Bonds and Shares
20/08/2015
Model Portfolios

Diversification of investments is one of the most time-tested ways to mitigate investment risk. One of the easiest, least costly and most effective way to spread your risk is to consider investing in one of Mediterranean Bank's Model Portfolios. Our Model Portfolios are diversified portfolios of mutual funds designed to address different risk tolerance levels. The aim of our Model Portfolios is to maximise your potential medium to long-term returns. Our Model Portfolios were developed by Mediterranean Bank working closely with our independent advisors, Morningstar, the globally renowned independent investment analysis and research firm.

Through our recommended Model Portfolios, we help you choose the right mix of investments by offering five different risk-based investment model portfolios that are designed to meet your chosen risk profile and help make asset allocation easier.

Risk aversion through diversification

There is no such thing as a risk-free investment. Investing is all about choosing the risks you feel most comfortable taking. A diversified portfolio can be a helpful way to weather the big swings over time as the market rises and falls. Thinking about your intended retirement date, objectives, and attitude toward risk will help you determine the types of investments - or asset classes - you should select, and how you would allocate your savings among them. The five Model Portfolios are each tailored to a different level of risk tolerance whilst providing wide investment diversification, which is the strategy of combining assets in such a way to reduce the overall risk of a portfolio.

Our five Model Portfolios are each tailored to a different level of risk tolerance. These Model Portfolios are designed to provide broad investment diversification by combining assets over a range of assets classes, industries, countries, etc., with the aim of reducing the overall risk of a portfolio. Portfolio diversification is a widely embraced investment strategy that helps mitigate the volatility of markets for investors. By investing in a range of asset classes, industries and geographical markets, a diversified portfolio helps ensure that a severe downturn in one asset class or market will not necessarily affect an entire portfolio. This is especially important during times of increased uncertainty.

Just to give a practical example, imagine a scenario where you invest a sum of money in a bond or equity issued by a single European bank which we will call ABC Bank. You now have 100% exposure to one company, in one investment class, in one geographical region and in one industry sector. Should ABC Bank suffer adverse effects as an individual company or in terms of its investment class, geographical region or industry sector, you are very likely to suffer a loss on your investment.

Now let us imagine that you decide to diversify your investment by investing in a bond fund that invests in a portfolio of 100 European banks. Your investment is still not fully diversified and could be adversely affected by negative movements within the European banking sector. You will be largely protected, however, against a loss specifically related to ABC Bank.

Taking the analysis further, suppose that rather than investing entirely in a bond fund of European banks, you invest in a model portfolio of ten mutual funds invested across a wide range of asset classes, industries and geographical regions. In this case, while losses in the banking sector will certainly have an adverse effect on your portfolio, the effect of such losses should be lessened by the fact that your investments are spread across different entities, investment classes, geographical regions sand industry sectors.

The Five Model Portfolios

Our Model Portfolios consist of a diversified portfolio of top rated mutual funds which are carefully selected by us together with Morningstar’s team of investment professionals. The Model Portfolios are continuously monitored and are updated periodically. When recommending to us the mutual funds that comprise these Model Portfolios, Morningstar considers dozens of factors such as the past performance of each individual fund, the experience of each individual fund manager, the strength of each fund house or parent company and the medium- to long-term outlook.

We offer five different Model Portfolios tailored to meet your preferred risk profile: DefensiveConservative,BalancedGrowth and Aggressive.

Investing in a Model Portfolio is very competitively priced at just 0.5% of trade consideration with a minimum of €25 per fund and we do not charge any exit fees.

Allocation Funds

If you are looking to invest less than €30,000, our Allocation Funds, which are also built based on recommendations from Morningstar, might be ideal for you. These are single diversified funds which try to achieve a similar diversification to that of a Model Portfolio. Allocation Funds are also available in five different risk profiles similar to those of the Model Portfolios.

Accumulator and Income Versions

Both the Model Portfolios and the Allocation Funds come in accumulator and income versions.

Accumulator - returns from the funds in the Model Portfolios or Allocation Funds are reinvested automatically helping you grow your capital.

Income - designed to provide attractive and regular income from your investment. The income versions of Model Portfolios are available only for a balanced risk profile.

If you wish to learn more about our Model Portfolios please contact us on (+356) 2557 4400 or visit one of our branches in Valletta, Sliema, Paola, Mosta, Qormi or Victoria, Gozo. Our branch opening hours are Monday to Friday between 8.30am and 5.00pm and Saturday between 9.00am and 1.00pm, whilst our Customer Service Team is available on 2557 4400 from Monday to Friday between 8.00am and 6.00pm and Saturday between 8.00am and 1.00pm.

 


The Model Portfolios are being provided for informational purposes only and should not be treated as investment advice. You should always take professional investment advice based on an appraisal of your full financial situation before taking any investment decisions. The price of all investments can go up as well as down, and past performance is not indicative of future performance. Investment markets are volatile in nature and it is important that any investment is viewed as long term in nature. Medbank does not accept liability for losses suffered by a Customer as a result of his investment in a Model Portfolio.

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