Risk assessment begins with a conversation with an adviser about a client's beliefs, past investment experience, stage in life and other things that could influence a person's or family's risk preference.
During these discussions, Golden Trail Advisers highlights the trade-offs between risk and return. Before the risk assessment is finished, clients complete a four-page Risk Tolerance Questionnaire with input from the adviser. Click here to view the Risk Tolerance Questionnaire [[LINK]]
During this phase of the process, Golden Trail Advisers gets a good handle on how well each client can deal with the ups and downs of different combinations of investments.
Portfolio construction entails several key steps. Up-front analysis includes top-down asset allocation and bottom-up security selection. During the holding period, performance is monitored and decisions are made to keep certain investments and to trim back or eliminate others. In parallel, continuous research into possible new investments is conducted.
And, importantly, clients are kept informed by receiving reports from both the custodians and Golden Trail Advisers. These reports from Golden Trail Advisers play a big part in the regular meetings and communication with clients.
Top-Down Asset allocation has been formalized into a model that is based on the insights and refinements that began in 1998 when Mike Sedlak, chief investment officer of Golden Trail Advisers, performed asset allocation and investment research at Responsive Financial Services. The methodologies have been updated and enhanced over time resulting in a unique approach to asset allocation. The use of "alternative" investments expands the opportunity set and improves the risk-return characteristics compared to portfolios that consist mainly of stocks and bonds. Below is a conceptual view of the asset allocation model in use at Golden Trail Advisers today.
Bottom-Up Security Selection is the process of identifying and researching the possible alternatives for filling each role that asset allocation identifies as a "need" in the portfolio. For example, if Golden Trail Advisers is looking for a manager for small company value stocks, extensive research is completed in that area of the market until a "winner" is selected for use in portfolios.
The list of criteria has been developed over years of use and includes both qualitative measures and quantitative measures. A big factor is consistency in both historic results and methodology. A more subtle factor is the investment climate. If certain investments would appear to have the wind at their backs due to established trends, these items would have a higher likelihood of being included in the portfolios. Below is a sample of a research report for one of the holdings in Golden Trail Advisers' portfolios.