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Guidelines for Achieving Broad Portfolio Diversification

Rationale of the 7Twelve® Concept

Let me briefly share the rationale governing the selection of funds chosen for the 7Twelve. Many factors are considered when selecting a fund for use in a portfolio.

  • Raw performance should not be the foremost issue. More important is a consistent history of ethical behavior by the company behind the fund.
  • Cost (annual expense ratio) is an important consideration, as is the tax efficiency of the fund.
  • Style consistency is important.
  • Minimum investment requirements need to be reasonable.
  • The fund needs to be open to new investors.
  • The fund needs to integrate well with the other funds in the portfolio-meaning that each fund needs to provide a return pattern reasonably different from any other fund in the mix.

    Each fund in the 7Twelve is an excellent fund. More importantly, each fund is an excellent contributor to the overall success of 7Twelve. Having extolled the virtues of these funds, it's important to remember that the future performance of any fund or any portfolio of funds cannot be guaranteed.

    In addition to being a blueprint for the design of a broadly diversified portfolio, the performance (both in terms of risk and return) of the 7Twelve portfolio can also serve as a benchmark, or index, for the evaluation of other portfolios. For example, an investor with 7-8 funds in a 401(k) portfolio could use the 7Twelve as a benchmark index to evaluate the risk and return of their entire portfolio.

    The performance of a diversified portfolio is more important than the performance of any individual fund.

    What Is 7Twelve?
    7Twelve Model
    7Twelve Performance
    The Rationale
    Historical Performance

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