Computer Optimized Asset Allocation Formulas

Many investors fail to choose an appropriate blend between asset classes for their age, tolerance for risk, reaction to loss and need for investment income. Very few realize there are ways to optimize this process to ensure the highest statistical probability of success.

This process is most commonly referred to as Asset Allocation. Where many investors go wrong in their quest for Asset Allocation is in assuming because they have many investments they are appropriately diversified. The consequence can often be that a high percentage of one’s portfolio reacts nearly the exact same in all market conditions. Investors usually recognize this when their entire investment portfolio is losing money at the same time.

Using engineering and casino gaming principals, RWA has created an optimization process designed to ensure clients have the most appropriate Asset Allocation for their unique circumstances. The engineering principals are to create the highest return with an ideal amount of risk. The casino gaming principals then “test” the optimized portfolio over 80,000 different scenarios (random combinations of history for each asset class). After optimization and testing we then know the statistical probability of success before implementing an investment strategy. Without this step, our first two (2) formulas are nearly useless. However, when appropriately applied the portfolio is complete. In the opinion of RWA, not utilizing this step is the equivalent of financial suicide.