Why Asset Allocation Works (and Why It Helps You Sleep at Night)
Most investors ask, "What should I buy?" A better question is, "How should my money be divided?" That split is called asset allocation, and it's the foundation of how we manage your portfolio.
WEALTH MANAGEMENTFINANCIAL PLANNING
Matthew Watt
10/30/20262 min read
Most investors ask, "What should I buy?" A better question is, "How should my money be divided?" That split is called asset allocation, and it's the foundation of how we manage your portfolio.
What the research found
In a landmark study, Brinson, Hood and Beebower looked at how pension plans actually performed. They found that the long-term mix of investments mattered far more than trying to pick winners or time the market . Later research refined the finding. Ibbotson and Kaplan found that about 90% of the ups and downs in a typical fund's returns over time come from its asset allocation policy . Allocation explains about 40% of the differences in returns between funds .
So your mix of investments largely sets how your portfolio behaves, in good markets and bad.
What this looks like for you
Our model puts your money to work in three ways:
35% fixed income for steadiness and income. Half is traditional bonds (3–7 year duration). The other half is a liquid alternative strategy that can go long and short, which may help when interest rates move.
55% equities for long-term growth, spread across Canada, the U.S., and international markets, so you aren't relying on any one economy.
10% alternatives in a market-neutral, low-beta long/short strategy. It's designed to move differently from stocks and bonds, which can be a welcome cushion when both are under pressure.
Why a mix beats a single bet
No one knows which market will lead next year. Leaders change, and diversification means you always own some of whatever is working. It also means you're not fully exposed to whatever isn't. The result is typically a smoother ride, and a smoother ride makes it easier to stay invested through the rough patches, which is where many long-term plans succeed or fail.
We keep it on track
Markets drift. After a strong year for stocks, your portfolio can quietly become riskier than you intended. We rebalance periodically, trimming what has grown and topping up what has lagged, so your risk level stays where we agreed .
What it means for your goals
Asset allocation can't remove risk or guarantee returns. It does give you a disciplined, evidence-based plan that doesn't depend on predicting the future. Has your timeline, income, or comfort with risk changed? Let's talk and make sure your mix still fits your life.
This post is for general information only and isn't personalized advice. Diversification doesn't guarantee a profit or protect against loss. Alternative strategies carry their own risks.
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Oakville, Ontario L6J 7W5