Whether you're building out a set of Model Portfolios for the first time or looking to improve your existing models, Nitrogen's Optimizer makes it simple to create efficient, mathematically refined portfolios specific to your desired Risk Numbers and/or Risk Targets.
Here are just a few reasons why the Optimizer is the go-to model construction tool for so many advisors:
- Constructing New Models: Effortlessly create models spanning the Risk Number spectrum based on a single template.
- Re-Engineering Models: Analyze your existing models and find ways to improve their efficiency and balance risk with potential returns.
- Testing "What if?" Scenarios: Combine the Optimizer with market assumption stress tests to design selective models that can withstand various market conditions and environments.
- Maintaining Risk Number Alignment: Maintain your models' alignment with their target Risk Numbers by re-optimizing periodically.
Use the Optimizer to Build Models
Consider building a range of models that use the same basic securities, but with various position weightings, to align with investors across the Risk Number range. The following steps will walk you through creating a Base Model consisting of securities you've previously vetted or would like to vet, and/or your approved investment choices. Then use the Optimizer to quickly create similar models with different Risk Numbers. Remember, the more investments you add to the Base Model, the broader the "universe" will be from which the Optimizer can choose.
- Start by creating your Base Model. This will serve as the template for all the other models.
Tip: Give every position equal weighting- don't worry about targeting a specific Risk Number yet.
- Now, copy your Base Model
- Give the copy a descriptive, client-friendly name such as "Capital Preservation"
- Open the Optimizer and select a Risk Number to optimize to, along with any constraints you wish to use.
- Click Optimize, review the results and SAVE them, or UNDO if you'd like to make changes and optimize again.
Repeat the steps above to build out additional Model Portfolios. Most advisors will create 5 - 6 models spread across the risk spectrum from 20 to 80, depending on the mix of clients they serve. Lastly, be creative! Nitrogen is flexible enough to be used in numerous ways; many advisors have developed their own best practices by taking a creative approach to the Optimizer.