Mutual funds have been an essential component of every investor’s portfolio for decades now. However, index funds have been gradually replacing them with ever-increasing momentum. Not only do index funds represent the latest technology in the methods of investing, but they also offer exceptional flexibility and transparency, while charging only a fraction of the fees one would pay for conventional mutual funds. Exemption from individual income tax one year after the purchase is yet another bonus for the investor. It should therefore come as no surprise that index funds are an essential building block of the Across smart portfolio.
- An alternative to mixed mutual funds
The stock-bond component should represent the basic building block of every quality investment portfolio. In Slovakia, the most frequent form of such investments are mixed mutual funds, often carrying attractive names, such as Easy Future, Smart, Magnifica, Opportunities etc. To the detriment of Slovak investors, the results of mixed mutual funds are rather poor in an overwhelming majority of cases. The ‘credit’ for these unsatisfactory results goes mainly to the people in charge of the fund’s investments. Smart portfolio by Across is managed passively, which means that asset managers do not select the individual shares or bonds; instead, they invest in a more advanced form – the index fund.
- They leave behind 90% of their competitors
While index funds outpace approximately 80% to 85% of their rivals with their performance, Across, using its original approach in mixing the bond-stock investment portfolio, managed to leave behind more than 90% of their global competitors with its smart portfolios. The best mixed fund available for Slovak investors (BNP Paribas L Diversified World Balanced) offered its investors performance that outpaced the rest by more than 25%.
- Stock-bond investment strategy
In order to better adjust the investment portfolio to the requirements and preferences of its investors, Across has developed three types of smart portfolios with various proportion of the stock component – amounting to 50%, 75% and 100%.
- Best index funds from all around the world
The index funds contained in the smart portfolios have been designed and are managed by the leaders in the industry. Among the companies whose index funds are included in our smart portfolios you can find players such as BlackRock (under the iShares brand), Deutsche Bank (db X-trackers), UBS, and Amundi, all of which belong among the top global players. They guarantee liquidity, transparency, consistent monitoring and following of the selected indices while charging low fees.
- Gradual entering of the portfolios
One-time investing is not a strategy that we prefer at Across. Instead, we aim at a gradual building of our positions. Typically, we invest over a year or two, when the client distributes his or her entries, which results in averaging their ensuing position. This approach significantly increases the likelihood of successful investment.
- Rebalancing of the portfolio on an annual basis (with regards to taxes and efficiency)
Market developments bring different valuations of bonds and stocks. From the beginning of the year, global shares outperformed global bonds by 12% on average. This also means that in a balanced portfolio, the share of the stock component amounted to 53%, while bonds stood at 47%. With similar development for several consecutive years, the share of stocks could grow to as high as 75%, which would significantly increase the portfolio volatility. To prevent this, we rebalance the portfolio on an annual basis, which means that the portfolio returns to the starting position. We therefore sell the stock and the bond component in order to keep the ratio of stocks vs. bonds at 50 : 50.
- Individual income tax exemption
Another welcome bonus comes in the form of income tax exemption: In the case when the investor owns his or her assets within the frame of smart portfolios for more than one year, the earnings are exempt from individual income tax.
Additional information about the possibility of participating in the revenues from the performance obtained by the respective investment strategies from the ACROSS INTELLIGENT PORTFOLIO+ will be provided to you by the investment consultants from Across Private Investments.