From Financial Consumer Agency of Canada
Different investors will need different investing strategies and a different mix of investment assets. For example:
Pauline is just beginning her working life. She does not have much money saved, but she's building up some money in the bank with every paycheque. Since she is still young and has no commitments, she feels that she can take more risks in choosing some long-term investments. After assessing her investing goals with her advisor, here's what she holds in her investment portfolio:
Speculative: 30%
Moderate: 50%
Low: 10%
Cash and cash equivalents : 10%
Pauline has put more of her savings in stocks or equity mutual funds. In the past, these choices have often done better than interest-based investments over time. But she knows she should not put all of her money into high-risk investments.
Alex has a good job and his earnings have been rising through the years. He is able to save a significant amount every month, but he also has significant responsibilities. In addition to a mortgage and savings for his retirement, he knows that in a few years his children will rely on him for university costs. Here's what he holds in his investment portfolio:
Speculative: 20%
Moderate: 40%
Low: 30%
Cash and cash equivalents: 10%
Alex expects to need some of his savings within a few years. But he is also investing some of his money for his retirement. With the help of his advisor, he chooses a mix of conservative, moderate and higher-risk investments, and prefers well-established investments like bonds, reliable "blue chip" stocks and mutual funds.
Karen and Samuel are near their retirement years. They want to protect their savings because they'll need to live on their investments after they retire. They prefer investments that create a steady, reliable stream of income. They have moved their investments gradually to safer, guaranteed investments. Here's what they hold in their investment portfolio:
Speculative: 10%
Moderate: 30%
Low: 40%
Cash and cash equivalents: 20%
Karen and Samuel want to avoid risk; they would rather earn less and know their money is safe. After discussing their situation with their advisor, they put most of their money into preferred shares, monthly payout guaranteed investment certificates (GICs), government savings bonds, and other low-risk investments. They have also converted part of their investments into an annuity, a form of investment that will pay out cash monthly to supplement their income.
Take a look at the three portfolios described above. Which one is closest to your own interests? How would you adjust it to better reflect your needs? Enter the percentage of each type of investment to draw your own asset mix in the circle below. Why would that be a good asset mix for your circumstances?
Asset mix is critical to investment success. Asset mix, or allocation, means the mix of investment types you hold. It's a very personal matter. You may be willing to take more risk in your early and peak earning years. As you head toward retirement, you may choose a more conservative mix. Be sure that you always get advice from a registered financial advisor to make sure your investment mix is suitable for your situation.
Review your mix from time to time and consider adjusting your portfolio:
