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Image by bon_here via FlickrKnowing your asset allocation is an important step to control and manage your investments. In a perfect world, you should be able to easily calculate and see your asset allocation. Simply press the button and voila! The reality is not that simple. Not all accounts you may have easily work together and that usually leaves you in charge of figuring out your asset allocation across all your accounts.
Consolidate Your Account Statements
Sounds simple? It can be but it can also require some work. If your finances have evolved to multiple accounts with different investments, it’s probably not that simple. Accounting software can greatly ease the pain of consolidating your statements but not all of them are online. For starter, not all investment providers allow you download statements not to mention that not all investments are publicly tracked openly. For examples, my company RRSP plan has mutual funds that aren’t trackable trough public markets. They are proprietary to the company and often times catered for the company they provide the service for.
With that said, the solution for me is manual tracking with Google Spreadsheet. A spreadsheet is perfect for the job as you can leverage its graphing capabilities and the math functions to group your investments under the appropriate allocation. You just need to build a table to categorize and track the information you need for the asset allocation graphs you want.
I’ll warn you up front that mutual funds are not easy to track within many other accounts. The fund company’s report will easily report your allocation for what you hold with them but you may have to do a bit of work to fit it within the different asset allocation graphs you desire. As mutual funds hold many other investments such as cash, bonds or equities, you may have to either classify the mutual fund as one asset or group the holdings within the fund.
The Different Asset Allocation Graphs
There is more than one way to look at your allocation. Some may be more important than others depending on your investments but it’s nice to see your portfolio from different angles. If you use a spreadsheet, it’s pretty easy to classify your allocation differently as shown below.
Just as an example, I am showing my dividends investment allocation below. The first graph represents my overall portfolio allocation otherwise it represents the dividend producer of my portfolio.
Allocation By Investment Types
Allocation By Sector
Allocation By Location
Allocation By Capitalization
- Large Cap > 10B$
- Mid Cap > 2B$
- Small Cap < 2B$
Reviewing Your Asset Allocation
My primary focus in reviewing my asset allocation is to identify potential risks and future rebalancing. I would recommend you review your allocation at least once per year, and if possible, twice. One of the benefits of rebalancing based on percentage is that it indicates when one allocation does better than the other and it forces you to take your profits and redirect them towards your less performing investments.
Readers: How do you track your asset allocation? What do you look for?
Hi everyone,
As a dividend investor and in order to have more canadian stocks in my portofolio ,i am about to choose 2 stocks between four which are :TA.TO,NWF.TO ,ENF.TO ,AGBF-B.TO.
Please give your thoughts
Have a nice day
I was using this post as a guideline in analyzing my portfolio. Was wondering which sector a couple of companies would fall under?
Russell Metals and Exchange Income
@Awesomeness
A quick look in Globe Investor online and the classification comes out as "Merchandising and Lodging" for Russell Metals and "Transportation and Environmental Services" for Exchange Income.
Now, you can organize it differently. For example, BCE comes up as Utilities but I classify it as Telecoms. My utilities are all energy utilities providing energy to consumers such as electricity and natural gas.
You always have great graphs to get your point across. We share a similar investment type when comparing to my RRSPs.
In fact my fixed income allocation fell to 25% with the recent market run, I am gonna have to rebalance and bring it back up to 35% this time.
TPIE, I recently forced myself to determine asset allocation by writing a post on it, and boy howdy was it a lot of work. The obvious benefit is that now I know better where our money is stashed.
Agree with Mich; you have some pretty good graphs here. I need to go over all of my accounts and create a chart like this, too.
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Once you’ve determined the asset allocation that is best for you, you have to implement it via the investments you choose for your portfolio. At this point, the most important question you have to answer is whether you are going to take an active or a passive approach to investing. In a nutshell, the active investor believes that he or she can regularly generate (or choose fund managers who can generate) returns that are above the returns generated by some benchmark portfolio. In contrast, the passive (or index) investor wants only to match those benchmark returns at the lowest possible cost.
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I have to agree, diversifying is always best as it provides the less minimal risk when investing. Passive income is always good too. I recently asked my trader at scottrade to move my portfolio to a different broker though, didnt like them all to much
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I tend to make my investments in physical products, for example suisse gold bars. If something happened and the computers went down and you owed $20k in virtual gold on the market, what then? Just my thoughts.
I think consolidating all your statements is a good though here. I love the asset location theory.
RE: Asset (Sector) Allocation
I am seeking a spreadsheet template to track my sector allocations.
The tool used for this article and its output would be perfect. I would appreciate getting some links.
@JeffreyM
Let me put it together as a Google Template and I’ll share the link. Thanks for the interest.
Cheers.
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