Portfolio of Financial Instruments

A portfolio is a group of different type of financial assets. When investing in the stock market, a portfolio would consist of stocks (US, Canadian, Europe, Japan  BRICS emerging markets etc), fixed income assets (Bonds, Cash),  REIT (real estate income trust).

Portfolio Approach is good for people with retirement funds, or place to store your capital and grow long term. Way lot better than savings accounts or fixed deposits in bank. 

Risk & Return of typical Assets

The growth portfolios have the highest risk and highest reward in 3 year period. However due to higher risk (standard deviation) the highest return can only be achieved in longer time horizon.

The Income portfolio has the lowest risk and return is also the lowest.

The Balanced portfolio is closer to the efficient portfolio with medium risk & higher return than income portfolio.

Investor should put their funds in ETF in a balanced portfolio. ETF could be Vanguard or any other with low fees <2%

  • Risk: 19.8%

    Return:  

    1 YR: -4.5%, 3 YR: 9.2%, 5 YR 8.5% 10 YR 13.1%

  • Risk: 21.7%

    Return: 

    1 YR: -13.4%, 3 YR: 3.2%, 5 YR 1% 10 YR 6.8%

  • Risk: 8.4%

    Return:  

    1 YR: 0.3%, 3 YR: 1.1%, 5 YR 3.0% 10 YR 2.1%

  • 20% Fixed, 80% Equity

    Risk: 14.4%

    Return:  

    1 YR: -4.9%, 3 YR: 6.4%, 5 YR 5.9% 10 YR 9.8%

  • 40% Fixed, 60% Equity

    Risk: 11.4%

    Return: 

    1 YR: -2.2%, 3 YR: 5.7%, 5 YR 5.9% 10 YR 8.3%

  • 80% Fixed, 20% Equity

    Risk: 7.1%

    Return: 

    1 YR: -0.6%, 3 YR: 3.2%, 5 YR 4.0% 10 YR 4.8%

  • This is an example of an efficient Portfolio, which shows maximum return with minimum risk.

    Asset                 Allocation

    US Stocks             50%

    ex-US Stocks          5%

    US Bonds              20%

    10 Yr US Treasury 20%

    REIT                         5%