Choose your asset mix

Choosing your asset mixAsset mix The percentage distribution of assets in a portfolio among the three major asset classes: cash and cash equivalents, fixed income and equities.+ read full definition is step 5 to investing. The right assetAsset Something of value that a company or an individual owns or controls. Examples: buildings, equipment, property, a car, investments, or cash. Can also include patents, trademarks and other forms of intellectual property.+ read full definition mix should:

  • help balance risk with your expected rate of return on your investments,
  • fit your tolerance for risk,
  • let you to get your money when you need it,
  • help provide the growth you need to reach your goals, and
  • change as your needs and goals change over time.

Why the right asset mix is important

By holding a mix of investments from the 3 main asset classes – cash and cash equivalents, equitiesEquities Another word for investments in the stock market.+ read full definition and fixed incomeFixed income An investment that pays regular income to you. Examples: Guaranteed Investment Certificates, Canada Savings Bonds and types of other bonds.+ read full definition investments – you can get a fairly well-diversified portfolioPortfolio All the different investments that an individual or organization holds. May include stocks, bonds and mutual funds.+ read full definition. Deciding how much of your portfolio to investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition in each asset classAsset class A group of securities that have similar characteristics. Examples of asset classes include, such as stocks, bonds, real estate or cash.+ read full definition is called asset allocation.

Your asset mix will largely determine the risk and expected returnExpected return Estimated value of your investment in the future. Tells you the overall profit you might expect – either as income (interest or dividends), or as capital gains (or losses). Often expressed as a percentage.+ read full definition of your portfolio. To get the right mix for you, be sure that your asset mix matches your risk tolerance, financial goals and time horizonTime horizon The length of time that you plan to hold an investment before you sell it. This may be a brief period of time or span as long as decades, depending on your financial goals.+ read full definition.

If you need help putting together an asset mix, you may want to work with an advisor.

To learn more about asset mix, watch this video.

Changing your asset mix over time

As your financial goals and needs change, you will likely want to review – and possibly change – your asset mix. Here are a few examples.

If you’ve just started your first job

You may not have a lot of savings and you may be paying off student debtDebt Money that you have borrowed. You must repay the loan, with interest, by a set date.+ read full definition. But you may also have more time to reach some of your financial goals. At this stage of life, you may be willing to take more risks with your long-termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition investments.

For tips on investing in your 20s, watch:

If you’re more established in your career

You’ll likely be earning more. And your financial goals will likely have changed. You may be paying down a mortgageMortgage A loan that you get to pay for a home or other property. Often the loan is for 20 years or more. You make a set number of payments for a set amount each year.+ read full definition, and saving for a child’s education or for your retirement. At this point, you may be interested in a mix of higher- and lower-risk investments.

As you approach retirement

You might want to start shifting into lower-risk investments. Protecting your savings may become more of a priority because you’ll need to live on your investments after you retire. You may also want to look into investments that create a steady, reliable stream of income.

Watch this video for tips on investing as you approach retirement.

5 key points

The right asset mix:

  1. Balances risk and return
  2. Fits your risk tolerance
  3. Lets you get your money when you need it
  4. Helps you reach your goals
  5. Changes over time
Last updated