represent a useful way for wealth managers to demonstrate to investors whether a portfolio is outperforming or underperforming an established, independently calculated index. Investors can use them to benchmark their own portfolios, or those suggested by a financial adviser.

The Armchair Trader says:

We like these because they represent a more realistic tool for measuring a multi-asset class portfolio that has been constructed to meet specific financial objectives. An equities index like the FTSE 100 is neither here nor there when it comes to reflecting the need to keep some money in asset classes other than shares, particularly for long term investors.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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