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Step 1: Focus on the basics Print
An important theme is that one should concentrate on those factors which are under our control in the management of our portfolio.

Insofar as the famous rate of return on a portfolio, studies have indicated that only a small percentage (probably in the order of 10%) of the return of a diversified portfolio can be explained by the individual selection of certain equities.

Therefore, our site will help you focus on what you can control, namely:
  • The choice of appropriate asset categories for diversified portfolio, namely, equity, debt and commercial leased real estate.
  • The allocation of investments by categories and geographic regions, and, notably, the percentage of equity in your portfolio. This decision is fundamental and deserves your full attention.
  • The use of exchange traded funds and index mutual funds to diversify your investments at minimum cost.
  • The effective use of a financial adviser, for example, to examine your personal situation and recommend an allocation of your assets, but not necessarily for the day-to-day management of your portfolio.
  • Managing your investment expenses. Even students specializing in finance at reputable universities (Harvard and Wharton) underestimate the importance of costs on investment returns.
  • How to calculate and evaluate the return on your portfolio.
  • The place of taxation in managing your portfolio: Know the importance of concepts such as marginal income tax rates and the different tax treatment of different types of investment; the importance of avoiding unnecessary triggering of taxable capital gains; how to maximize the benefits from the use of your RRSP by the optimal allocation of investments among asset classes and as between your RRSP account and your non-RRSP account; being aware of tax ineffectiveness of many mutual funds.
Last Updated ( Wednesday, 09 January 2008 )
 
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Quotation

An attempt to beat the index must either concentrate its assets–meaning less diversification, meaning more risk–in stocks it hopes will outperform the index, actively trade from one asset to another in search of performance (meaning tax consequences and lots of effort on the part of the investor, as well as the costs of trading), or both. Ryan Suenaga