Monday, May 07, 2007

Analyzing my Current Asset Allocation

Welcome readers to the second Canadian Tour of PF Blogs. I hope you enjoy this post and I encourage you to check out the other blogs. For a complete list head over to the Money Diva's blog.

I know I've been guilty of this myself for a number of years. I tend to focus on each account separately rather than looking at the macro or big picture of all the accounts. I for some reason have a hard time seeing the forest because I'm staring at the trees.

So out of my most recent net worth ($131,500) let me break down where it all is:

1) Primary Residence Equity $91,600 or 70%
2) Canadian Equity $13,950 or 11%
3) Canadian Bonds $3200 or 2%
4) US Equity $3200 or 2%
4) International Funds $3250 or 2%
5) Old Work Pension (?) $10,500 or 8%
6) Cash $5800 or 5%

Well that was an useful exercise I had no idea I was that heavy into Canadian equities. Also it looks like I'm very heavy into a real estate with a huge 70% of my net worth tied up in my house. I'm also a bit embarrassed to say I have no idea where my old work pension is invested. There is a good reason I'm going to the bank soon to get that transfered into a Lock In RRSP.

What is interesting about this was I just broke this up into broad categories, but if I break it down further I suspect I'm holding onto a lot Canadian bank shares since they seem to be a big favorite of most mutual funds.

Now the issue stands, how do I fix this mess of accounts into a bit of order. I'm not sure how I'm going to do it yet, but if you have an idea please share.


Outroupistache said...

Hi, sometime in the next two weeks I will be taking my own portfolio apart and rebuilding along the lines I have been doing with the UK portfolio that I have been describing on my blog. I will post as I go in re-making my own.

Short of renting a house, having a substantial part of one's equity in house is almost inevitable. My own paid-off house still occupies a too-substantial chunk of my net worth but I ain't selling it. Putting the house aside, you seem to have a fair balance already. The locked-in account will offer a chance to add more non-Canadian content. One thing I would add is to set yourself a target percentage for each category and re-balance regularly, like annually, to maintain the target percentages as things rise or fall at different rates. Good luck.

Mike said...

Interesting post.

I think any kind of analysis of your financial situation is worth doing. My suggestion is to separate the investment side from everything else in order to analyse your investments better. I'm not saying stop the analysis you are doing - this would be extra analysis. Including house equity as part of asset allocation can really throw things off if it's a lot higher than your investments.

Looking just at your investments it appears like you have the following allocations
Cdn eq = 35%, US eq = 8%, Int eq = 8%, pension = 26%, bonds = 8% and cash = 15%

From there you can look at what % of your portfolio is fixed income (cash, bonds) or equity and decide from there if that matches your desired allocation. Obviously you need to find out what is in the pension fund in order to do this.

Anyways - that's how I do it.

Canadian Dream said...


I look forward to you posts on redoing your portfolio. I also agree that you house will always be a large amount of your net worth.


That was a great idea for doing an additional analysis. Thanks. I've started the ball rolling on moving the old pension over to a Lock In RRSP yesterday, so once that is done I'll check out the new balance and adjust from there.


Mike said...


My next suggestion is to look at the costs of your investments. It's up to you if you prefer managed investments or passive but the passive ones have lower costs.

I know TD online has very cheap index funds as does Altamira (but not quite as cheap). For your portfolio size, either would be a good choice.

As you mentioned you should check out (as I will be doing) outroupistache's new portfolio since it will have mostly low cost products I'm sure.

Thicken My Wallet said...

Good analysis. As you mentioned, I would start looking at duplication issues on the Canadian equity side and separate out by industry allocations as well. Just make sure you are not heavily invested in any one stock (whether held individually or in mutual funds). Looking forward to seeing what you do.