The Riskalyze Report: Advisors Spread the Wealth

My friends at Riskalyze share the stocks and funds that advisors all over the country have used in their clients’ accounts each week*. This data has been aggregated from across the client accounts of the thousands of advisors who use the software. Most of it comes directly through the third-party custodians where advisors’ assets are held. I hope we can uncover interesting trends for you each week…


January 11th – 17th 2015
DFA funds
Parnassus Core Equity Investor (PRBLX)
CASH/money market
General Electric (GE)
Franklin Income (FKINX)
American Funds (AGTHX, ABALX, AIVSX)

Two things worth pointing out about last week’s allocation changes across the thousands of client accounts that are tracked by Riskalyze – the first is that the “losers” were not statistically significant, as dollar figures leaving these positions were small and not very noteworthy. Advisors will almost always be in buying mode and not selling mode at the start of any new year, as a general rule.

The other thing is that DFA funds – diversified across all stocks and bond asset classes – have been 8 of the top 10 “winners” in recent weeks. I think this speaks to the difficulty of outsmarting the market with sector selection.

Last year, the S&P 500 gained 14% and the top three sectors were all defensive ones. Strength in Utilities especially was incredibly surprising, given the recovery in the economic data, specifically into year-end. The DFA approach to portfolio composition emphasizes smaller companies with cheaper valuation and does not get into the top-down weeds of trying to figure out which parts of the economy will perform better. There seems to have been a sea change among advisors – they’re realizing that attempting to make sector selections intuitively is not in the best interests of their clients anymore, given how difficult this game has become.

In addition, the active managers of mutual funds have just suffered one of their worst years relative to their benchmarks in decades. Advisors have seemingly thrown in the towel on the idea of a hand-picked portfolio of names that a manager knows really well. It simply isn’t accomplishing anything these days.

As such, asset allocators in the industry have opted for large-scale diversification among stocks and DFA is one of the most efficient ways to arrive there.

A word about Riskalyze:

In my practice, we use Riskalyze software tools to help assess clients’ true risk tolerance and to test portfolio configurations that match up accordingly. It’s changed our practice for the better, as I explain here.

Check it out today!

*(to state the obvious, Riskalyze does not share client sensitive data with me or use animals in testing).

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