Set up and use your Investment Style

A complete guide to using your Investment Style

Setting up an Investment Style allows you to specify your investing preferences according to your tolerance to a set of factors and sectors. 

Once you create an Investment Style, Boosted Insights will use it to help evaluate recommendations on individual securities or evaluate a portfolio’s adherence to your preferences.

Keep reading this article to learn about the following

• Creating an Investment Style from a list of securities vs. from scratch
• Naming your Investment style and choosing a Benchmark
• Selecting an Asset Class
• Setting up your Risk Profile
• Selecting Sectors
• Setting up Additional Financial Criteria
• Setting Importance
• Style Match

Creating an Investment Style from a list of securities vs. from scratch

When creating a new Investment Style, you’ll have two options: to create it from a list of securities or to create it from scratch. You can read more about each of these below.

Creating an Investment Style from a list of securities
When you create an investment style from a list of securities, your list of securities will act as a guideline for your Investment Style. All preferences are pre-selected for you, but you’ll have the option to adjust any of them as you see fit. 

To create an Investment Style from a list of securities, cick the Generate Style button at the top of the page.

Creating an Investment Style from scratch
When you create an investment style from scratch, you’ll have to choose all your preferences individually. Nothing will be presented on your behalf.

Naming your Investment style and choosing a Benchmark

You’ll need to name every new Investment Style that you create. Make sure to name each style something that differentiates it to ensure you can easily identify which style you intend to use.

You’ll also choose a Benchmark for your Investment Style. The risk factors of your investment style will be normalized by the benchmark you choose.

Selecting an Asset Classes

Next, you’ll choose an Asset Class. Boosted Insights will automatically mark anything that falls within an unselected asset class as a poor match. Keep this in mind when selecting your preferences here.

Setting up your Risk Profile

Your Risk Profile is where you’ll set your preferences on how comfortable you are being exposed to each risk factor.

Next to each risk factor, you’ll see a bar with two sliders. The sliders represent the lowest and highest exposure in z-scores that you want securities to abide by when fitting into your Investment Style. Specifically, each slider represents a percentile of stocks mapped to z-scores (on a normal curve). 

Example

Let’s say you indicate a range of 0-50 with the sliders. Choosing these settings will indicate that you want to include the bottom 50% of stocks that have the risk factor vs. the benchmark universe.

Risk factor composition
We’ve broken down the composition of each factor in the table below:

Selecting Sectors

In this section, you’ll select the sectors you’re most interested in. Leaving this section blank will mean that securities in all sectors will be seen as acceptable in your strategy. However, if you add sectors, we’ll penalize securities in any sector that’s not included.

Setting up Additional Financial Criterion

Here, you can add in any other criteria you want acceptable securities to meet.

There are 30+ criteria options for you to choose from, including but not limited to dividend yield, earnings to price, and capital employed.

When adding in an additional criterion, you’ll need to select “< >” (between) “>=” (greater than or equal to) or “<=” (less than or equal to). For every criterion, we’ll give you a typical range as a reference.

Setting Importance

Finally, you’ll tell us how important it is to stay within the bounds you've set for each risk factor. In this section, each risk factor defaults to an importance of 100. This means that they're all weighted equally.

To mark a risk factor as more important than the others, you'll need to increase its score. Alternatively, to mark a risk as less important than the others, you'll need to decrease its score.

Example
Let's say you value your growth exposure preferences twice as much as any other risk factor's exposure. You also value your momentum exposure preferences significantly less than any other risk factor's exposure.

• All of your risk factors are at their default importance score of 100.
• You would need to set growth to a score of 200 to make it twice as important as any other factor's exposure.
• You would need to set momentum to something substantially lower. Setting its score to 50 would make it half as important as all other risk factors.

Style Match 

When looking at securities throughout the Boosted.ai platform, you’ll see a style match associated with the security. A security’s Style ranking can be a Perfect Match, Strong Match, Medium Match, Weak Match or Poor Match. 

This represents how closely aligned the security is with your Investment Style.