Yesterday I talked about allocation amongst the asset classes and today I’m going to talk about the second allocation of concern, allocation amongst countries. Before I being I just wanted to reiterate that there are many different views and beliefs on this subject. What I’m going to attempt to do is simply state what I believe is the best country allocation for my unique situation. Yours may be the same but will probably be different based on your unique investment objectives, time frame and risk tolerance.
Contrary to popular opinion I believe that the majority of my retirement portfolio should be in CDN dollars. I am aware of the argument that Canada is only 2.5% of the worlds markets so we should be diversifying as much as possible to take advantage of opportunities globally. Although I agree with that in principle I believe that the majority of my holdings should be in the currency of the country that I will ultimately be retiring in. Once my dividend cash flow is established I do not want my retirement interrupted because the peso, US dollar etc... is having a bad couple of years. I currently have about 70% of my holdings in Canadian securities but would be willing to go as low as 55% (if I thought a great opportunity presented itself) otherwise I would be comfortable between 60% and 70% CDN.
(Disclaimer: I’m not your boss or your spouse so do you own research and make your opinions on when to buy or sell. Nothing I say should be bastardized or construed in any way to be advice)