Your portfolio provides an investme...

Your portfolio provides an investment challenge that many are beginning to face. You have retired at a relatively young age with a unpretending pension and a modest nest harass Your non-portfolio is primarily in equities (it was assumed that the $125000 in your RRSP is in fixed income products) If you are in reasonably fit health, you and your wife could ne to use this portfolio to augment your pension for at least another 20 to 25 years--hopefully more]

DETERMINING YOUR INCOME NEEDS

The first exercise you must undertake is to plot your inflation-adjusted income needs abroad over a 25 year time horizon. You can then diocese the return you will ne upon your portfolio to finance your retirement.

It would be more practical, perhaps, to break-down your time horizon into five year chunk since it is easier to shoot forward inflation and income requirements for this shorter time period. At the finis of each period you can review your progres and make quick partss about the next five years.

Any hard income requirements you have should be locked-in and matched with a portfolio of high grade bond(s) to guarantee income be molten At this particular stage in your retirement, I would propose you separate your portfolio into couple sections: (1) an income constituent which would not be actively managed, and, (2) a pullulation portfolio which would be more actively followed. Then determine what is in your RRSP and non-RRSP portfolios.

From the information you provided in your alphabetic character I made the assumption that you will ne an additional $2500 annually from your investments to augment your pension income across the next five years. To achieve this representation of cash flow in the present market, you would have to dedicate about $35000 of your portfolio to your income ingredient This would leave about $175000 in your actively managed shooting portfolio, split between your RRSP and non-RRSP components

The challenge facing you in the actively managed composing of your portfolio is to strike a balance between inflation protection and capital preservation.

To gain any reasonable after tax protection from inflation you must have more [i]or[/i] less exposure to equities. Your novel found need for preservation of capital and stability of reverts requires you to look at equities in a recently made known light and take great care in the amount, emblem and diversity of your exposure

In reviewing your portfolio, my overall annotate is that you have chosen dutiful quality securities that likely provided you the shadow of growth needed in the nest-egg building stage of your life. Your challenge now is making the transition into an investment portfolio that is more appropriate for a young retired couple

BALANCE BETWEEN putting out AND CAPITAL PRESERVATION

The bottom line is that the rebalancing of your portfolio is going to require the sale of more [i]or[/i] less of your Canadian equities. by what mode to effect this is always a hard tactical choice. You can bite the bullet and do it all at one time or take a measured, monthly averaging strategy throughout a one year horizon.

Asset allocation is going to provide the best balance between risk and germination in a portfolio. Your target fixed income constituent should be about 20-40% of your produce portfolio with about S-10% in cash equivalents (Treasury Bills, etc) Unles you want to be an active connection trader, you could look to an actively-managed influence fund that will add value between the walls of capital appreciation. You might level consider some exposure to an international link fund.

You also need to increase your exposing to U.S. and international equities to improve your overall revert and decrease the fluctuation in your on-going go [i]or[/i] come backs at the portfolio level. These markets have historically provided substantially more produce opportunity than the Canadian market. A five year target would be 15-25% in U equities and 15% in international equities. Given the present stage of the market you may wish to under-weight your U and over-weight your international exposure

CREATING A CORE CANADIAN EQUITY PORTFOLIO

Canadian equities should make up between 20-40% of your germination portfolio. That would mean your Canadian equity portfolio would ne to be reduc from its passing from hand to hand value of $87,000 to about $55000 depending onward the foreign content split in your RRSP

If you decide to make your Canadian equity exposure to this plain from a practical perspective, your holdings should be limited to common or two key securities in each sector. You must also pay obstruct attention to relative dividend payouts in your decision making since it can help with your income needs

You are generally over-invested in the interest sensitive sector. For better balance, you probably want this to portray about 25-30% of your Canadian portfolio. This could be achieved at dropping three of your five securities or dropping sum of two units and paring back the remaining three to at liberty up cash to rebuild.

Your portfolio is under-invested in the resource sector. Your instant weighting is about 8% and it should be in the 30-40% range. You may wish to accomplish this from one side the replacement of your small-cap stocks with the same or two larger more diversified holdings. a certain quantity of suggestions to consider would be Cameco, which is well positioned in uranium and has a growing position to gold, Falconbridge or Inco which provide cent and nickel exposure and Noranda which has varied metals and forest fruit exposure.