Investment Management
Diversifying Across Asset Classes
The advantages of diversification between asset classes are similar to the advantages of diversification between stocks. The Canadian stock market represents only about 3% of the world’s total equity - are you missing out?
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Satellite Portfolio Methodology
Many investors will not have a Satellite portion in their portfolio whereas others will have as much as 40% allocated for active management predominantly in the form of specialized managed mutual funds or individual security selection (stocks, bonds, specialized ETFs, etc.).
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Near Term Withdrawal or Income Requirements
If there is a requirement of income from the portfolio beyond the interest and/or dividend income provided by the Core/Satellite portfolio, it is recommended that a portion of the overall portfolio that is required for this additional income be allocated to Cash and Cash Equivalents, or guaranteed Canadian Government Bonds only.
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Standard Deviation
According to the Capital Asset Pricing Model (CAPM), risk can be used interchangeably with standard deviation with respect to well diversified portfolios. In other words, risk can be viewed as a measure of portfolio volatility. We have seen, Standard Deviation increases exponentially with Potential Return, but what does this translate to in real world application?
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Investment Policy Statement
The Investment Policy Statement (”IPS”) is a document designed to establish expectations and guidelines for investment decisions. It should outline the investment management philosophy for your portfolio with respect to construction, maintenance and monitoring.
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