Q.: How would we model an approach like the Efficient Frontier in the Voyant software?
A: One way to illustrate an Efficient Frontier-style approach in Voyant is to grow assets using Growth by Asset Allocation.
You can create a series of portfolios (for example, Risk 1–5) with different asset allocations and assign each allocation to separate investment accounts within the plan. Using the client’s portfolio data, Voyant will calculate the weighted average return assumptions based on the underlying asset classes in each portfolio.
This allows you to demonstrate the relationship between risk and potential return. As equity exposure increases, the expected return may increase, but so does volatility. By comparing diversified portfolios with varying allocations, you can illustrate how changes in risk exposure influence potential outcomes and how diversification helps balance risk and return, concepts that underpin the Efficient Frontier.
From there, you can further evaluate each portfolio by stress-testing the plan using Voyant’s scenario tools. For Example.
A major market crash event can illustrate how different allocations respond to a downturn.
Historic Simulation and Monte Carlo analysis can then be used to compare the probability of success across the different portfolios.
In practice, the market crash scenario can be particularly powerful when paired with portfolio-based growth assumptions. It helps illustrate why advisers often keep a portion of short-term funds in bonds or lower-volatility assets, since they tend to be less affected by sudden market downturns than equities.