How do you take an existing portfolio and fine-tune it to align with a specific Risk Number? How do you analyze a number of holdings to find the best mixture for the level of risk you want to take?
How does it work? The advisor selects an account to optimize, sets minimum and maximum constraints across investments, then directs the Optimizer to build a portfolio around the desired Risk Number. With these ingredients, Riskalyze quickly calculates millions of probable portfolio solutions and presents the most efficient portfolio. The most efficient portfolio is the portfolio that provides the highest probable upside for the risk associated with that Risk Number.
Using the Optimizer
1. Open the Optimizer by clicking Optimize under Account Actions:
PRO TIP: If the account is integrated from a custodian/outside data source you will want to create a copy to avoid disrupting this connection.
2. Select a Risk Number to optimize to. You can choose any Risk Number from 1 to 99:
- 3. (Optional) Set any constraints you wish to apply. If you want to optimize only some holdings, lock the ones you don't want to be optimized. You can also set minimums and maximums for the entire account, or for each individual holding; this will limit the amount the Optimizer allocates to the securities.
- 4. Click Optimize. Review the results and click SAVE if you wish to keep the results.
PRO TIP: Want the inside scoop on how advisors are leveraging the Optimizer? Check out our Riskalyze Academy Lesson on Become a Pro: The Optimizer for Riskalyze's Top Seven Optimizer Hacks - and more!
Frequently Asked Questions
Why doesn't it always optimize to my specific Risk Number?
Depending on the contents of the portfolio, and any parameters set, the target Risk Number may not be possible. In those cases, Riskalyze will return the most efficient (risk vs. return) portfolio possible. When the Optimizer does not achieve the exact Risk Number you selected, a message will be shown such as this:
How can I tell why some securities are being rated higher than others?
Advisors are encouraged to review the underlying data and override data as they deem prudent. Click on the investment to access the drop-down for review and override.
I want to see more diversification. How can I use the Optimizer to build a broader base?
How does the Optimizer work with Bonds, Custom Investments, etc?
The same as other investments — the Optimizer will use the provided risk/return data to decide what allocation of that investment will get the portfolio to the desired Risk Number for the most amount of return.
For Custom Investments, keep in mind that the investment's Risk /Return data is static, whereas the Risk/Return data for investments in the Riskalyze database is dynamic - updated with new data each night.