My Portfolio – Asset Classes

by Mike Holman

In this post I want to outline the basic asset classes that make up my portfolio and also to give some extra information on two classes (REITs (such as VNQ), and real return bonds) which I’m not as familiar with.

 

In the bonds area I have various bond products (ETF, mutual fund, GIC) and a real return bonds ETF.  Note – real return bonds are referred to as treasury inflation-protected securities in the US.

 

My equities are divided up into Canadian, US, international (Europe, Asia and Far East), emerging market and REITs. I’ll be posting soon about my exact proportions of these different areas.

 

 

REITs – Real Estate Investment Trusts

 

These are considered a separate asset class since real estate has a low correlation with other types of investments.

These securities are trusts that purchase properties and pay out a high percentage of their income in the form of dividends. This group was the only type of income trusts to be excluded from last year’s income trust tax change so investors have to be aware that government tax policy on REITs could change at any time. An example of a REIT is VNQ which trades on the AMEX and is run by Vanguard.

Canadian REITs trade on the TSX so they can be bought individually but I’m buying the iShares ETF XRE which represents the TSX Capped REIT Index.

 

This site has some great info on REITs.

 

 

Real Return Bonds

 

These are Government of Canada bonds that pay you a rate of return that is adjusted for inflation. Unlike regular bonds, this feature assures that your purchasing power is maintained regardless of the future rate of inflation.

These bonds can be purchased individually through any broker but I’ll be buying the iShares ETF XRB which represents the Scotia Capital Real Return Bond Index.

 

Bylo has a lot more details on these bonds.

 

Other Stuff

 

I noticed today that Middle Class Millionaire has a series on asset allocation as well – I thought it would be interesting to list some bloggers and their equity asset allocation along with their ages for comparison. This would have been better in yesterday’s post but better late than never! Please note that I’m including cash as part of the bond portion.

 

Middle Class Millionaire – age 27 – 95% to 100% equity

Outroupistache – mid 50’s – 70%

Canadian Capitalist – early 30’s – 80%

Moi – late 30’s – 75%

I’d love to hear from anyone else about what kind of asset allocation they have?

 

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{ 2 comments… read them below or add one }

1 Canadian Capitalist

I don’t have any cash in my actual portfolios. I figure that I have to hold a bit of cash anyways as a cushion against surprises, so the only cash in my portfolios are dividends and interest waiting to be reinvested. My bond allocation is 20%.

2 FourPillars

Thanks CC – I’ll make the change.

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