We begin our investment process by identifying global asset classes with which to build our portfolio. We consider each asset class' potential return and sensitivity to different economic scenarios such as interest rate movements, stagnating growth, dollar strength, and inflation. Finally, we calculate the risk of each asset class. In addition to the standard measure of risk and volatility, we also look at "worst case scenarios" such as maximum drawdowns. Most importantly, we calculate the correlation of each asset class to one another. If two asset classes are highly correlated and perform in a directionally similar manner, it can be best to hold only one asset class as the potential return is already captured.
When you first open an account with Axos Invest, we'll ask you a few questions to properly construct your investor profile. When you create your first milestone, we'll use this information along with your financial targets and time horizon to build your recommended portfolio allocation. This recommended portfolio optimally weights each ETF to provide your desired amount of risk and potential return along the efficient frontier. You can adjust your stock/bond allocation for each milestone at any time, and your recommended auto-deposit will automatically update according to the new risk-return preference.