iSectors®, LLC Post-MPT Allocation: Improving the Application of Modern Portfolio Theory

Posted on: 06/07/2016

The research on Modern Portfolio Theory (MPT) was published more than 55 years ago.  Nonetheless, it would be difficult to overstate the influence of MPT’s core principles on the manner in which investments are managed today.

The first principles of the MPT include:

  • Investors are risk-adverse. The only acceptable risk is that which is adequately compensated by potential portfolio returns.
  • Markets are efficient. For the most part, stocks are fairly priced because so many people research stocks all factors are already reflected in the price.
  • Every level of risk has an optimal allocation of asset classes that will maximize returns. Conversely, for every level of return there is an optimal allocation of asset classes that can be determined to minimize risk.

The research published since the 1950s, which has been termed Post-Modern Portfolio Theory, including research in Behavioral Finance, has pointed the way to applications and technologies that can improve investment results and catapult the principles of MPT to a new level of effectiveness.

In an effort to improve the risk-adjusted returns for their investors, Vern Sumnicht and his team at iSectors®, LLC, spent years working to apply the lessons learned from Post-MPT. Mr. Sumnicht continues to update his white paper on Post-MPT.  To obtain a copy of this whitepaper, click here to download.

The Post-MPT Growth Allocation is now available as an ETF.  You should consider the fund’s investment objectives, risks, and charges and expenses carefully before investing. Contact Virtus ETF Solutions at 1-888-383-0553 or visit www.isectorsetfs.com to obtain the fund’s factsheet and prospectus, which contain this and other information about the fund. Virtus ETF Advisers LLC serves as the investment adviser and iSectors, LLC serves as the investment sub-adviser to the Fund. The Fund is distributed by ETF Distributors LLC, an affiliate of Virtus ETF Advisers LLC.



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