I wont ever advise for timing the market, yet the current imminent US-Canada trade war and political storm inspired me to reassess my investing strategy.
Context : Mid 30, kids, mortgage, stable job but no retirement plan with the job.
I favour a diversified mix of low cost index fund but being a nerd i enjoy the Rational Reminder podcast and understanding the smallest details. An evidence based approach to risk and expected returns will guide my choices.
I started with 20 % bond and 80 % stock. The problem with bond : can exhibit volatility if interest rate change especially over longer time horizon, will limit growth if too high %, uncorrelated to stock but sometimes move in the same direction than stocks in recent downturn… I can put some extra payments on my mortgage and consider this a bond for a few years.
I want home country bias : no withholding taxes on dividend and at the opposite i get a tax credit for taxes already paid in Canada. In a conflict i can’t ever be expropriated from my own country stocks and use the Canadian currency for my spending. Let’s make Canada 25%.
Next is the US allocation. It’s two thirds of the investable world by market weight (see the VT etf if you want references) it’s had incredible returns in the last decade with p/e multitude going higher. Currency and country are uncompensated risk (random) and i won’t put myself in a place where 2/3 of my retirement is subject to random results. I choose 35 %.
That leaves 20 % for International developped market. I would like this to be higher than US but i will wait for the actual market weight to tell me that International merits a higher than US %. I leave developing market alone : i want an efficient market with free flow of information snd rules of law properly enforced.
Total 100% (20-25-35-20) close to VGRO.to No single stock, no gold, no crypto. What are your asset allocation plans and most importantly why?
If there is enough engagement here, i will make a future post about asset location, favourite etf to achieve my goal, small cap value and insured US allocation with deep itm options on SPY.
10 % isn’t based on anything but let’s imagine: 2-4 % military 1 % communication infrastructure, media and unbiased information 2-4 % healthcare 2-4 % food. You quickly get to 10%. Too big and you loose the benefit of free trade.