Today, advisors have a diverse array of investment solutions that allow them to access virtually every market segment to construct well-diversified portfolios for their clients. They can develop broad-based asset allocation strategies to own the market or break it into smaller pieces of the pie. By dividing the market into finer slices, they may be able to efficiently make tactical decisions. In other words, based on their view, advisors can overweight sectors of the market they find attractive and underweight those they believe are overvalued. By investing in a specific sector, or a group of securities within the same industry, advisors may be able to help their clients take advantage of a market segment that is well positioned for growth.
Real-Time Basis Allocating across sectors helps in reducing company-specific risk. It also enables advisors to create a pure play to focus on an investment theme that is expected to perform in a particular sector, but not necessarily in the market at large. Specifically, sectors allow for the deconstruction of the market and the ability of advisors to build portfolios as they see fit. Sector allocations provide the opportunity to respond to the market in more of a real-time basis, rather than waiting for a broad market investment to reconstitute or rebalance. Sectors can also be used as complements to core exposures. In general, sector exposures provide flexibility to respond to the market.
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