Q: I am a retired, dividend-income investor with a company pension, CPP, OAS and some Insured Annuities. I wanted to get your views on our asset allocation. Currently we have the following targets by asset class (in the equity portion of our portfolio):
Finance = 17.5%
REITs = 7.5%
Telecom, Utilities and half of Pipelines = 22.5%
Consumer Staples & Disc = 17.5%
Health = 2.5%
Industrial = 10%
Tech = 10%
Energy and the other half of Pipelines = 10% (actual is 7%)
Materials = 2.5%
While I believe pipelines should be 100% allocated to the Utilities sector, they seem to trade more like the Energy sector...hence the 50-50 split. Also I normally have 20% allocated to the Consumer sector, but we have reduced the Discretionary sub-sector for a period of time due to COVID.
I read years ago that something like 75% of your returns are associated with your asset allocation as opposed to your stock selection. Our portfolio is set up for mostly dividend generation, with some capital growth.
Question 1 = Do you see any red flags with our allocation targets?
When I attempt to replicate the 5iR Income Portfolio into my system, I note 5iR has a significantly higher weighting in Consumer and Industrials...while significantly lower in Health, Technology, Energy and Materials.
Question 2 = Are there reasons for the lower allocation weights in the last 4 sectors...higher risk maybe? I am asking so I can fine-tune my own allocations, which don't change much over the years...maybe 2.5% here or there from time to time.
Thanks for your help...much appreciated...Steve
Finance = 17.5%
REITs = 7.5%
Telecom, Utilities and half of Pipelines = 22.5%
Consumer Staples & Disc = 17.5%
Health = 2.5%
Industrial = 10%
Tech = 10%
Energy and the other half of Pipelines = 10% (actual is 7%)
Materials = 2.5%
While I believe pipelines should be 100% allocated to the Utilities sector, they seem to trade more like the Energy sector...hence the 50-50 split. Also I normally have 20% allocated to the Consumer sector, but we have reduced the Discretionary sub-sector for a period of time due to COVID.
I read years ago that something like 75% of your returns are associated with your asset allocation as opposed to your stock selection. Our portfolio is set up for mostly dividend generation, with some capital growth.
Question 1 = Do you see any red flags with our allocation targets?
When I attempt to replicate the 5iR Income Portfolio into my system, I note 5iR has a significantly higher weighting in Consumer and Industrials...while significantly lower in Health, Technology, Energy and Materials.
Question 2 = Are there reasons for the lower allocation weights in the last 4 sectors...higher risk maybe? I am asking so I can fine-tune my own allocations, which don't change much over the years...maybe 2.5% here or there from time to time.
Thanks for your help...much appreciated...Steve
