ItransactGO opens up a new world of investment possibilities by making the investment process simple and easy providing you with instant professionally managed investment strategies.
ItransactGO is smart and will get smarter.
Our algorithms are intelligent. They "listen" to your needs and make continual automated adjustments ensuring your personal investment portfolio is on track and working as it should be.
Based on the investment profile created in step 1, our systems and algorithms calculate a diversified investment strategy for you based on our portfolio construction methodology.
Each portfolio we create is a discretionary managed personal portfolio product which simply tracks the market by investing in a range of low cost regulated Exchange Traded Funds (ETFs) which track domestic money, bond, property, domestic equity and offshore equity markets.
The manager allocates capital by weight to all the portfolios in a similar way in two steps. The first step is ETF (or Index) selection. The second step is asset allocation to the selected ETFs (or index/ indices) to produce the final desired portfolios.
Let’s discuss the first step, ETF selection (or index selection). There are a large and growing number of ETFs in the South African domestic universe. We only use indexation ETFs. The reason is simple: When we bake a cake we don’t use muffins or cupcakes; which are already baked products. We use raw ingredients like flour, eggs and sugar, and we want only the best quality. This is what ETF index selection is about; selecting the best raw ingredients. So we do not use ETFs that are already portfolios or ETF products that have so called “smart-beta” components – these are all “dressed up” ETFs – we only use unpolluted plain simple vanilla ETFs as our building blocks. These give us broad, well-diversified exposure to a market. Each portfolio is designed to tolerate the failure of a stock or two within the ETF without losing much money. These also average out the price behaviour signal we are looking for as their performance is the average of many stocks, making the ETF price return behaviour more predictable.
We take the historical price and total return (net of its Total Expense Ratio) series of each and every indexation ETF and process that in a tried and tested algorithm that tells us how indexation ETFs behave in terms of producing a market view. From this process, we can see that there are only six or seven unique areas, let’s call them “bins”, in the market. These bins are the unique areas or classes of the market that are well diversified from one another. Every ETF in our analysis falls into only one of these bins. Each of these bins inevitably represents offshore equity, domestic equity, domestic property, domestic bonds, and domestic money. Such is the nature of this analysis that it recognizes these classes. We now have six or seven well diversified bins that each contain a number of ETFs. We now need only select the lowest risk, highest return ETF, from each bin. We then have six or seven of the most efficient (efficient means lowest risk, highest return) ETFs to use as the quality ingredient in our portfolio bake.
Let’s talk about the asset allocation. Our goal is to provide investors with five risk managed portfolios, ranging from low risk to high risk, that are aimed at the investor who wishes to invest with an investment horizon; as in the table below.
|1||Conservative||1 to 3 years|
|2||Cautious||3 to 6 years|
|3||Moderate||6 to 8 years|
|4||Growth||8 to 10 years|
|5||Aggressive||10 plus years|
Using the risk characteristics of the six to seven ETFs we selected, we assign weights, or capital, in a risk driven asset allocation process to the ETFs, and arrive at the portfolio weightings. We do this once for the five ETF savings portfolios range. We do this once again using regulation 28 as a constraint to produce yet another range of five retirement annuity ETF portfolios.
It is up to the investor, sometimes together with their financial advisor, to shorten or lengthen the recommended investment horizons in the table above, dependent on the investors assessed risk profile.
Itransact has proudly partnered with Arcus Capital, a leading technology provider of digital financial advice, portfolio analysis and asset management solutions. Their machine learning algorithms help investors meet their financial goals by analysing the market and creating risk targeted portfolios, matching investors to portfolios and providing information and analysis in a graphically intuitive way so that investors can make informed decisions for their financial health.
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