How Guided builds a portfolio

Broad core and combined satellites

At least 75% of equity and listed equity-like holdings must be AC World Equity. Country, size and style funds, listed property, listed infrastructure and listed private-market vehicles together occupy at most the remaining 25%. They cannot avoid this rule because the catalogue calls some of them alternatives. Bitcoin is counted separately. No minimum total equity allocation is imposed, so a cash-heavy portfolio remains possible.

This implementation uses AC World as the single identifiable broad global core. Regional funds are not automatically credited as equivalent global coverage. A domestic minimum counts as a satellite and may conflict with the global core or domestic regulatory rules; a conflict is reported rather than silently exempted. Custom strategy allows different construction.

Vanguard describes a broadly diversified core with selected satellites. It does not prescribe our exact 75/25 split.

You choose the Bitcoin limit

Bitcoin is separate from the equity core. Guided uses your chosen Bitcoin maximum, including allocations above the 5% starting suggestion. It does not impose an additional Bitcoin allocation or risk-contribution ceiling. A 10% return target is a request for the lowest-risk portfolio reaching that forecast, subject to your other limits; it is not a promise of future returns.

We show Bitcoin’s contribution to modelled portfolio variance using the same covariance matrix as the optimizer. This can be much larger than its share of the money. Sensitivity checks show what happens with a lower Bitcoin return assumption and higher volatility. These are illustrations, not probability bounds or a personal suitability assessment.

For example, with 20% Bitcoin and 50% equities, at least 37.5% of the whole portfolio must be in the broad equity core; the other 12.5% can be equity satellites. Changing to Custom removes the equity-core requirement; it is not needed to choose a higher Bitcoin maximum.

The same rules from preview to result

The questions preview uses the active worksheet, selected currency and hedge treatment, return assumptions, cash reserve, diversification policy and January to September 2022 loss limit. Each displayed target is a separate constrained solve. Whole-percent preview choices are samples, not a proof that no higher return exists. The optimizer checks the exact chosen target with the same search. If the target is not reached, the result is labelled with the return found; no rule is relaxed.

Without an explicit target, the questions page can select the highest sampled target it has verified. Without a return target, Max Sharpe seeks the best modelled excess return per unit of risk, while retaining the equity-core rule and your other limits. Contradictory hard limits can produce no accepted result.

Check the assumptions and difficult periods

The result review holds weights fixed and tests equity compound forecasts two percentage points lower and a zero Bitcoin compound forecast. A separate risk stress raises non-cash volatilities 25% and moves all correlations 25% towards +1. A convex combination of valid correlation matrices stays positive semidefinite. We keep arithmetic means fixed in the risk-only stress, so higher risk does not create an artificial forecast uplift. A third case combines both changes. These are illustrative sensitivities, not calibrated probabilities or worst-case limits.

Historical checks include the technology crash, financial crisis, COVID and 2022. Missing asset histories remain missing; we do not invent Bitcoin returns before it existed or treat unobserved returns as zero. Month-end windows can miss larger intra-month losses. A 15% 2022 loss rule does not cap future losses at 15%.

Liquidity, trading and personal circumstances

The cash reserve is a minimum portfolio allocation for money that must remain available. Guided diversified excludes unlisted private assets, diversified hedge funds and unclassified custom tickers from new allocations. Listed vehicles still have trading, spread and market risks; this tool does not guarantee broker availability or executable prices.

The review reports total purchases plus sales and a user-editable one-off trading-cost illustration, defaulting to 10 basis points per amount traded. It does not deduct tax or claim to know actual broker charges. The optimizer does not solve a tax-aware transaction-cost problem; small model improvements should be considered against trading costs before implementation. Each holding is labelled with its intended role.

The questions do not establish personal suitability, debt obligations or full capacity for loss. FINRA’s digital advice report discusses investor profiling, conflicting answers and model governance; it is used here as design guidance, not a statement about this app’s regulatory status.

Custom and Pro remain available

Custom strategy retains the entered limits but removes Guided’s broad equity-core requirement. Its results are labelled Custom and still show the risk review. Pro retains advanced methods; methods that ignore constraints cannot run as a Guided diversified result. Changing strategy or inputs makes previous results stale until rerun. The captured policy and review travel in the audit JSON and the report identifies which policy produced the result.