The wisdom of appropriate asset allocation

Summarizing the above last month chart of our core portfolio:

  • The straight green represents a 4% annual growth. It shows +0.33% for the month.
  • The blue line with the large dots is our core portfolio performance.  It shows -1.5% for the month.
  • The yellow dotted line is the S&P 500. It shows -4.5% for the month.
  • The yellow dotted line is the Toronto Stock Exchange index.  It shows -5.3% for the month.

We maintain a 40/60 asset allocation between an index-exchange traded fund and cash in our core portfolio. (We changed from a 50/50 allocation a few months ago.) In a rising market such as we have had for the last decade, cash drag leads to portfolio underperformance. More memorably stated, cash is trash in a rising market. In a declining market, cash is king.

Our core portfolio declined by 1.5% in a market that declined three times as much! When the market declines by 10% which, someday, it will, our cash position will allow us to buy it at bargain prices.

The 10/22/2018 blog dealt with the prospects of a market correction.





Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

Schedule Your Free Half-Hour Discussion

Get in touch with us and schedule a free half-hour discussion with Milan.