Designing a goals-based portfolio

Thoughtful portfolio construction requires a focus on an investor’s goals and financial risk tolerance. By taking these considerations into account, investors can make more-informed decisions regarding the role of alternatives in their portfolios.

Income An investment strategy that seeks to provide a steady stream of current income, or yield, over time.

Investors have varying needs for dependable current income, whether to meet monthly expenses or achieve long-term financial goals. Especially during periods of low interest rates, some alternatives may offer higher yields than traditional investments.

Diversification A risk management technique that mixes a wide variety of investments within a portfolio.

A diversified investment portfolio that includes stocks, bonds and alternatives can help smooth the impact of market volatility and may generate higher returns relative to their levels of risk over time. Many alternative investments tend to have lower correlations to traditional investments. As a result, they can potentially reduce overall portfolio volatility and help mitigate extreme swings in investor sentiment that too often lead to poor investment decisions.

Growth An investment strategy that seeks to grow an investor's principal through capital appreciation, or an increase in the value of a portfolio or asset over the long term.

Alternative investments have the potential to improve the risk and return profile of a portfolio. Investing in alternatives can provide access to a broader set of investments and strategies beyond traditional investments, which may help grow an investor’s total return.