The Investment and Trust Services Department of Citizens State Bank & Trust Company follows an investment strategy employing Modern Portfolio Theory using asset allocation model portfolios. The allocation of each portfolio consists of a mix of equity securities, income securities and cash equivalents. As the portfolios progress from conservative to more aggressive the percentage allocation of equity securities increases and the percentage allocation of income securities decreases. This strategy provides an array of diversified investment portfolios to meet the needs of a variety of investment objectives.
Currently, the investment vehicles of choice as a foundation for each portfolio are no-load, open end mutual funds. These funds are chosen based upon three main criteria as follows:
- Manager/fund performance relative to peer group, for each asset class evaluated. Evaluation based on Morningstar and Value Line for Mutual Funds using funds and fund managers with investment management experience of at least 10 years, using 3, 5 and 10 year performance when available.
- Lowest fees/expense ratios possible relative to peer group; institutional fund shares are used whenever possible.
- Economic outlook; considering such things as business cycle, geo-political environment, industrial sector rotation, and such other circumstances that may impact the economy. This is a subjective evaluation of current and anticipated near term (1-3 years) economic conditions.
After funds are chosen for each asset class they are combined as part of each portfolio’s asset mix. Each holding is monitored daily and is subject to replacement at any time. Each portfolio is re-balanced periodically to maintain the proper percentage allocation.
These model portfolios are the foundation for each account. Individual stocks, bonds and more complex financial instruments may be used for larger accounts, keeping in mind the ratio of equity securities to income securities. However, the exposure to any one equity security should represent no more than 5% of the market value of any investment portfolio unless unusual circumstances dictate otherwise. Individual securities will undergo extensive and ongoing review and evaluation.
The stated goal of any investment portfolio shall be to meet the investment objective of the client, trust and its beneficiaries or other account ownership with consideration of risk aversion, time horizon and the effects of inflation.