Plenty's portfolio construction process starts with identifying a subset of up to 200 representative stocks from the broad-based stock index. While the index used is proprietary, it reflects a fairly standard representative mix of mainly large cap stocks found in major indexes such as the S&P 500. These are primarily U.S.-based equities, with some exposure to international stocks via ADRs to provide additional diversification. Back-testing is conducted to optimize samples of stocks to demonstrate low tracking error against the broad-based index tracked.
Selection of the stocks in the index is based on the proprietary algorithm, and further refined via optimization for each user utilizing their responses on the account opening questionnaire. Each account will typically own about 80 individual stocks in its portfolio through direct holdings. Fixed income exposure in the index consists of bond ETFs. The balance between equities and bonds in a client’s portfolio will depend on their risk preferences and investment horizon. A higher risk score will result in a greater equity allocation, driven by that user’s increased risk appetite.
Each user’s portfolio is personalized based on risk preferences, ESG preferences, and time horizon.