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Introduction:

There are two high level Model Portfolio Types available in Portfolio Cloud
Fixed
Floating

Fixed Model Portfolios

Fixed model portfolios are those portfolios where the weights are not dependent on the underlying prices. The user creates a model portfolio and assigns weights to all the holdings in the portfolio. The weights are then 'fixed' until the users manually changes them.
Consider the following example
At Time = 0, the following model portfolio is created.

Ticker
Weight
Price
BHP
50%
$10.00
RIO
50%
$100
There are no rows in this table
⁠

At Time = 1, BHP price has increases from $10 to $20, and RIO price is unchanged.
In this case, the weights do not change because they are fixed

Ticker
Weight
Price
BHP
50%
$20.00
RIO
50%
$100.00
There are no rows in this table
⁠

Floating Model Portfolios

Floating model portfolios are those portfolios where the individual weights will vary with their underlying price and units. The user creates the model portfolio with a set of initial units in each holding. The weights will then 'float' as the underlying prices change.
Consider the following example
At Time = 0, the following model portfolio is created.

Ticker
Weight
Price
Units
BHP
50%
$10.00
100
RIO
50%
$100.00
10
There are no rows in this table
⁠

At Time = 1, BHP price has increases from $10 to $20, and RIO price is unchanged.
In this case, the BHP's underlying price and value have increased relative to all the other holdings, so its weight in the portfolio will also increase relative to all the other holdings.

Ticker
Weight
Price
Units
BHP
67%
$20.00
100
RIO
33%
$100.00
10
There are no rows in this table
⁠

Floating Model Portfolios and Dividends

Dividends are not incorporated into the calculation of Floating Model Portfolio weights. It is assumed that any dividend is paid to an 'external' bank account, so the value of the dividend is removed from the Model Portfolio. As a result, the price and value of a holding that pays a dividend will fall.
If the user wishes to incorporate the value of dividends paid, they must periodically update the floating model portfolio units (or weights).


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