Target Risk Portfolios

What is the objective of these portfolio?
These portfolios have the objective of achieving a specific target return or managing risk at a predetermined level. By adjusting asset allocations dynamically, they aim to either reach a set return goal or maintain risk within a defined range, depending on market conditions.

What qualifies as a Target Risk Portfolio?
These portfolios qualify as "Target Risk Portfolios" because they focus on optimizing portfolio allocation to meet a specific risk or return target. The "Target Return" portfolios seek a predetermined return, while "Target Risk" portfolios aim to limit volatility, making them distinct in their risk management focus.

Why is this family of portfolios rebalanced and tracked each month?
TheTarget Risk Portfolio family was created and tracked to offer investors a way to align their investments with specific risk or return objectives. By targeting defined levels of risk or return, these portfolios help investors achieve consistent performance aligned with their financial goals, while allowing for flexible adjustments based on evolving market conditions.

What portfolio recipes are included in the Target Risk Portfolios family?
RecipeInvesting tracks the following Portfolio Recipes in the category of Target Risk Portfolios :

• Target Risk 10% Portfolio (t.tris): chooses an allocation based on a targeted level of risk, as measured by standard deviation, by plotting an "efficient frontier" of optimal portfolios (return vs. standard deviation) using the historical returns from the set of 8 ETFs, then choosing a portfolio allocation on the frontier that mostly closely matches the target risk of 10% standard deviation.
• Target Return Post-Modern Portfolio (t.trdd): similar to t.tret except instead of using standard deviation as the risk measure, this algorithm uses downside deviation. The algorithm targets a total return of 12% while working to minimize risk as measured by downside deviation.
• MFS Target Return A Portfolio (DVRAX): gives investors access to a tactical, hedged portfolio that invests in a variety of securities using an absolute return approach.

What do Target Risk Portfolios have in common?
All of the Portfolio Recipes in the Target Risk Portfolios Family share the following characteristics:

• These portfolio falls in the same portfolio category which is Tactical

How do Target Risk Portfolios differ?
Despite their similarities, Portfolio Recipes in the Target Risk Portfolios Family can differ based on these attributes:

• Rebalance frequency (DVRAX has fund manager that handles the monthly rebalancing)
• Portfolio approach (Dynamic and Managed)
• Type of funds used

Comparison of Target Risk Portfolios