7Twelve ® Partners Program
In October 2019, Kastler Financial Planning became a member of the 7Twelve ® Partners Program. This program allows us to implement and manage all of the various 7Twelve ® models in our clients’ portfolio. Our job as your Financial Planner and Investment Advisor is to align your aspirations and risk tolerance to design a portfolio that makes sense for you, with proper asset allocation and asset correlation.
With your goals and aspirations, our portfolio design expertise, and the 7Twelve ® multi-asset philosophy, we can come up with a personalized investment strategy that makes sense for you.
Our Role as your Fiduciary Financial Planner and Investment Advisor
As a fiduciary, our role is to design an investment strategy that is in your best interest. Although a variety of clients can benefit from a multi-asset portfolio, it may not be the best fit for you. Perhaps a more traditional 2-asset or 3-asset portfolio will better serve your needs. If that is the case, we have plenty of portfolio design options for you to consider!
As a 7Twelve® Partners Program member, Kastler Financial Planning does not receive any referral fees or commissions.
We believe that investing is for the long-term, even if you are at or near retirement! Therefore, once your monthly income strategy is solidified, we build a portfolio design to invest the remainder for your long-term goals, such as Long-Term Care. We use several portfolio design criteria, including:
- Adheres to Modern Portfolio Theory (MPT)
- Horizontal and Vertical Diversification
- Multi-Asset Allocation
- Low Correlation amongst the asset classes in the portfolio
- Low Expense Ratios
- Readily available mutual funds and ETFs
One such portfolio philosophy that addresses these criteria is the 7Twelve ® portfolio philosophy developed by Dr. Craig Israelsen in 2008. Dr. Israelsen is a researcher, author, speaker, and investment portfolio consultant. 7Twelve ® portfolios have been deployed by well over 1,000 Financial Advisors for their clients.
The fundamental premise behind the 7Twelve ® portfolio design is that a multi-asset portfolio, with low-correlated diversification, will perform better and with lower risk than a traditional 2-asset or 3-asset portfolio. 7 asset classes and 12 underlying funds make up the 7Twelve® portfolio design philosophy. As always, past performance is not indicative of future performance.
Modern Portfolio Theory and 7Twelve ®
When you compare the 7Twelve ® multi-asset portfolio design to MPT, you get the blue curve in the graphic at right. You can see that the 7Twelve ® portfolio is yielding about the same return as a portfolio made up of 100% large-cap stocks, but with less risk taken on by the investor over the 20-year annualized return.
Please note that previous results may not be indicative of future results and that a 20-year annualized return analysis is used to show the significance of investing over a long period of time.
Everyone by now has heard of how important it is to diversify your investment portfolio. But some people think that by investing in an S&P 500 fund, they are diversified. That’s truly unfortunate! That strategy would only provide diversification amongst the 500 large-cap stocks. That’s called vertical diversification. You would be highly diversified amongst U.S. large-cap stocks.
Horizontal diversification means to be diversified amongst many asset classes. For example small-cap stocks, international equities, U.S. bonds, corporate bonds, international bonds, real estate, and more.
No one asset class is the best performer year after year. It’s impossible to predict. The combination of horizontal and vertical diversification in a portfolio helps smooth out returns over the long-term.
Correlation and Diversification
The 7Twelve ® portfolio design utilizes Correlation as a means to achieve diversification. Correlation is a statistic that measures the degree to which two securities move in relation to each other. If they move in the same direction, the Correlation is 1. If they move in opposite directions, the Correlation is -1. By designing a multi-asset and low-correlation portfolio, one can achieve more consistent returns with lower risk.
How Can 7Twelve ® Help with Retirement Planning?
Retirement planning is creating peace of mind that retirees will be able to meet their monthly expenses with somewhat guaranteed income streams such as a pension, Social Security, annuity, etc. Once the monthly income is established to meet these expenses, the remainder of the asset pool can be used to fund the longer-term goals, such as Long-Term Care.
If you have a long retirement time horizon and monthly expenses covered, then investing in the long-term may be for you. It would be prudent, however, to make sure the remaining asset pool is invested properly to minimize the downturns that are common in the various markets.
An advantage of investing in a portfolio with the multi-assets approach during those retirement years is there is less chance for portfolio dollar value loss as compared to just investing in only one or two asset classes. If you are invested in just a couple of asset classes and those asset classes depress severely, it may seriously jeopardize meeting your long-term goal.
If you are interested in learning more about Modern Portfolio Theory, 7Twelve ®, Diversification, or Correlation, use the Calendly scheduler on the Contact Us page. Our first consultation is no charge.
Please note that performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown.