The Money Pouch Investment Methodology
Our Approach to Modern Portfolio Theory
The Money Pouch offers sophisticated automated investment management & advice without the hassle, high fees, or high account minimums that hedge funds charge.
The first step in our methodology is to identify a broad set of diversified asset classes to serve as the building blocks for our portfolios. We determine the optimal mix of our chosen asset classes by solving the “Efficient Frontier” using Mean-Variance Optimization (MVO) which is the foundation of Modern Portfolio Theory. The Efficient Frontier solves the mix of assets that generate the maximum return with minimum risk for any given portfolio.
Selecting the Right Portfolio
The Money Pouch then invests your monies using cost effective, index-based Exchange Traded Funds (ETFs) for each asset class such as stocks or bonds. We periodically review the entire universe of ETFs to identify the most appropriate for each of the recommended asset classes. We then look for ETFs with the lowest costs, tracking errors, best risk/reward ratio and best market liquidity.
Identifying Your Risk Appetite
Once the Efficient Frontier has been established, it is necessary to pinpoint an investor’s risk tolerance in order to identify the ideal asset allocation for his or her needs. Rather than asking the typical 25 questions asked by most financial advisors to identify an individual’s risk tolerance, The Money Pouch has employed specialists in behavioural economics research to simplify the risk identification process, so only a few questions need to be asked to set up the appropriate portfolio for a client.
Rebalancing and Monitoring
Finally, we constantly monitor our clients’ portfolios and rebalance the stock/bond ETF mix frequently in order to optimise returns for clients' identified level of risk. We use targeted sniper algorithms for best execution trading. Click here to learn more about rebalancing.
Rigorous Investment Research
As part of our commitment to transparency, we’ve provided the following white papers that explain our investment methodology in more detail.
Please click here to find out more about our conservative, balanced and adventurous ETF strategies.