ASSET ALLOCATION
Cardinal Point approaches investing from a scientific perspective. We leverage Modern Portfolio Theory, using mean-variance optimization to help put together the most efficient portfolio allocation possible.
ASSET ALLOCATION
Cardinal Point approaches investing from a scientific perspective. We leverage Modern Portfolio Theory, using mean-variance optimization to help put together the most efficient portfolio allocation possible.
We approach investing from a scientific perspective. We leverage academic research, starting with the pioneering work done by Dr Harry Markowitz, who won the Nobel Prize in 1990 for Modern Portfolio Theory. Markowitz’s now well-known theory uses mean variance optimization to help put together the most efficient portfolio allocation possible, taking into consideration not only the expected returns and volatility of asset classes, but also how the different asset classes covary with one another.
Professors Eugene Fama and Ken French put forth the notion of premiums within different types of stocks with their research on value and small companies. Their work showed that by tilting a portfolio towards stocks which were trading on a cheaper relative basis to their peers, or were smaller, unproven companies, investors could receive positive expected premiums compared to the market over the long term. Later work by others showed similar results when sorting companies by momentum or relative profitability. Sorting stocks in a quantitative manner like this is often known as factor investing or smart beta.
We build our asset allocations by looking first at your desired risk tolerance and risk capacity and then applying academic research to determine first, the balance of stocks and bonds in your portfolio and then the composition of the stock and bond portions. In practice this is done so utilizing a Core and Satellite approach.
Core Areas
This approach assigns the largest weights to those core areas of the market such as:
- US Stocks
- Canadian Stocks
- International Stocks
- Investment Grade bonds
Satellite Positions
We then add on smaller satellite positions with the goals of either higher expected returns or enhanced diversification. Examples of these positions include securities targeting:
- Factor premiums, such as Value, Small, Momentum, or high Profitability stocks
- Low Volatility Stocks
- Real Estate Investment Trusts
- Emerging Market Stocks
- International Bonds
- Market Neutral Strategies
- Commodities
OUR RECENT PUBLICATIONS
East Coast Taxes for Retired Divorced U.S. Citizen
Where is the right place to retire – Canada or USA? Which province or state? These are difficult questions with lots of factors to consider, many of which are personal. Taxes should not be the most important issue, but neither should it be ignored. Cardinal Point’s experts can guide you through the implications of each option you are considering.
Secure Act 2.0
There are a number of rules changes proposed by Congress that will impact retirement accounts. The changes will benefit US residents and also Canadians with IRAs and other retirement accounts. There are many ways this could be advantageous for you, possibly deferring tax or extending benefits. Cardinal Point, as the leading cross-border specialist, can show you how.
Infographic: Lifetime Capital Gains Exemption & Qualified Small Business Corporation
The Lifetime Capital Gains Exemption (LCGE) is available to all Canadian residents and Americans living in Canada as a tax deduction on the sale of a Qualified Small Business Corporation (QSBC). It is indexed to inflation, and it can be used in part. Three tests must be met to claim an LCGE, and there are complicated regulations governing each of these.