Seven Portfolio Construction Myths, Demystified

With rapidly changing markets and a growing universe of investment options, building investment portfolios has never been harder. Fidelity is focused on helping advisors build better portfolios by revealing common practices that may hinder productivity and portfolio performance.

New! Thinking Outside the Portfolio podcast series

Your clients are expecting more from you than ever before. Fidelity is here to help by providing insights and resources to help you position your clients' portfolios for the future. This podcast will explore common portfolio construction misconceptions as well as provide timely market insights to help you navigate the markets.

Thinking Outside the Portfolio
Thinking Outside the Portfolio

Thinking Outside the Portfolio

Season 1, Episode 1: What should advisors consider when creating portfolios in an ever-changing world?

Listen on Apple Podcasts

Myth: There's One Optimal Portfolio for All Investors

Reality: Time Horizon Matters

What works for one investor may not be the right time horizon or asset mix for another. Asset performance is driven by a confluence of various short-, intermediate-, and long-term factors.

Thinking Outside the Portfolio

Thinking Outside the Portfolio

Season 1, Episode 2: Can there really be one optimal portfolio for all investors?

Listen on Apple Podcasts

Myth: All Bonds and Debts Are Created Equal

Reality: It's Time to Get Back to Bond and Debt Fundamentals

Investors often use general terms like “fixed income” or “bonds” to describe an asset class that encompasses hundreds of subsectors with differing correlations, exposures, and associated risks.

Thinking Outside the Portfolio

Thinking Outside the Portfolio

Season 1, Episode 3: Do all bonds offer the same risk and exposure?

Listen on Apple Podcasts

Myth: Inflation Is No Longer Relevant

Reality: Don't Be Complacent about Possible High Inflation or Deflation

It's important to remember that nothing is set in stone—especially inflation expectations.

Thinking Outside the Portfolio

Thinking Outside the Portfolio

Season 1, Episode 4: What inflationary trends should investors be aware of?

Listen on Apple Podcasts

Myth: Style and Market Cap Are the Only Ways to Gain an Edge

Reality: There's More to the Outperformance Story, Including Sector, Active/Passive, and Smart Beta

Many investors use size and style as a framework to build equity portfolios thus ignoring key performance drivers, such as sectors and smart beta.

Thinking Outside the Portfolio

Thinking Outside the Portfolio

Season 1, Episode 5: What portfolio characteristics could help drive better returns?

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Myth: Consensus Is Comforting

Reality: Beware of Consensus

Following the crowd allows us to take a mental shortcut to making our own decisions. That may be why many investors emulate what others do, especially in times of market uncertainty.

Thinking Outside the Portfolio

Thinking Outside the Portfolio

Season 1, Episode 6: What effect might following the crowd have on your portfolio?

Listen on Apple Podcasts

Myth: A One-Size-Fits-All Portfolio Is Good Enough

Reality: Achieving Client Goals with Personalization and Customization Matters

Given the sheer number of investing options available today, the concept of an ideal portfolio is an attractive one. However, varying levels of investor needs means a one-size-fits-all portfolio may miss out on opportunities to meet specific investor needs.

Thinking Outside the Portfolio

Thinking Outside the Portfolio

Season 1, Episode 7: What investment options help meet changing investor preferences?

Listen on Apple Podcasts

Myth: It's All about Managing the Money

Reality: Investors Now Expect More Comprehensive Services, Holistic Planning Content: Clients' expectations of what they gain from hiring a financial advisor have changed over time

The majority of investors look to advisors to provide comprehensive services that go beyond managing money.

Thinking Outside the Portfolio

Thinking Outside the Portfolio

Season 1, Episode 8: What type of investment products help support an advisor in a changing landscape?

Listen on Apple Podcasts

Get the eBook

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Take a deeper dive into each of the seven myths, uncovering the research-based reality along with an actual real-world advisor scenario for each.

 
 

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