easyvest uses a thoughtful, time-tested investment philosophy to grow your hard earned money. No need to pick stocks or try to beat the market. Instead simply surf on the market, cut out all noises from financial gurus, and focus on building your long-term wealth. It is simple, time-tested, and traditional. It is not sexy, but over the long term it works in a pretty impressive way.
This investment methodology is based on the Modern Portfolio Theory of Nobel Prize winner Harry Markowitz. It has been developed by Matthieu Remy at Harvard Business School with the help of world-famous financial experts and has been approved by Leleux Associated Brokers.
easyvest investment methodology is based on 5 pillars:
Asset classes are the fundamental building blocks of an investment portfolio. They come in various forms like stock, bonds, or cash.
Each asset class plays a specific role in a portfolio. In simple terms, stocks drive growth and bonds protects you in case of a crisis.
Putting these different asset classes together in the right proportion both increase a portfolio expected return and reduced its risk. In finance lingo, this process is referred to as diversification.
We use the following asset classes in all our portfolios. We believe they represent the best long-term source of growth and stability for investors.
| Asset Class | Description | Role |
|---|---|---|
| World Stocks | Ownership in diversified basket of companies in a multitude of geographies and industries | Capital growth |
| European Government Bonds | Debt issued by European states to finance their country operations | Captial preservation and regular source of income |
| Cash | Liquid assets used to lower risk in volatile markets | Capital preservation |
Note that the world stock asset class contains in itself multiple asset-classes like real estate or commodities. Owning world stocks therefore expose you to many different asset-classes, further increasing your diversification which is a good thing.
We have no relationship with investment companies and we do not accept any commission of any kind from them. We are therefore free to recommend the best product to build your portfolio.
The portfolio we recommend to you is built using financial products called Trackers or Exchange Traded Funds (or ETFs). ETFs are like mutual funds, except that they trade in real-time like stocks on a stock exchange like Euronext. They are not actively managed and seek to offer to their investors the performance of the index they track. They are low-cost, widely accessible, and tax-efficient.
We screened all ETFs available that track our selected asset classes. Two have been shortlisted for offering the lowest fees, the best track record of performance, and the most reputable counterparty. These products seek to reproduce the performance of the indices stated in the table below.
| Asset class | Index tracked |
|---|---|
| World Stocks | MSCI All Country World IM |
| European Government Bonds | JPM Government Bond Index EMU |
| Liquidity | Cash |
We continuously seek out the best investment products for you and we could therefore recommend other holdings if we feel it would add value to your portfolio.
With the two ETFs mentioned above, 10 risk-efficient portfolios have been designed by combining these ETFs in various proportions. Each portfolio corresponds to a target risk the investor can bear. easyvest Portfolio 1 is the least risky portfolio while easyvest Portfolio 10 is the riskiest.
We define the risk as the maximum value of his portfolio an investor is willing to lose in any given year. For instance, the risk on easyvest Portfolio 5 is of 15%. This means that we don’t expect this portfolio to lose more than 15% in a year in 98% of the case.
The risk number is a statistical measure that attempts to predict the future. The statistical model we use makes assumptions about how the world is expected to behave in the future. It is an approximation that may very well prove wrong. No one can predict the future. However, we have strong reasons to believe that our model is directionally right if we compare its predications with what really happened in the past.
The next important concept, is that for a given risk, there is an expected return. This bound between risk and return was first described by Harry Markowitz in 1952 in a theory for which he later received the Nobel Price of economy in 1990. In simple terms, once an investor has decided which level of risk he is willing to take on a portfolio, he can also determine the expected return of that portfolio, And vice-versa. In principle, the potential return rises with an increase in risk. Hence the popular adage: “no risk, no reward.”
The table below illustrates the risk-return trade-off of all easyvest model portfolios. Those values are calculated and updated every day by our statistical algorithm to consider all the information available from the past. Again, those numbers are not a promise or guarantee of performance. They are the way easyvest statistically models the future.
| Risk | Maximal loss | Annual return | Mix |
|---|---|---|---|
| 1 | 2,2% | 2,7% | 8-90% |
| 2 | 4,0% | 3,2% | 18-80% |
| 3 | 6,7% | 3,7% | 28-70% |
| 4 | 9,8% | 4,2% | 38-60% |
| 5 | 13,0% | 4,7% | 48-50% |
| 6 | 16,4% | 5,2% | 58-40% |
| 7 | 19,8% | 5,7% | 68-30% |
| 8 | 23,2% | 6,2% | 79-19% |
| 9 | 26,6% | 6,7% | 89-9% |
| 10 | 29,6% | 7,1% | 98-0% |
| Mix: % stocks / % bonds All portfolios hold 2% of cash The expected annual return is net of all costs (Taxes and fees) Calculation date: 1/1/2018 | |||
We will recommend that you invest in one of the ten easyvest portfolio based on your personal needs and goals. In particular, we will pay special attention to your age, your financial knowledge and experience, your investment horizon, your financial goals, your tolerance to losses, and your personal projects.
We want to make sure that the recommended portfolio is right for you. So, when you open an account with us, we will proceed in two steps. First, you will answer to a personal assessment questionnaire that will help you determine your investor profile and make you a first portfolio recommendation. Then, you will have a conversation with your personal personal advisor to review your investor profile and make potential adjustments before you validate and we build your portfolio.
Building your portfolio is not the end, it is actually the beginning. We regularly inform you on the performance of our portfolio. We warn you when we notice it deviates from your investor profile, and we help you with your overall life savings plan.
Since the balance of stocks and bonds might drift from its equilibrium overtime due to market cycle, we monitor any deviation daily and offer you to adjust the weight of each fund to match your risk profile. All you must do is to confirm the rebalancing transactions and we execute them for you.
As a patrimony is build overtime, you might want to add money on a regular basis. We thus assist you in designing saving plans to reach your financial goals and add money to your existing portfolio.
Your personal goals might also change with time. We therefore reassess your investment profile every few year or every time you face a life changing event like a wedding, a child birth, a real estate acquisition, or an entry in the pension.