Pension linked to an index with low charges

Well the core might be 80% equity, with the satellite being 10% property and 10% commodity - within the core a full diversification should (of course) be achieved.
 
We differ on whether 80% equity within a portfolio could be deemed diversification, but as I said earlier, that's a difference of opinion - neither one of us can say how to achieve better results in the future.
 
Well it was just an example, that % could be anywhere from 0 to 100 and it's a moving target.

It is not possible to crystal ball future returns, it is possible to devise an optimal portfolio based on a client's personal situation and risk attitude.
 
It is not possible to crystal ball future returns, it is possible to devise an optimal portfolio based on a client's personal situation and risk attitude.
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It's only possible to try to devise the optimal portfolio to the best of your ability and opinion. Any number of advisors can have any number of opinions as to what the optimal portfolio is.
 
The portfolio that lies on the efficient frontier for a given client's circumstances is the optimal portfolio - there will be an optimal portfolio.
 
Who is to decide what's the optimum?

You could say 80% equity; I could say 60% equity and so on. The optimum from the client's perspective is one that achieves the highest return while remaining within her selection criteria. That can't be known in advance so all we can do is try.
 
It would be determined by the efficent portfolio based on return on a vertical axis and standard deviation on the horizontal axis.

I think everybody in the world knows that nobody can predict stock market returns in advance.

If I could then I would not be sitting here I would be on a golf course in Bermuda!!!
 
I think everybody in the world know that nobody can predict stock market returns in advance...
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Therefore nobody can construct the singular optimal portfolio for a client in advance; there will be countless permutations that suit a given client's requirements.

If there was a simple mathematical formula for constructing the optimal portfolio, I'd write a computer program to do it and would join you in Bermuda.
 
There is a model for devising the variety of optimal portfolios for a client - it is based around optimal Mean-Variance Portfolios and would lie on the efficient frontier.

I'd probably head off to Marbella so & I really do not think that this discussion is furthering this thread or helping the OP at all!
 
As I have said, it is an efficient frontier, only one portfolio will be selected...glad to see you're finally getting the message.

As you would say yourself, now we're getting places.
 
There's a world of difference between

...it is possible to devise an optimal portfolio based on a client's personal situation and risk attitude.
Click to expand...

which is not correct and

...it is an efficient frontier, only one portfolio will be selected...
Click to expand...

which is correct. But as you modified your original statement when queried, we are indeed getting places.
 
There is only one portfolio for one level of return.

Once the return is agreed the unique optimal portfolio is selected.

Looks like we're not getting places yet, I thought the penny had dropped.
 
Here we go again - hopefully you'll get it this time.

You cannot choose "the optimal portfolio" in advance. You can only pick one from a choice of suitable possibilities.
 
How could you agree that there is an efficient frontier and disagree that there is an optimal portfolio for each and every level of risk, I thought we were getting places!!!

Let's agree to disagree on this one...
 
Of course there's an optimal portfolio. You simply cannot choose it in advance. That would be back to the golf course arguments above.

As I've said more than once, you can pick a portfolio from a range of suitable alternatives. You cannot know the optimal portfolio in advance.

Which is why your original statement

...it is possible to devise an optimal portfolio based on a client's personal situation and risk attitude.
Click to expand...

was wrong and your subsequent statement

...it is an efficient frontier, only one portfolio will be selected...
Click to expand...

was correct.

But I seem to be repeating myself, so maybe we'd better agree to disagree alright.
 
They are the same statement, but if you can't see that I reckon we won't be getting any places any time soon - good luck Dave.
 
Of course they're not, but as I've tried to explain the difference several times, I can only wish you well. All the best, D.
 
The points on the frontied represent different risk.

For a given risk - agreed with client - there is only one optimal portfolio.

QED
 
After everything we've discussed in this thread, you seem to be still clinging to your belief that an advisor can recommend the optimal portfolio to a client without the benefit of hindsight.

The optimal portfolio is the one that gives the client the maximum return for their investment. No amount of analysis of client information, modelling, frontiers or anything else will tell you what it is, in advance.
 
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