The 60/40 equity/fixed income split remains a classic, but legacy doesn’t always mean benefit for investors. Advisors looking for enhancements to the 60/40 mix can evaluate some model portfolios modern approaches to this investment concept.
Enter the WisdomTree Global Multi-Asset Income Model Portfolio, which spans seven risk tolerance levels, ranging from very conservative to very aggressive.
A model portfolio “designed to help maximize income, offer capital appreciation potential and reduce volatility, this strategy typically provides exposure to a diversified allocation of dividend-focused stocks and yield-focused bonds using ETFs with global exposure. The strategy may include both WisdomTree and non-WisdomTree ETFs. These model portfolios were previously known as Income Model Portfolios,” according to WisdomTree.
Why this Model Portfolio Matters
Low yields and coronavirus are certainly making a formidable roadblock when it comes to fixed income investors, but there are still some income-generating opportunities as well as multi-asset strategies that investors can utilize.
Multi-asset tactics can be useful avenues for investors looking to reduce correlation and boost income streams – two relevant strategies in today’s raucous market climate.
Adding to the allure of the WisdomTree model portfolio is its depth. This strategy addresses an array of asset classes, including common stocks, international equities, covered calls, preferred stocks and master limited partnerships (MLPs).
A covered call refers to an options strategy where an investor writes or sells a call option on an asset which they already own or bought on a share-for-share basis to generate income via premiums derived from the sale of the call options.
Covered calls can potentially augment a portfolio during periods of heightened volatility. The covered-call options allow an investor to hold a long position in an asset while simultaneously writing, or selling, call options on the same asset.
Preferred stocks are a type of hybrid security that shows bond- and equity-like characteristics. The shares are issued by financial institutions, utilities, and telecom companies, among others. Within the securities hierarchy, preferreds are senior to common stocks but junior to corporate bonds. Additionally, preferred stocks issue dividends on a regular basis, but investors don’t usually enjoy capital appreciation on par with common shares.
The model portfolio’s fixed income sleeve features exposure to varying credits and durations as well as international bonds and municipal debt, among others.
For more on how to implement model portfolios, visit our Model Portfolio Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.