ETFs – Financial Securities (IDC4U) Mr. M. Goldberg, Martingrove C.I., 2010 Asset Mix Financial Securities (IDC4U1) Mr. M. Goldberg, Martingrove C.I., 2010

ETFs – Financial Securities (IDC4U) Mr. M. Goldberg, Martingrove C.I., 2010 Asset Mix –Basically the mix of Equities (ownership of companies, eg. Stocks) and Fixed Income (debt of companies/governments eg. Bonds) and cash and other investments you have in your portfolio (cash equivalents, commodities) Recommended Asset Mix –To avoid risk in your portfolio financial advisors recommend that you should have a mix of Equity and Fixed Income investments –Financial advisors also recommend that at least 5% of your portfolio should be held in cash –All of this depends on two things: Your Risk Tolerance level Your Age

ETFs – Financial Securities (IDC4U) Mr. M. Goldberg, Martingrove C.I., 2010 Asset Mix Fixed Income Rule of Thumb –Your age should be your percentage of fixed income in your portfolio Asset Mix Examples Age Fixed Income25%45%55% Equity75%55%45%

ETFs – Financial Securities (IDC4U) Mr. M. Goldberg, Martingrove C.I., 2010 Asset Mix Caution – Near Retirement? –If you’re 5 years away from retirement or less, the majority of your portfolio should be invested in fixed income investments, to avoid volatility/risk of losing your nest egg (retirement savings) How to Apply the Asset Mix –As mentioned in the ETF presentation, ETFs can be purchased according to your asset mix –The asset mix can be applied easily in mutual fund investments too –The traditional way of accomplishing your asset mix is to invest in both equity and fixed income investments individually.

ETFs – Financial Securities (IDC4U) Mr. M. Goldberg, Martingrove C.I., 2010 Additional Asset Mix Examples AgeEquity (%)Fixed Income(%) < s s50 60s2080 >70595 These are rough estimates Note that this doesn’t include cash Your asset mix should be re-balanced annually The fixed income age rule, isn’t really followed here

ETFs – Financial Securities (IDC4U) Mr. M. Goldberg, Martingrove C.I., 2010 Diversification Along with creating a portfolio with a proper asset mix, there are many other ways of spreading risk by diversifying your investments. –Geography All of your investments should NOT be based in one country –Market Capitalization Some choose to diversify by purchasing stocks of large and small companies Investments in smaller companies (often called “small caps”) tend to be riskier, but have the potential for larger gains –Investment Style Some mutual funds are based on a Value approach to investing, while others tend to be focused on Growth –Other Asset Types Some funds are focused on certain industries or commodities. For example you can invest in certain sectors (like high tech., or biotechnology, or health care), currency exchange or commodities (eg. Gold).

ETFs – Financial Securities (IDC4U) Mr. M. Goldberg, Martingrove C.I., 2010 Bortolotti, Dan, “The Complete Couch Potato Roadmap”, MoneySense (November 2009), complete-couch-potato-roadmap/, February 16, 2010 Works Cited