Right now, we Canucks are having our day in the sun, and we might make some diversification hay while that sun shines. I like to call it “fixing portfolio holes.”
Of course, what’s required to fix any portfolio weaknesses is unique to each investor. We all have different strengths and different portfolio holes, or portfolio potholes. On the top line, we want to ensure that we are investing within our own risk tolerance level. And then we want to ensure that we build in geographic and asset diversification.
I asked Arthur Salzer, of Northland Wealth Management, where an investor might find opportunities. Northland is an award-winning family office. They manage money and wealth for more affluent individuals and families in Canada and around the globe. And Salzer says families are overweight Canadian stocks in the 20% range. (If you need a checkup, you might touch base with a fee-for-service advisor.)
Canadian stocks are on a good run, thanks largely to the financial, and resource and mining sectors. They’ve offered more value compared to the U.S. markets that have outperformed for more than a decade.
In search of greater value Salzer has been moving clients into more equal-weight U.S. stock funds, compared to the cap-weighted S&P 500.
Salzer says families are 7.5% to 10% Canadian real estate, and might consider currency hedging where possible, given the strong run for the Canadian dollar.
Yves Rebetez of Credo Consulting is not a fan of bonds these days, save for emerging market bonds. And on the portfolio front, he says: “I think the discussion for Canadians and holes goes back to sector overweights, gaps in exposures, greater breadth in value and small caps elsewhere, and other factors like momentum and quality.”
He would also add gold to the list of rebalancing opportunities. I am in agreement there on gold, adding commodities. Emerging market stocks might be a good consideration as well.