Introduction        
Proper asset allocation is one of the most important investment decisions that you need to make yet it is often overlooked when building investment portfolios. It is part science, part art and part personal preference. Use this asset allocation tool to begin developing your own personal guidelines.  
Asset Allocation Guidelines  
Personal Information  
Age          
Risk Profile - See Risk Tolerance tab      
   
Total Dollar Value of Portfolio - Optional        
Basic Asset Mix  
Asset Class - see Asset Classes Tab Range Guideline Dollar Value  
  Minimum Maximum      
Cash  
Canadian Bonds    
Global Bonds    
Canadian Equities & REITs    
US Equities & REITs        
International Equities & REITS    
Other      
(Returns & volatility will increase or decrease depending on individual investments chosen within each asset class.)  
Sample average returns over a 15 year period        
Sample one year drop in value in a stock market crash    
(See Risk Tolerance tab for examples of major equity market corrections.)  
(Returns shown above are not a projection - they are for illustration and comparative purposes only)  
 
 
Disclaimer:  
The results produced by this calculator are based on the user's age and by their own personal assessment with regard to risk tolerance. Suggestions provide a baseline which users can consider along with other input to make their own asset allocation decisions. Results should be compared with more comprehensive asset allocation programs, with client profile worksheets, with risk tolerance questionnaires and/or with suggestions from a qualified financial advisor before any final asset allocation decisions are made. Asset allocations in all portfolios should be reviewed regularly to ensure they meet the needs of the portfolio holder and reflect any changing economic circumstances, changing financial circumstances or changing market values.  
Sample rates of return are for comparative and illustration purposes only. They do not predict actual future rates of return but a possibility of what could occur. MoneyPages does not imply, warrant or guarantee in any way that any suggested asset allocation created by this calculator will meet the expectations or achieve the desired investment goals of the user.  
Copyright © 2020 MoneyPages Canada
  Profile Description  
(In these hypothetical scenarios which of the six categories best matches how you feel about risk & return)
    Risk Averse Conservative Moderate Growth Aggressive Speculative  
  Frequency of
Negative Returns
1 out of
 15 yrs
1 out of
 12 yrs
1 out of
 10 yrs
1 out of
 8 yrs
1 out of
 6 yrs
1 out of
4 yrs
 
  Typical Range of
1 Year Returns
0% to 4% -2% to 8% -4% to 12% -6% to 16% -8% to 20% -10% to 24%  
  Maximum Negative
1 Year Return
-3.0% -9.0% -15.0% -21.0% -27.0% -33.0%  
  Long term
average annual return
2.00% 3.50% 4.50% 5.25% 5.75% 6.50%  
  Rates of return for various risk categories are based on long term returns of various asset classes  
  History of Equity Market Corrections  
  The equity markets have historically experienced major corrections about every 8 to 12 years. In the past ~60 years there have been significant drops in value in 1961, 1973, 1980, 1987, 2000, 2008 and 2020. While timing the date of these corrections is an impossible task, prudent investors will plan for them and structure their portfolios accordingly.

 
  The following table illustrates the drop in value of the S&P 500 during these market corrections. It is important to keep in mind that the S&P 500 is a "blue chip" or "large cap" index. Small cap indicies, emerging market indicies and other "non-blue chip" equities could experience even greater market volatility. Individual securities and many sectors within the broad index will experience significantly greater volatility than the overall index.  
  Market Correction Period Length of
Correction*
Percentage
Drop
Time to Full
Recovery
 
  Dec '61 to Oct '62 10 months -21.0% 21 months        
  Jan '73 to Oct '74 22 months -49.0% 80 months  
  Nov '80 to Jul '82 20 months -24.0% 36 months  
  Aug '87 to Jan '88 5 months -42.0% 23 months  
  Aug '00 to Feb '03 40 months -46.0% 71 months  
  May '08 to Mar '09 10 months -52.0% 28 months      
  Feb '20 to Mar '20 2 months -34.0% n/a  
  Average 16 months -38.3% 43 months        
  Median 10 months -42.0% 32 months  
  Length of correction refers to the period of time from peak valuation to lowest valuation and NOT from peak valuation to full recovery  
  Time to full recovery refers to the period of time required for the market to regain all the value it lost during the correction.  
 
  Asset Class Investment Examples  
  Cash Treasury Bills Money Market Funds High Interest Savings Cash Balances  
  Canadian Bonds GICs Government Bonds Corporate Bonds Bond Mutual Funds Bond ETFs  
  Global Bonds GICs Government Bonds Corporate Bonds Bond Mutual Funds Bond ETFs  
  Canadian Equities Large Cap Stocks Mid Cap Stocks  REITs Equity Funds Equity ETFs  
  US Equities Large Cap Stocks Mid Cap Stocks  REITs Equity Funds Equity ETFs  
  International Equities Large Cap Stocks Mid Cap Stocks  REITs Equity Funds Equity ETFs  
  Other Small Cap Stocks Micro Cap Stocks Precious Metals (bullion) Bullion Funds Bullion ETFs  
  EM Stocks EM Bonds EM Stock Funds or ETFs EM Bond Funds or ETFs "Junk" Bonds  
  Cryptocurrencies All other uncategorized investments  
Note 1: Preferred shares are sometimes included in the same asset class as bonds
Note 2: Equities refer to common shares and not to preferred shares
Note 3: The term "EM" refers to emerging markets and includes many countries in Latin America, Asia, Africa and eastern Europe
Note 4: "Junk" bonds refer to high yield corporate bonds that have either a poor credit rating or are unrated by bond rating agencies
  Balanced or Portfolio Mutual Funds and Exchange Traded Funds  
  Balanced Funds & ETFs or Portfolio Funds & ETFs will include more than one asset class within a single investment.  
  If you hold any of these investments, in order to correctly assess your asset mix the amount allocated to each asset class within these funds needs to be determined. In some cases these investments can closely match your asset allocation requirements with a single investment.  
  As such, they are sometimes referred to as single solution funds.  
  The asset mix in various portfolio funds differs. On a basic level, one fund may hold 60% equities and 40% fixed income while another may hold 40% equities and 60% fixed income. When considering a portfolio fund choose one with an asset allocation that meets your needs.  
  Even after choosing a portfolio fund,  your asset mix still needs to be monitored as your needs and tolerance to risk can and likely will change over time.  
  These funds can also be used as a core holding in an account and the portfolio asset mix can be adjusted by adding cash, bonds, equities or other investments in amounts that will result in a portfolio that meets your desired asset allocation.  
Portfolio Construction Guidelines
BASIC GUIDELINES
These guidelines are intended to help you decide on the asset mix for your "core portfolios" that would include investments in your taxable investment accounts, your Tax Free Savings Account (TFSA), your Registered Retirement Savings Plan (RRSP) and/or your Registered Retirement Income Fund (RRIF). These are the portfolios that you will rely on when you no longer have earned income or business income to support your lifestyle.
You may wish to have a different profile for each of your core accounts. As an example, you may want a conservative profile for your RRSP, a moderate profile for your TFSA and a growth profile for your taxable investment account. Or you can maintain the same profile for all accounts.
NON-CORE ACCOUNTS
Emergency Funds
In addition to these "core accounts" you should have a readily accessible savings account or "emergency funds account" with sufficient funds to cover 3-9 months of basic living expenses (accommodation, food and utilities)
Saving for a Major Purchase
If one of your goals is to save for a major purchase or the down payment on a house, these savings should be allocated to safe, highly liquid cash investments such as a savings account, a money market fund or treasury bills.
Trading Accounts
If your core portfolio is of sufficient size to meet your long term goals (or expected to grow to sufficient size with growth and future contributions), if your savings for a major purchase and/or down payment are in place and you have your "emergency funds" in place, you can also consider an "aggressive trading or speculative trading account".
ASSET ALLOCATION
None of the assets in your non-core accounts should be considered when considering an asset mix for your core portfolios. The non-core accounts are stand alone accounts that serve specific needs rather than long term growth or income.
Asset allocation is a critical first step in the construction of a core portfolio. Selection of individual investments or funds should occur only after you have determined a suitable asset allocation
While the calculator suggests an asset mix, it also provides a range of allocations for each asset class to provide you with some flexibility in developing or transitioning your portfolio. In other words it provides boundaries that you can consider.
INVESTMENT SELECTION
The characteristics of the individual investments and funds within each asset class must be considered. The quality of these investments can range from poor to excellent and the returns on these investments can range from stable to highly volatile. There are many resources available to assess individual investments, mutual funds and exchange traded funds. Use these resources along with the advice of your financial advisor and make educated choices.
ECONOMIC ENVIRONMENT
As always consider prevailing economic conditions along the characteristics of individual investments and funds when choosing your asset allocation and the underlying investments. In periods of extreme over-valuation or under-valuation of a particular asset class(es) you may want to deviate sigificantly from the guidelines provided.