Asset Allocation
           
    SPECIAL WARNING: The Investin' Intestin' Tester is a thrill-ride. Do not board if you have a cardiac condition. Consult your physician. It may also cause nausea, vomitting, and severe emotional upset. A screen protector and personal protective equipment (PPE) are suggested for the safey of both you, and your electronic devices.  
     
     
     
             
  This is a mental exercise, almost like guided meditation.   Do you want to simply put a stock:bonds ratio and have stocks distributed as 1/3 Canadian & 2/3 Foreign or set your own custom allocations?  
  So, be still and think on how you feel as you go through it.    
       
 
  If you are close to retirement, enter your portfolio value into the box below.        
             
  If you are many years away from that, enter what you want your portfolio to look like in ten years.        
             
  Money Invested        
        Hover over charts to see data points  
       
   
  Bonds Stocks        
         
  Conservative Aggressive        
 
       
             
             
             
  Enter Allocation. Must Add Up To 100%  
 
     
     
     
     
     
  Total    
             
  Think about how excited you are to have achieved this financial goal.  
             
  You worked and sacrificed to get here. You should be proud!  
             
    Now Open Your Financial Statements One At A Time    
             
Indexes Used: TSX, Total US Market, MSCI EAFE, MSCI Emerging Markets, XBB.TO. Dividends re-invested where data available.
Quarterly Statement 1
       
   
  Elapsed Time 3 Months      
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
             
  Breaking News..Breaking News..        
         
             
  The internet will revolutionize everything.        
             
  It is like the new industrial revolution!        
             
  As a tech tycoon, you might buy a new car or take a trip.        
         
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Quarterly Statement 2
       
   
  Elapsed Time 6 Months      
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
             
  Breaking News..Breaking News..        
         
             
  Big revenue miss by a major Canadian company.        
             
  Probably a one-off. It is a healthy pull-back.
     
             
  No new car for now, but not a big deal.        
             
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Quarterly Statement 3
       
   
  Elapsed Time 9 Months      
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
     
     
  Breaking News..Breaking News..        
         
  The economy has slowed,        
   Revenue forecasts lowered.        
             
  Many tech companies have gone bankrupt.        
             
  The U.S. and Europe are in recession.        
             
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Quarterly Statement 4
             
  Elapsed Time 1 Year  
 
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
  Breaking News..Breaking News..        
         
  Global economies have shrunk.        
             
  Provincial budgets in crisis. After no increase in payments in a decade, doctors fees shrink.        
         
  Docs are unhappy & the "brain-drain" is in effect.        
  At least docs have job security & plenty of work.        
             
  Maybe the market is bottoming.        
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Quarterly Statement 5
             
  Elapsed Time 1 Year 3 Months
   
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
     
     
  Breaking News..Breaking News..        
         
             
  Global economies recognized to be in a recession.        
             
  Canada has been spared.        
             
  Guess that wasn't the stock market bottom.        
  It’s still dropping.        
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Quarterly Statement 6
             
  Elapsed Time 1 Year 6 Months  
 
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
  Breaking News..Breaking News..        
         
  Terrorists crash planes into World Trade Center.        
             
  Cases of major corporations cooking the books come to light. Some major companies are in trouble.        
         
             
  Is anywhere safe?        
             
  Your friend is worried they may lose their job.        
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Quarterly Statement 7
             
  Elapsed Time 1 Year 9 Months
     
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
     
     
  Breaking News..Breaking News..        
         
             
  You friend loses their job.        
  More job cuts are coming.        
             
  A colleague at work decides to delay retirement.         
  They are waiting for their portfolio to recover.        
             
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Quarterly Statement 8
             
  Elapsed Time 2 Years
   
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
  Breaking News..Breaking News..        
         
  You friend loses their house.        
  They are bankrupt and struggling.        
             
  Your financial advisor calls you.        
  They tell you to be calm. Trust them.        
   Despite 2 years of losses, you have a long time-line.        
             
  The markets are starting to recovery already.        
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Quarterly Statement 9
             
  Elapsed Time 2 Years 3 Months  
 
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
  Breaking News..Breaking News..        
         
  Your friend's marriage broke down.        
  They live in your basement.        
             
  You have a dream of your advisor boarding a plane.        
             
  They are wearing a Hawaiian shirt & shorts.        
  And carrying a briefcase stuffed with money.        
             
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Quarterly Statement 10
             
  Elapsed Time 2 Years 6 Months
   
             
  Quarterly Investment Statement        
         
  Opening Portfolio Balance        
  Current Balance        
             
         
  In percent, that is        
             
             
     
     
  Breaking News..Breaking News..        
         
             
  You don't make it another three months.        
           
  The stock market "crash" is all over the news.        
  Your spouse is angry and upset.        
  You check your statement.        
             
             
  If you feel uncomfortable, you can adjust your asset allocation section in the beginning tab.  
  Stocks   Bonds  
             
Dismount and Debrief
             
  Time Period June 2000 to September 2002  
   
       
  Final Financial Statement  
   
  Opening Portfolio Balance  
  Current Balance  
       
   
  In percent, that is  
  Stocks Bonds  
   
       
  How did seeing those losses make you feel?  
       
  Did you feel tempted to adjust your asset allocation?  
       
  This was the market bottom. If you managed to stay on for the ride, it would take you  
   
  Years to get back to break even from bottom  
   
  Years since the bear market started  
   
             
  The ride down in a bear market can be much longer & tortuous than most expect. We stopped at month 28.  
             
  It is hard to ignore losses that long and you don't live in a vacuum. It will be in the media and your life.  
             
  If you were able to hang on through all of that, the chart above shows what the markets did over the next 5 years.  
             
  But bear markets are rare and the tech bubble was just a bad example…   
  Well, the above chart ends just before the Global Financial Crisis.  
             
  These rare events occur frequently. The next tab shows a longer-range 68 year chart.  
             
Longer Range
  These rare events occur frequently.  
  The 2000-2002 area is highlighted in yellow.