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Unlocking Success with a Total Portfolio Approach: What You Can Learn from Ca...

Inside CalPERS’ total portfolio approach — how CIO Stephen Gilmore defines success

A Total Portfolio Approach to Success: Lessons from CalPERS

As investors, we're always on the lookout for strategies that can help us achieve our financial goals. Recently, the California Public Employees' Retirement System (CalPERS), one of the largest public pension funds in the US, has been making waves with its total portfolio approach. In this article, we'll dive into what this means and how you can apply these principles to your own personal finance journey.

What is a Total Portfolio Approach?

A total portfolio approach is a strategy that considers the entire investment portfolio as a single entity, rather than evaluating individual assets in isolation. This approach recognizes that each asset has its own unique characteristics, risks, and potential returns, and that these factors interact with one another to produce overall portfolio performance.

Key Principles of CalPERS' Approach

CalPERS' Chief Investment Officer (CIO), Stephen Gilmore, defines success as a total portfolio approach that prioritizes:

  • Risk management: identifying and mitigating risks across the entire portfolio

  • Diversification: spreading investments across various asset classes to minimize risk

  • Long-term focus: taking a long-term view when making investment decisions

To achieve these goals, CalPERS has implemented a range of strategies, including:

  • Asset allocation: regularly reviewing and adjusting the mix of assets in the portfolio to ensure it remains aligned with the fund's objectives

  • Active management: actively managing individual investments to optimize returns and minimize risk

  • Risk reduction techniques: using techniques such as hedging and diversification to reduce overall portfolio risk

How Can You Apply These Principles to Your Own Finances?

While CalPERS' approach is tailored to a large institutional investor, the principles behind it can be applied to individual investors seeking to achieve their personal finance goals. Here are some ways you can incorporate these strategies into your own investment approach:

  • Create a comprehensive financial plan: take a holistic view of your finances and identify areas where you need to make adjustments

  • Diversify your investments: spread your assets across various asset classes, such as stocks, bonds, and cash, to minimize risk

  • Monitor and adjust your portfolio regularly: regularly review your investment mix and rebalance as needed to ensure it remains aligned with your goals

Get Ahead of Your Finances with TogetherBudget

Want to make smart financial decisions and achieve your long-term goals? TogetherBudget is a powerful tool that helps you track expenses, create a budget, and plan for the future. With its intuitive interface and comprehensive features, TogetherBudget makes it easy to manage your finances and stay on top of your investments.

By applying the principles outlined above, you can take control of your finances and achieve success in your own personal portfolio. Remember to stay focused on the long-term, diversify your investments, and regularly review and adjust your portfolio as needed. With the right approach and tools, such as TogetherBudget, you'll be well on your way to achieving financial freedom.

By Malik Abualzait

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