Investor Toolkit: 4 balancing acts for a successful portfolio

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Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you a specific advice on successful investing, including advice on successful portfolio management. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away.

Tip of the week: “Diversifying your portfolio gives you the greatest chance for safety and profit and there are 4 ways to ensure that you balance your portfolio successfully.”

At first glance, managing an investment portfolio may resemble prize fighting, with an investor bobbing and weaving to get the upper hand on the market. But for successful investors, good portfolio management is much more like a multi-dimensional tightrope act. And you must be able to perform these 4 balancing acts to succeed.

  • Investor balancing act #1: Your portfolio strategy should begin with a fundamental piece of advice that we underline frequently. Spread your money out across the 5 main economic sectors (Finance, Utilities, Manufacturing, Resources, and the Consumer sector). The proportions should depend on your objectives and the risk you can accept. The Finance and Utilities sectors involve below-average risk. Manufacturing and Resources tend to be riskier, and the Consumer sector is in the middle.
  • Investor balancing act #2: Balance aggressive and conservative investments in your portfolio, in line with your investment objectives, and the market outlook. Above all, avoid the urge to become more aggressive as prices rise and more conservative as prices fall.

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  • Investor balancing act #3: Good portfolio management also means balancing your investments geographically. Avoid focusing your portfolio on any one country or region. A lower-risk way to add international exposure to your portfolio is to hold multinational U.S. stocks, such as IBM, McDonald’s and Wal-Mart, which is now tapping into China. We cover all three of these companies in our Wall Street Stock Forecaster newsletter. What’s more, today’s lower U.S. dollar provides you with an opportunity to add high-quality U.S. stocks to your portfolio at bargain prices.


Do you invest with a plan in mind in order to give yourself a diversified portfolio? Do you review your portfolio regularly to make sure you don’t have too many similar investments?
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  • Investor balancing act #4: Market leaders and market laggards both deserve a place in your portfolio. Over long periods, high-quality stocks play leapfrog. Some of the lowest-risk, highest-profit buys you’ll ever find are overlooked or out-of-fashion stocks of high investment quality that are coming back into investor favour.

COMMENTS PLEASE—Share your investment experience and opinions with fellow members

Is there a big difference in the diversity of your investments now compared to when you began investing? What do you think is the most important advantage you have gained by diversifying?


  • I follow your advice and allocate 16% of each of the five economic sectors. I also allocate 10% each to high tech and trusts. I rebalance not more often than quarterly but must do so at end of calendar year when I calculate my RRIF withdrawals.

    I originally allocated 50% to Canadian stocks and 25% to each ‘US’ and ‘Rest of World’. This allocation is based on location of head office so IBM is US and Nestle is Rest of World. This allocation has slipped at little as US stocks and currency have done better than Canadian.

  • Todays U.S. dollar is actually high versus Canadian dollar and caution should be taken when investing at this time unless potential return outweighs risk of currency depreciation if Canadian dollar rises against U.S. dollar.

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