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Key takeaways

  • A portfolio solution allows you to invest in a carefully chosen, well-diversified mix of mutual funds and/or exchange traded funds (ETFs).
  • The portfolio is managed for you by a team of investment professionals.
  • The portfolio team rebalances the portfolio to keep it on track as economic and market conditions change.

Some people are do-it-yourself investors by nature. They like to research and manage their investments themselves. Other investors may use advisors to help them build a portfolio, but remain involved in the day-to-day management to keep their investments on track. Either way, there are many decisions to make along the way. For example:

  • When to invest?
  • Which investments to buy or sell? In which countries and which sectors?
  • When to make changes or rebalance?
  • How do you stay on track as markets, interest rates, inflation and other economic factors change?

For millions of Canadians, the easiest investment experience is when you can hand all those decisions – and many more – over to a team of investment professionals. This can be done by investing in a portfolio solution.  

A portfolio solution is an investment made up of carefully selected and managed mutual funds and/or exchange-traded funds (ETFs). It can also be called a fund-of-funds.

Sample portfolio solution asset mix

Four things to check before you choose a portfolio solution:

  1. Is it a good fit with your financial goals, investing preferences and risk capacity?
  2. Is it managed by investment professionals?
  3. Is the portfolio well-diversified across asset classes and regions?
  4. Does the investment team rebalance the portfolio to keep it on track as economic and market conditions change?
They are matched to your investment goals, needs and preferences: you choose a portfolio that aligns with your target risk profile or a target date when you will need to start withdrawing funds, such as retirement.
They take the complexity out of investing: with one investment decision you get a professionally managed, diversified portfolio. You don’t need to research, choose or monitor individual investments for your portfolio.
They don’t require a large investment to get started: in general, you can put a smaller amount of money to work across many more parts of the market than is possible on your own. Other investments may be out of reach for the average investor because you have to invest a large minimum amount.

Many are actively managed: investment professionals make decisions on a daily basis that keep the portfolio well positioned as market conditions change.

Portfolio drift happens as markets rise and fall over time. If one asset class in the portfolio does very well, it will grow in value and represent a greater share of the portfolio’s total investments over time.

Why does this matter? It has to do with setting the level of risk you want as an investor.

Why is it important to correct portfolio drift?

Think of it like a dial that needs to be adjusted from time to time. For example, if equities rise in value, you’ll be exposed to more risk in the portfolio. If fixed income rises in value, you could end up with a more conservative portfolio, with less potential growth – the flip side of too much risk.

equities fixed portfolio exposure potential

Either way, it’s important to ask: is this the investment experience you want? Have you got the right balance of risk and reward? If not, rebalancing a portfolio can turn the dial back to the right place for you. For example, you may need to sell some of your equities. Or add more fixed income.

With a portfolio solution, the investment team will do all this for you. And more.

actively managed portfolio process 6 steps en

Tip: When it comes to risk, it’s not just your ability to tolerate risk emotionally, it’s also your capacity to handle potential losses. Read more about finding the right balance between volatility and returns and take our risk capacity quiz now.

Target risk

These portfolios are designed around different levels of risk. For example, if you are willing to give up some potential return for a smoother ride when you invest, you’d likely be invested in a portfolio with lower risk. If you are comfortable with more volatility in return for pursuing higher potential returns, you’d likely be invested in a more growth-oriented portfolio. Whatever type of investor you are, your target risk portfolio will be designed and managed to keep the portfolio’s level of risk within the limits you prefer.

Target date

These portfolios are organized around a target date to reach a goal. For example, if you’re saving for retirement, you choose the approximate year you will retire. If you’re saving for a child’s education, you choose the year they are likely to graduate from high school.

Your investment mix will be automatically adjusted as you come closer to your target date. In general, this means early on your portfolio will focus on growth. You will also have more exposure to risk, but if markets drop there is more time to recover. As you approach the date you will need your money, your portfolio will make a gradual shift to lower risk investments to help preserve your investment and avoid losses.

Tip: You can adjust the target risk or target date of your portfolio at any time if life – and your financial goals – change. Learn more now about how investing in target-risk and target-date portfolios works.

Ready to learn more about portfolio solutions? Explore RBC Portfolio Solutions with your advisor.

Disclosure

Last reviewed: January 1, 2023

Please consult your advisor and read the prospectus or Fund Facts document before investing. There may be commissions, trailing commissions, management fees and expenses associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. RBC Funds, BlueBay Funds and PH&N Funds are offered by RBC Global Asset Management Inc. and distributed through authorized dealers in Canada.



This has been provided by RBC Global Asset Management Inc. (RBC GAM) and is for informational purposes, as of the date noted only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. RBC GAM takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when provided.



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© RBC Global Asset Management Inc., 2021