When you go to your financial institution to purchase mutual funds, you will be given a questionnaire to complete to determine your “investor profile” which in turn determines your asset allocation mix.
I have heard it said that it doesn’t matter what investments you have within your asset classes as long as you have the correct percentage mix. What a load of nonsense! Your individual investment choices should have some meaning to you and your plan and should be unique to you and your circumstances.
This is how my asset allocation is set up. I know approximately how much I want to have in each category in dollar value. I don’t know, and have never figured out what the percentages are. It’s nearly impossible to find a perfect asset allocation solution.
Related: The Perfect Portfolio Doesn’t Exist
Asset Allocation Mix #1 – Safety of Principal
I believe everyone needs some funds that are relatively easy to get to for emergencies, opportunities and just plain peace of mind. This is what I have in this category:
- A savings account that I make regular monthly deposits to that covers my yearly expenses such as insurance, vacation and Christmas.
- A high interest savings account for unexpected expenses, etc.
- Money Market mutual fund that is my real emergency fund in case I find myself about to be homeless or worse
Asset Allocation Mix #2 – Income
I’m not a fan of bonds these days, but I do have a Bond mutual fund in my RRSP that is not doing too badly.
This is not really used for income, but I have 5 GICs that are laddered in 5-year compound interest terms. I initially purchased these quite some time ago for $1000 each to be used in what I morbidly call my funeral account, as GICs are easy redeemed prior to maturity in case of death.
However, with current interest rates, I’d have a pretty puny funeral if I were to pass away right now. I’ll have to stick around for a long, long time to get the send off I think I deserve.
Asset Allocation Mix #3 – Growth
- Financials – TD Bank, Power Corp.
- Utilities – Fortis, Emera
- Telecom – Rogers, BCE
- Resources – TransCanada Corp, Suncor
- Consumer Goods – Empire, Reitman’s, Saputo, Corby Distillery
I have some income trusts: Canadian Oil Sands, Liquor Stores, Cineplex, Rogers Sugar and Riocan.
I also own some specialty mutual funds: US Midcap, Emerging Markets, Health, Entertainment and Global.
I’m only giving some examples of what I have in my investment portfolio because I don’t think anyone should just copy what I have. Many of my stocks I purchased years ago when the prices were substantially lower. Everyone needs to do their own research and keep their own goals in mind when investing.
What’s your asset allocation strategy?