Diversification Score® (DivScore®) functions much like a credit score. While a credit score measures your creditworthiness based on financial history, a DivScore® measures how effectively your portfolio is diversified based on your investment objectives, risk tolerance, portfolio value, years until withdrawal, available investment options, and other factors.
The DivScore® metric rates your portfolio diversification on a scale of 400 (poorly diversified) to 850 (well diversified). A DivScore® of 750 indicates that the portfolio is well diversified, just as a credit score of 750 indicates excellent creditworthiness and low risk of default.
Your DivScore® provides insight into whether your chosen asset allocation accurately reflects your financial situation and investment objectives. A high DivScore® may indicate that you’ve made sound investment decisions relative to your goals and available investment choices.
On the other hand, discovering you have a low DivScore® gives you the opportunity to seek advice for improving your portfolio’s allocation. If you subscribe to Tickeron, our Artificial Intelligence tool can provide allocation advice and generate investment ideas.
Limitations: DivScore® isn’t a definitive measure of how well a portfolio is diversified, or of an investor’s probability of meeting his/her long-term goals. It’s a measurement tool for investors to get a better understanding of how effectively they have assembled a portfolio based on certain parameters. Investing involves the risk of loss, and investors should consider other factors such as cash flow needs, market outlook, fees, and so forth when building or adjusting an investment portfolio. The technology behind Diversification Score® (DivScore®) involves a sophisticated algorithm that measures factors like asset class, sharpe ratio, correlations, and more. Tickeron created the algorithms and owns the technology used to generate Diversification Scores® or DivScore® is calculated based on the following, and results may vary based on how much info you provide: