Structure
Capital markets are composed of many classes of securities, including stocks and bonds, both domestic and international. A group of securities with shared economic traits is commonly referred to as an asset class. There are several asset classes, all with average price movements that are distinct from one another. Investors can benefit by combining the different asset classes in a structured portfolio.
A full range of asset classes includes small and large stocks, domestic and international, value and growth, emerging market countries, global bonds, real estate, and even municipal bonds. Because the asset classes play different roles in a portfolio, the whole is often greater than the sum of its parts. Investors have the ability to achieve greater expected returns with less price fluctuation and more consistency than they would in a less comprehensive approach.
However, because no two investors are alike, there is no single "optimal" asset allocation. Each investor has his or her own risk tolerances, goals, and life circumstances that dictate the weightings of core and asset class portfolios. You should consult your financial advisor or plan administrator to help you determine an appropriate mix. In general, the greater the proportion of stocks a portfolio holds, especially small cap and value stocks, the more "aggressive" is its risk and the greater is its expected return.
| A Structured Approach to Asset Allocation |
| Hypothetical Portfolio Annualized Returns |
|
| Monthly: 1994 - 2009. |
| The S&P data are provided by Standard & Poor's Index Services Group. Frank Russell Company is the source and owner of Russell data. S&P/TSX data provided by S&P/TSX. Dimensional indices are simulated by Dimensional from Bloomberg Securities data. MSCI indexes are net dividends, except EAFE Small, which is price-only for 1994-1998, and net dividend for 1999-present; MSCI data copyright MSCI 2010, all rights reserved. Global Bonds are the JP Morgan Global Government Bond Index 1-5 Years (hedged to CAD). JP Morgan data provided by JP Morgan. |
|
Hypothetical examples are provided by Dimensional Fund Advisors Canada ULC for illustrative purposes only. Dimensional Fund Advisors Canada ULC is a portfolio management company registered in British Columbia. The information shown should not be relied upon to make investment decisions. Indexes are unmanaged and considered to be representative of the historical performance of a particular asset class. An investment cannot be made in an index. Past performance is not an assurance of future results. |