U.S. patent application number 13/872324 was filed with the patent office on 2014-01-16 for asset allocation based system for individual investor portfolio selection.
This patent application is currently assigned to Morgan Enterprises of Westlake, Inc.. The applicant listed for this patent is Morgan Enterprises of Westlake, Inc.. Invention is credited to Darrin B. Farrow.
Application Number | 20140019380 13/872324 |
Document ID | / |
Family ID | 35542523 |
Filed Date | 2014-01-16 |
United States Patent
Application |
20140019380 |
Kind Code |
A1 |
Farrow; Darrin B. |
January 16, 2014 |
ASSET ALLOCATION BASED SYSTEM FOR INDIVIDUAL INVESTOR PORTFOLIO
SELECTION
Abstract
A system for allocation asset based portfolio investment and
management provides model portfolios which are selected by
correlation to investor's responses to a questionnaire concerning
time frames and risk tolerance. Recommended model portfolios are
presented to investors by asset allocation class percentages only,
without identification of any specific securities of fund holdings
of the portfolio and without enabling the participating investor to
choose or delete specific assets for inclusion in the recommended
portfolio. The system enables the investor only to alter the asset
allocation. The model portfolios are professionally overseen and
managed for compliance with projected returns and conformance to
the assigned asset class. The system can be executed on paper or in
the form of computer software run locally or on a network.
Inventors: |
Farrow; Darrin B.;
(Westlake, OH) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
Morgan Enterprises of Westlake, Inc.; |
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|
US |
|
|
Assignee: |
Morgan Enterprises of Westlake,
Inc.
Westlake
OH
|
Family ID: |
35542523 |
Appl. No.: |
13/872324 |
Filed: |
April 29, 2013 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
|
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10888965 |
Jul 12, 2004 |
8442889 |
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13872324 |
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Current U.S.
Class: |
705/36R |
Current CPC
Class: |
G06Q 40/00 20130101;
G06Q 40/06 20130101 |
Class at
Publication: |
705/36.R |
International
Class: |
G06Q 40/06 20060101
G06Q040/06 |
Claims
1. A method of using a computer system including a computer and a
database for managing investments in an account of a particular
investor, said method comprising the steps of: providing a
plurality of predetermined model investment portfolios each having
a plurality of different investment asset allocations selected in
advance by one or more experts to achieve a different degree of
risk; providing an investor questionnaire to the particular
investor, said questionnaire including questions adapted for use to
determine a degree of risk for the particular investor; inputting
investor answers to the investor questionnaire provided by the
particular investor to the computer system; the computer system
automatically determining the degree of risk for the particular
investor from said investor answers; the computer system selecting
at least one of said predetermined model portfolios by comparing
the degree of risk for the particular investor to the degree of
risk of each model investment portfolio; and the computer system
presenting the selected at least one of said predetermined model
portfolios for acceptance or rejection by the particular investor,
wherein should the particular investor accept the selected at least
one of said predetermined model portfolios, performing the step of
purchasing shares in said selected at least one of said
predetermined portfolios for holding in the account of the
particular investor.
2. The method of claim 1, wherein said questions include a
plurality of questions pertaining to a) a number of years which the
investor will contribute funds to be invested in a portfolio, b) a
number of years which the investor will want to withdraw funds from
the portfolio, and c) the investor's tolerance for fluctuation in
the value of the portfolio.
3. The method of claim 1, wherein said plurality of predetermined
model investment portfolios each has a different investment
performance based on the different investment asset allocations
selected by the one or more experts.
4. The method of claim 3, wherein said questionnaire includes
questions adapted for use to determine an expected investment
performance or variance or average performance for the particular
investor, and wherein said method further includes the step of the
computer system automatically determining the expected investment
performance for the particular investor from said investor answers,
wherein said selecting the at least one of said predetermined model
portfolios for investment by said investor also includes the step
of comparing the expected investment performance for the particular
investor to the investment performance of each model investment
portfolio.
5. The method of claim 1, wherein said particular investor's shares
of said at least one of the predetermined model portfolios are
automatically asset balanced to maintain consistency with the
degree of risk for the particular investor without any purchase or
sale of shares of said at least one of the predetermined model
portfolios in the account of the particular investor.
6. The method of claim 1, wherein the different investment asset
allocations of the at least one of said model portfolios is not
changed by implementing said method.
7. The method of claim 1, wherein the asset allocations of each one
of said plurality of predetermined model investment portfolios is
regularly updated by one or more experts independent of any action
by the particular investor.
8. The method of claim 1, wherein, only after the investor accepts
the selected at least one of said predetermined model portfolios,
the asset allocations of the at least one of said predetermined
model portfolios is displayed to the particular investor.
9. A method of using a computer system including a computer and a
database for managing investments in an account of a particular
investor, said method comprising the steps of: providing a
plurality of predetermined model investment, portfolios each having
a plurality of different investment asset allocations selected in
advance by one or more experts to achieve a different investment
performance; providing an investor questionnaire to the particular
investor, said questionnaire including questions adapted for use to
determine an expected investment performance for the particular
investor; inputting investor answers to the investor questionnaire
provided by the particular investor to the computer system; the
computer system automatically determining the expected investment
performance for the particular investor from said investor answers;
the computer system selecting at least one of said predetermined
model portfolios by comparing the expected investment performance
for the particular investor to the past and/or expected future
investment performance of each model investment portfolio; and the
computer system presenting the selected at least one of said
predetermined model portfolios for acceptance or rejection by the
particular investor, wherein should the particular investor accept
the selected at least one of said predetermined model portfolios,
performing the step of purchasing shares in said selected at least
one of said predetermined portfolios for holding in the account of
the particular investor.
10. The method of claim 9, wherein said questions include a
plurality of questions pertaining to a) a number of years which the
investor will contribute funds to be invested in a portfolio, b) a
number of years which the investor will want to withdraw funds from
the portfolio, and c) the investor's tolerance for fluctuation in
the value of the portfolio.
11. The method of claim 9, wherein said plurality of predetermined
model investment portfolios each has a different degree of risk
based on the different investment asset allocations selected by the
one or more experts.
12. The method of claim 11, wherein said questionnaire includes
questions adapted for use to determine a degree of risk for the
particular investor, and wherein said method further includes the
step of the computer system automatically determining the degree of
risk for the particular investor from said investor answers,
wherein said selecting the at least one of said predetermined model
portfolios for investment by said investor also includes the step
of comparing the degree of risk for the particular investor to the
degree of risk of each model investment portfolio.
13. The method of claim 9, wherein said particular investor's
shares of said at least one of the predetermined model portfolios
are automatically asset balanced to maintain consistency with the
expected investment performance for the particular investor without
any purchase or sale of shares of said at least one of the
predetermined model portfolios in the account of the particular
investor.
14. The method of claim 9, wherein the different investment asset
allocations of the at least one of said model portfolios is not
changed by implementing said method.
15. The method of claim 9, wherein the asset allocations of each
one of said plurality of predetermined model investment portfolios
is regularly updated by one or more experts independent of any
action by the particular investor.
16. The method of claim 9, wherein, only after the investor accepts
the selected at least one of said predetermined model portfolios,
the asset allocations of the at least one of said predetermined
model portfolios is displayed to the particular investor.
17. A method of using a computer system including a computer and a
database for managing investments in an account of a particular
investor, said method comprising the steps of: providing a
plurality of predetermined model investment portfolios each having
a plurality of different investment asset allocations selected in
advance by one or more experts to achieve a different degree of
risk and a different investment performance; providing an investor
questionnaire to the particular investor, said questionnaire
including questions adapted for use to determine an investor degree
of risk for the particular investor and said questionnaire also
including questions adapted for use to determine an expected
investment performance for the particular investor; inputting
investor answers to the investor questionnaire provided by the
particular investor to the computer system; the computer system
automatically determining the degree of risk for the particular
investor from said investor answers; the computer system
automatically determining the expected investment performance for
the particular investor from said investor answers; the computer
system selecting at least one of said predetermined model
portfolios by both comparing the degree of risk for the particular
investor to the degree of risk of each model investment portfolio,
and by comparing the expected investment performance for the
particular investor to the investment performance of each model
investment portfolio; and the computer system presenting the
selected at least one of said predetermined model portfolios for
acceptance or rejection by the particular investor, wherein should
the particular investor accept the selected at least one of said
predetermined model portfolios, performing the step of purchasing
shares in said selected at least one of said predetermined
portfolios for holding in the account of the particular
investor.
18. The method of claim 17, wherein the asset allocations of each
one of said plurality of predetermined model investment portfolios
is regularly updated by one or more experts to maintain their
corresponding degree of risk and their investment performance
without any purchase or sale of shares in the account of said
particular investor.
19. The method of claim 17, wherein the different investment asset
allocations of the at least one of said model portfolios is not
changed by implementing said method.
20. A method of using a computer system including a computer and a
database for managing investments in accounts of a plurality of
investors, said method comprising the steps of: providing a
plurality of predetermined model investment portfolios for purchase
by any of a plurality of investors, each one of said predetermined
model investment portfolios having a plurality of different
investment asset allocations selected in advance by one or more
experts to achieve a different degree of risk and a different
investment performance; providing an investor questionnaire to each
one of the investors, said questionnaire including questions
adapted for use to determine an investor degree of risk for each
one of the investors and said questionnaire also including
questions adapted for use to determine an expected investment
performance for each one of the investors; inputting answers to the
investor questionnaire provided by each one of the investors into
the computer system; the computer system automatically determining
the degree of risk for each one of the investors from the answers
of that investor; the computer system automatically determining the
expected investment performance for each one of the investors from
the answers of that investor; for each one of the investors, the
computer system selecting at least one of said predetermined model
portfolios by both comparing the degree of risk for that investor
to the degree of risk of each model investment portfolio, and by
comparing the expected investment performance for that investor to
the investment performance of each model investment portfolio; and
for each one of the investors, the computer system presenting the
selected at least one of said predetermined model portfolios
selected for that investor for acceptance or rejection by that
investor, wherein should that investor accept the selected at least
one of said predetermined model portfolios, performing the step of
purchasing shares in said selected at least one of said
predetermined portfolios for holding in the account of that
investor, and wherein the asset allocations of each one of said
plurality of predetermined model investment portfolios is regularly
updated by one or more experts to maintain their corresponding
degree of risk and their investment performance.
Description
CROSS-REFERENCES TO RELATED APPLICATIONS
[0001] This application is a continuation of, and claims the
benefit of, U.S. patent application Ser. No. 10/888,965 filed on
Jul. 12, 2004, and is incorporated herein by reference.
FIELD OF THE INVENTION
[0002] The present invention pertains generally to investments in
securities and, more particularly, to systems for selection of
investment portfolios.
BACKGROUND OF THE INVENTION
[0003] Modem portfolio theory studies have shown that more than 93%
of investment performance is due to asset allocation. For
individual investors who attempt to follow this principle, the task
of allocating investment or retirement fund dollars among the
thousands of marketed securities is formidable, and to be done
successfully requires extensive knowledge of securities markets and
investing experience. For these reasons, investing in securities
was in the past done almost exclusively by trained professionals
experienced in the markets and securities selection. The advent of
discount brokerage services and the Internet have provided easy
access to the purchase and sale of securities to virtually
everyone. Although Internet based on-line trading systems have made
the process of buying and selling securities very simple, they have
actually increased the probability for most of losing money,
particularly by those with little or no experience in long term
investing.
[0004] The assets of pensions and profit sharing plans of
corporations and other types of entities have also traditionally
been managed by professional investors. The creation of 401(k) type
self-directed retirement accounts compelled employees to make their
own investment decisions, albeit from a relatively small set of
plan choices. The investment allocation of retirement funds is
typically done by providing employees with a list of investment
funds from which to choose, and requiring the employee to designate
an allocation percentage of their contribution dollars to each
available fund. Some basic information about the funds, such as
investment objective and performance history is also provided. With
only this skeletal information, plan participants are expected to
correctly allocate their retirement funds for optimal return.
Furthermore, there are restrictions on the frequency with which any
reallocation of funds can be made.
[0005] To provide assistance to this task, retirement planning
guides have proliferated, many with more practical approaches which
focus on participants' projected financial needs, rather than
trying to teach investment strategies. Because money management and
investing has significant behavioral and emotional components, many
planners make an assessment of how the participant handles or
responds to these aspects of investing. This information or
assessment is then used to recommend certain investments, typically
mutual funds, to the participant. The participant is, however, left
to make the final investment decisions on their own. So even though
they have been provided with some assistance in the process, this
prevailing methodology of retirement planning does not remove the
participant--who is most likely a novice at investing--from making
the most critical and important decisions which will directly
impact their total return.
[0006] Although many different computer software-based approaches
have been taken to investment and retirement account management,
such systems tend to focus on data acquisition and information
processing of investor profiles which are then matched to an
appropriate portfolio by a professional investment manager.
Financial planning software, whether creating an investor profile
of including time periods of contributions and withdrawals and risk
tolerance, or selecting investments which match a developed
profile, all leads to the point at which specific investment
decisions must be made on an individual basis for each plan
participant.
SUMMARY OF THE INVENTION
[0007] The present invention provides a system for selection of a
predetermined investment portfolio which is properly allocated in
accordance with applicable time periods and risk tolerance of
individual investors. The investor is not required and not enabled
by the system to pick specific funds or securities in order to
achieve an appropriate allocation. The system provides a plurality
of model portfolios with differing allocations among stocks, bonds,
money market, cash or cash equivalent. The responses to the
questionnaire on time period of contributions to investment funds,
time period of withdrawal, and risk tolerance are correlated to one
of the predetermined model portfolios. A graphical representation
of the suggested asset allocation is presented to the
investor/participant, who is then required to accept or reject the
proposed allocation, without knowing the specific securities
proposed for purchase in accordance with the allocation.
Importantly, the individual investor or plan participant is never
required to pick specific investment vehicles.
[0008] In accordance with one aspect of the invention, there is
provided a system for automated assembly of a professionally
managed portfolio based upon individual investor criteria. The
system ascertains the investment goals of an individual investor by
a series of questions concerning time frames, risk tolerance,
appreciation targets and percentage of total assets to be invested.
The system then automatically selects an asset allocation model
based upon the responses to the questions. The asset allocation
model is presented to the investor by asset class percentage
allocations. The investor can then select the proposed asset
allocation model. Selection of the model then reveals the identity
of the funds among which the allocation is made. Each fund in the
model is linked to further information such as the fund history,
investment strategy, management team, list of securities held,
return history, ratings, etc. By allocating funds according to
asset class categories, and then to a corresponding professionally
managed portfolios offunds, the investor is protected from the
potentially negative results of individual fund picking and market
timing. Any re-allocation of the investment portfolio requires a
re-taking of the investment objective questionnaire which leads to
selection by the system of a different model portfolio based upon
the responses to the questionnaire.
[0009] In accordance with another aspect of the invention, there is
provided a system for proper allocation of investment capital
according to an investor's financial behavioral characteristics as
determined by responses to a set of questions, wherein a model
portfolio is selected which correlates to the investor's responses
to the questions and recommended to the investor for purchase by
presentation of percentage allocation per asset class and without
disclosing individual securities or funds.
[0010] And in accordance with another aspect of the invention,
there is provided a method of investing an individual investor's
capital in an individual investment account portfolio without
allowing the investor to select individual securities in the
portfolio, the method including the steps of: querying the investor
on time remaining for contribution of capital to an investment
account and time during which withdrawals will be made from the
investment account; selecting an asset allocation model portfolio
based upon the investor's responses to the queries; presenting the
selected model portfolio to the investor as a recommended model
portfolio by showing percentage allocations by asset class and
without disclosing individual funds or securities in the
recommended model portfolio; requiring the investor to accept or
reject the recommended model portfolio, whereby acceptance of the
recommended model portfolio allows the investor to view a list of
individual funds or securities in the portfolio, and rejecting the
recommended model portfolio prompts selection and presentation of a
different asset allocation model portfolio.
[0011] These and other important principals and concepts of the
invention are herein described and claimed in detail, with
reference to the accompanying Figures.
DESCRIPTION OF THE FIGURES
[0012] FIG. 1 is a block diagram of an organizational and
operational structure of the investment system of the present
invention;
[0013] FIG. 2 is a graphical and textual listing of an asset
allocation model portfolio constructed in accordance with the
present invention;
[0014] FIG. 3 is a graphical representation of an asset allocation
model constructed m accordance with the present invention;
[0015] FIG. 4 is listing of assets in a model portfolio, and
[0016] FIG. 5 is a graphical representation of another asset
allocation model portfolio constructed in accordance with the
present invention.
[0017] FIG. 6 is a graphical representation showing potential best
and worst case ending values.
DETAILED DESCRIPTION OF PREFERRED AND ALTERNATE EMBODIMENTS
[0018] FIG. 1 represents an organizational structure for operation
of the investment system of the invention, described in the context
of an employer sponsored investment plan such as a 401(k) plan,
although the principals and concepts of the invention are equally
well applicable to selection of investment portfolios outside of
such qualified plans.
[0019] A plan sponsor 1 presents to eligible employees 2 an
investment plan in which employees can contribute funds, such as a
qualified plan which is tax sheltered, such as 401(k) type
accounts. The system of the invention, however, is equally
applicable to other types of managed investment funds and plans
wherein the funds of individual investors are to be allocated among
different types of securities and cash. The plan or qualified plan
3 consists of a plurality of asset allocation models 30, also
referred to herein as model portfolios, which are most broadly
defined by the overall investment objective, such as High Growth,
Growth, Moderate Growth, Moderate, Moderate Conservative,
Conservative, Income and Stable Value. These broad classifications
of investment portfolios are generally used nomenclature in the
industry and the invention is not limited to thereto but is equally
applicable to other types and categories of investments. Each asset
allocation model is made up of percentage allocations to the
various classes of investments selected to produce the targeted
returns with the corresponding degree of risk, as shown in FIG. 2.
To select the specific securities or funds which make up the model
portfolios by satisfying each of the specified asset classes,
professional investment management 4 performs the tasks of
researching available securities and securities funds, analyzing
fund strategies, management and performance history, and continuous
monitoring of securities, funds and fund management once selected
for inclusion in one of the model portfolios, all in accordance
with the primary factors 5, including proper asset allocation
correlated to the investor questionnaire, style drift, rebalancing
if necessary, overlap, manager tenure, IPS, performance and beta.
If in the opinion of the professional management 4, one or more of
the securities or funds which are a component of a model portfolio
is either underperforming or has drifted from the desired
investment strategy or objective, the management 4 has the
discretion to sell that security or fund and replace it with
another security or fund holding which satisfies the criteria and
asset class of the portfolio. This proactive managed approach to an
asset allocated investment fund is markedly different than the
typical investment plan in which a layman investor simply selects
one or more funds and is then locked into those funds for a period
of time without any ongoing monitoring, and with restrictions on
the ability to make any changes to the portfolio, regardless of
market performance. By contrast, the investment system of the
invention essentially provides ongoing personal professional money
management services to individual plan participants, by assuring
proper asset allocation for total return, and then continuously
monitoring performance of each of the assets of the portfolio.
[0020] Use of the system of the invention by an investor or plan
participant begins with a set of inquiries of an individual
investor, focused primarily on real life and behavioral factors
which impact how the individual would like his/her money invested.
In one embodiment, a questionnaire is presented to the investor or
plan participant with questions on two main topics, time and risk
tolerance. The time related questions are to determine the number
of years remaining for contribution of funds to be invested, and to
determine the number of retirement years for which withdrawals are
to be available. These time parameters are important factors in the
asset allocation model selection, primarily with respect to the
targeted annual rate of return of the various assets in a
portfolio. A second category of questions is designed to ascertain
an investor's expectations for investment performance, risk
tolerance, and emotional response to fluctuations in portfolio
values. The percentage of total assets to be invested in the plan
is also determined.
[0021] Non-limiting examples of questions in these categories are:
[0022] 1. Given your financial goals, when will you begin
withdrawing from this 401(K)? "I expect to begin making withdrawals
in": [0023] Less than 3 years [0024] 7 to 10 years [0025] 11 to 15
years [0026] More than 15 years [0027] 2. Once you begin making
withdrawals from this 401(K) how long will the money need typically
your retirement age subtracted from your life expectancy. e.g.
85-65=20 yrs. (life retirement age) [0028] Less than 5 years [0029]
For 5 to 10 years [0030] For 11 to 15 years [0031] For 16 to 20
years [0032] More than 20 years [0033] 3. Which statement best
describes your priorities regarding your Street Smart 401(K)?
[0034] Protecting the money I have is more important to me than
making it grow [0035] I prefer an investment strategy designed to
grow steadily and avoid sharp ups and downs even if it lowers
returns [0036] Making the most money is most important to me, even
if it requires some risks to do so [0037] 4. At the beginning of
the year, you have $10,000 in your 401(K). The graph to the right
[see FIG. 6] shows the performance of four different hypothetical
portfolios. Each bar gives the range of potential values at the end
of one year. Example: Portfolio B could either go up to $11,000 or
drop to $9,500 after one year. Which portfolio are you most
comfortable with? [0038] Portfolio A [0039] Portfolio B [0040]
Portfolio C [0041] Portfolio D [0042] 5. Which of the following
statements best describes your attitude about investing for your
Street Smart 401(K)? [0043] Minimizing the chance for loss in my
account is most important, so I am willing to accept the
lower-long-term returns offered by lower risk investments [0044]
Experiencing some short-term loss in value in an effort to achieve
higher long-term returns is okay. However, I prefer that the
majority of my investment be lower risk [0045] Seeking higher,
long-term returns is important to me, so I am willing to accept
substantial short-term losses [0046] Maximizing long-term
investment returns is most important, and I'm willing to accept
large- and sometimes dramatic-short-term losses in value to achieve
this goal [0047] 6. If you had money invested in a diversified
portfolio and the stock market took a downturn, when would you sell
your riskier investments and put the money in safer investments?
[0048] At the first sign of loss [0049] After a 10% loss [0050]
After a 20% loss [0051] I wouldn't sell any of my investments. I
would continue to follow a consistent, long-term investment
strategy [0052] 7. Which of the following types of investments do
you feel more comfortable with? An investment that might return:
[0053] 5% a year on average over the long term, but has a 10%
chance of experiencing a decline in value in a given year [0054] 8%
a year on average over the long term, but has a 20% chance of
experiencing a decline in value in a given year [0055] 11% a year
on average over the long term, but has a 30% chance of experiencing
a decline in value in a given year [0056] 13% a year on average
over the long term, but has a 35% chance of experiencing a decline
in value in a given year [0057] 8. Looking at other investments I
own, such as pension, inheritance, stocks, CD's, mutual funds or
personal investments, my 401(K) assets represent the following
percentage: [0058] Over 75% [0059] 50%-75% [0060] 25%-50% [0061]
less than 25%
[0062] An investor's answers to the questionnaire provide a score
or rating which is correlated to the most appropriate asset
allocation model which will provide the necessary rate of return
and diversification for capital preservation and control of
volatility. In the system, the response to each question preferably
has some bearing on the percentage allocations in each of the asset
classes of the model portfolios. Depending upon how the questions
and corresponding multiple choice answers are drafted, the chosen
responses can directly impact asset class percentage allocation, or
be added to a total score which falls within a bracket correlated
to a model portfolio, such as one of the model portfolios shown in
FIG. 2, as further described.
[0063] The asset allocation model portfolios of FIG. 2 are
professionally selected groups of securities or securities funds
which fall within the asset classes necessary for diversification
and growth. For example, the asset classes in the portfolios may
include, in stocks, the various fund types of: large growth, large
blend, large value, mid cap growth, mid cap value, small growth,
small value, small blend, international growth and international
value; real estate (e.g. REITS); and in bonds, the various fund
types of for example: high quality, high yield, short term. U.S.
government, and international; and in cash or cash equivalents:
money market and stable value funds. Other categories of funds,
including hybrids of those listed, and funds with similar holdings
but which are categorized differently or under different names, can
of course be included among the asset classes from which the model
portfolios are constructed. Not all asset classes are necessarily
included in each model portfolio.
[0064] The securities of the portfolios are selected and managed by
investment professionals, so that the investor or plan participant
never selects, and cannot select, a security for inclusion in
his/her model portfolio. The securities or funds are selected for
inclusion in the model portfolios by a professional money manager,
based upon analysts' percentage recommendations per asset class,
and by identifying the top managers within each class, and other
factors as known in the industry, including for example and without
limitation: alpha, R.sup.2, standard deviation, returns, security
selection and removal, and ERISA compliance. The funds within each
portfolio are constantly monitored for style drift, duplication of
holdings, manager turnover and performance compared with their peer
group asset class. This proactive monitoring and ability to replace
a manger or fund quickly when needed gives a highly competitive
advantage over portfolios which are managed by the novice
self-directed investor or plan participant.
[0065] Upon completion of the questionnaire, the investor or plan
participant is directly presented with a proposed model portfolio
selected in accordance with parameters set by the questionnaire
responses. Importantly, the presentation of the proposed model
portfolio 30 to the investor/plan participant is in the form of the
selected optimal asset allocation, which as shown can be both
graphical, as by pie chart 32 or any other graphical representation
of percentage components of a whole, and asset class names in
fields 34. In field 36 there is provided a textual description of
the process by which the model portfolio was selected, with the
admonition that the investor or plan participant should select the
recommended model portfolio due to the fact that it corresponds
with his/her responses to the questionnaire on investment
objectives. At this point the investor/plan participant is given
the option of accepting the proposed model portfolio as represented
by field 38, or viewing alternative model portfolios with different
asset allocations representing either more risk or less risk, as
represented in fields 40 and 42. Only after selecting the
recommended model portfolio are the actual fund holdings disclosed
to the investor/plan participant, in the form of an asset holding
listing, as shown for example in FIG. 4. In this example each of
the portfolio holdings are various types of mutual funds, the names
of which can be associated with or hyperlinked to additional
detailed information about the funds, as published by the fund
proprietors or compiled by fund tracking and rating services such
as Morningstar or Lipper Analytical.
[0066] In the event the investor/plan participant does not accept
the recommended portfolio and instead desires a greater or lesser
degree of risk as would result from a different allocation, the
investor is given the opportunity to change the allocations by
operation of fields 40 or 42. For example, selection of field 42,
More Risk, would lead to presentation of a graphical representation
of a different model portfolio, as shown for example in FIG. 5,
with a greater percentage of total assets invested in stock funds,
representing a higher degree of risk than the portfolio of FIG. 3.
This alternate model portfolio is presented to the investor in the
same general format as in FIG. 3, but with the warning, for example
in field 36, that the portfolio does not match the answers given to
the questionnaire, and consequently may result in account activity
and volatility which is outside the investor's desired parameters.
Nonetheless, the investor may choose the alternate model portfolio,
by selecting it in field 38, only after which the identity of the
specific securities holdings of the portfolio are revealed, as for
example in the manner or format shown in FIG. 4.
[0067] The principles and concepts of the investment system of the
invention can be executed in different forms, such as a paper based
system in which the investor questionnaire is presented as a
document which is then processed by the plan manager to select the
appropriate model portfolio for presentation to the investor, who
then accepts or rejects, and once a final selection is made the
portfolio holdings are also disclosed on paper to the investor,
similar to any paper account statement. Any changes which are made
to the model portfolio by the professional managers can also be
reported to the investors by a written notification.
[0068] The system can also be fully implemented and operated as a
computer program which receives and processes all of the data from
the investors or plan participants and generates information and
screen displays to communicate model portfolio selection and
portfolio holdings to the investor on a single computer, or over
any type of network, including an intranet, extranet, or global
computer network such as the world wide web. In a computerized
digital format, the software generates screen displays which
prompts the user through the system, such as explanation of the
asset allocation investment approach, presentation of the
questionnaire and storage of the responses to the questionnaire,
presentation of the recommended portfolio without disclosing
specific portfolio holdings, and then presenting specific portfolio
holdings only once the portfolio has been accepted by the user. In
a networked environment the system can be presented as multiple
pages at a website domain, access to which can be controlled by an
administrator who provides user names and passwords to investors of
plan participants. The asset allocation approach of the system is
fully explained on one or more pages of the site, and the process
of model portfolio selection. The investor questionnaire is
presented as text with active select buttons next to each of the
multiple choice answers to each question. To segue from the
completed questionnaire to presentation of a recommended model
portfolio, a button, labeled for example BUILD MY PORTFOLIO can be
placed at the end of the questionnaire. This prompts the selection
of the appropriate model portfolio for display, in the format for
example shown in FIG. 3. Of course other graphical and text formats
for displaying this information in digital form are within the
scope of the invention. The portfolio options of ACCEPT, MORE RISK
and LESS RISK as shown in FIG. 3 can be implemented as separate
active buttons on a web page which operate accordingly to either
present alternative portfolios, or implement the accepted
portfolio, followed by identification of the specific securities or
fund holdings of the accepted portfolio as shown in FIG. 4. Each of
the specific securities or fund holdings of the accepted portfolio
can be hyperlinked to additional information about these assets,
such as to the separate website of a fund or fund monitoring
service or to other sources of information about the assets.
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