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The Importance of Asset Allocation
The overall performance of your portfolio is determined,
more than anything else, by the way major asset classes have
been combined. Known as Asset Allocation, nothing has a
greater impact on risk and return than how you’ve chosen to
divide your money among stocks, bonds and cash. To help
you learn more about asset allocation and how you can position
your portfolio in the best way for you, I will be sending a
series of short emails early in the New Year. Keep an
eye out for them and feel free to bring any questions forward.
Have you Unbundled your Funds Lately?
If allocating your assets appropriately is the most
significant performance driver, then perhaps it’s time to take
a close look at how you’re currently invested. If you
take a look at your last statement, you’ll see that you have
so much in Canadian Equity funds and so much in Bond funds so
it’s all fairly straightforward. Right? Not
necessarily. Things may not be as they appear on the
surface. Consider this. Say you have $75,000 in
Canadian Equity funds and $25,000 in bond funds. Do you
really have a 75/25 mix? Your Canadian Equity fund may
hold foreign stocks. Your Bond fund may hold preferred
shares. Unbundling your funds means looking closely at
what each of your funds is holding to determine what areas of
the market you’re really exposed to. If you’d like me to
review your portfolio to provide an analysis of how you are
truly invested and if it’s appropriate for you, please contact
me.
And What About Cash?
Consider that at the end of November, the average Canadian
Equity mutual fund held almost 7% of its assets in cash.
This is not to say that you or your funds shouldn’t hold
cash. You may want some on hand for emergencies or to
take advantage of buying opportunities. Similarly, all
funds need a cash float to deal with redemptions and day to
day trading and expenses. Just make sure the funds you
hold are not holding too much. Otherwise you won’t get
the full value of the management fees charged by mutual
funds. If you want to hold cash, hold it yourself.
Pay the fund manager to put your money to work for you.
Take the Worry Out of Interest Rates Changes
Almost seven out of 10 Canadians are concerned about their
mortgages, credit card and other debts if interest rates keep
rising, according to a recent survey by Maritz Research.
My colleagues at Scotiabank offer a range of innovative and
flexible products that help you deal with a number of
challenges including changing interest rates. To be sure
your borrowing is structured appropriately for your needs,
please contact me and I’ll arrange for a review by a personal
banker.
Total Financial Solutions
My commitment is to offer Total Financial Solutions.
This means that in addition to professional investment advice
including portfolio strategy and execution, I am also
available to help with wealth planning including tax and
estate planning. As part of that commitment, I’ve
attached the following links and files with some helpful tips.
Probate Planning
Tips
http://www.scotiabank.com/cda/content/0,1608,CID685_LIDen,00.html
Year-End Tax Tips
2004
download
pdf
It’s All About Process
I have a wonderful presentation that outlines the process
for building a strong portfolio. It is not about any
specific product, but rather about the important elements of
an investment strategy and the pitfalls most investors fall
into when making investment decisions. I would be happy
to make this presentation to a group of your colleagues over
lunch sometime early in the New Year. I have no doubt
they will gain valuable insights from it – regardless of who
they invest through. Please let me know if you’d like me
to make this presentation in your workplace – the lunch is on
me.
Pass it on
Thank you for the positive feedback on the information I
sent last quarter. And thanks as well for passing it on
to friends and colleagues as many of you indicated you
did. I appreciate your help with my effort to let people
know what I do and the value I provide as an advisor.
I wish all of you a very happy holiday season and wonderful
New Year.
This article is for
information purposes only. It is recommended that individuals
consult with their own tax advisor before acting on any
information contained in this article.
Commissions, trailing
commissions, management fees and expenses all may be
associated with mutual fund investments. Please read the
prospectus before investing. Mutual funds are not guaranteed,
their values change frequently and past performance may not be
repeated.
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