Perspectives Blog

Engineering a better retirement portfolio

Columbia Management, Investment Team | June 4, 2013

Experiencing a significant portfolio loss in the early retirement years (timing risk) is one of the greatest risks to the longevity of a retirement nest egg (shortfall risk). This risk is typically a function of being concentrated in the wrong asset class — any asset class — at the wrong time. By looking at a portfolio through a risk lens, investors can gain valuable insight into building a portfolio that minimizes concentration risk and can in…

Duration for diversification

Columbia Management, Investment Team | November 19, 2013

Many investors struggle to determine the appropriate amount of bond duration in an environment of rising interest rates. The right amount of duration has to be considered in a portfolio context, because the main value of duration exposure comes through diversification. Because of the negative correlation between duration and the returns of riskier assets, high-quality fixed income will still be a cornerstone of any disciplined portfolio. By Za…

Holding multiple investments does not ensure better diversification

Columbia Management, Investment Team | April 23, 2014

The degree of risk reduction benefit in diversification depends directly upon the correlation of the portfolio’s assets. Adding just one zero-correlated asset to a portfolio reduces risk 29.5%, while adding a thousand 66%-correlated assets reduces risk by only 19%. Well-designed absolute return products can be meaningful additions to traditional allocations, substantially enhancing diversification. By Todd White, Head of Alternative Investment…

Three tools for a resilient portfolio

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | January 15, 2014

Portfolio resilience refers to the ability of a portfolio to withstand unanticipated adversity and to respond from that adversity. Effective diversification requires thinking not only about allocating the assets in a portfolio but about allocating the risks. A flexible strategy enables a portfolio to adapt to changes in the relative attractiveness of different risks. Watch: Jeff Knight describes three strategies his team employs in seeking to…

Building a resilient portfolio

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | July 16, 2013

Diversification is the single most important tool an investor has to improve their portfolio’s resilience to negative events. Now is an opportune time for investors to look at ways to protect year-to-date gains and prepare for monetary policy changes. Video: Two investment opportunities that may help stabilize portfolios today. Diversification is the single most important tool an investor has to improve their portfolio’s resilience to negative…

Time for a change

Columbia Management, Investment Team | July 23, 2013

The end of a long bull market for bonds means investors need to redefine how they generate income. In an environment of heightened risk, professional expertise can help investors avoid emotion-driven mistakes. Investors should consider including non-traditional investments in a broadly diversified portfolio. The end of the bull market for bonds means the way that many people have been investing — with a heavy concentration in traditional bond…

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

…nd local income taxes. Municipal bonds are one of the few investments that remain exempt from many of these taxes, including the NIIT. Active is the answer After determining that muni bonds should play a part in a diversified portfolio, the next question is: Which investment approach should one take — active or passive? With so many investment options to choose from, some believe that picking a passive municipal investment strategy is a no-braine…