Portfolio Diversification and Asset Allocation

Every investment need to be reviewed to ensure it’s on target and one step in the review is to assess your asset allocation for diversification. You don’t want all your eggs in the same basket. I wrote a post on how to track your asset allocations and today, I’ll review my allocations. A portfolio diversification is important and it also needs to be looked at from many angles as you’ll see below.

Asset Allocation By Sector

Asset Allocation By SectorMy investments now cover 7 sectors which are non-cyclical. The financial sector is still my leading sector in asset allocations and I don’t see that changing. In fact, the recent pull back allows me to buy some more. The dividends are good and I expect them to get back on the annual dividend increase.

The next largest sector is the utility sector and that’s without Just Energy. As you can see, the financial and utilities are well represented in my dividend income portfolio. That’s where I started and I buy on dip as well as through regular OCP (Optional Cash Purchase) with the transfer agents. I categorize the Utility sector as to the companies that deal directly with customers directly and Enbridge (TSE:ENB) fall in that category although they do much more. Below is the number of investments per sector adding up to the percentages above based on the amount invested.

Asset Allocation

Asset Allocation By Capitalization

Asset Allocation By CapitalizationAs you can see, I am mainly invested in large cap companies. The only exceptions are REITs as they tend to fall on the smaller side and I have Liquor Store (LIQ) which is quite small.

– Large Cap is more than 10B$

– Medium Cap is more than 2B$

– Small Cap is less than 2B$

Aside from JNJ, KO and AT&T, which have well above 100B$ in market cap., large cap in Canada aren’t crazy high. The banks actually have the largest capitalization and I have a position in 5 of them.

Asset Allocation By Location

Asset Allotion By LocationUntil last year, I would have been invested 100% in Canada but I started looking south of the border and investing into some world conglomerates. Not only do I have exposure to the U.S. but I also have international exposure through my holdings.

Summary

I am satisfied with my current diversification and my progress into the global conglomerates. As a Canadian, the US dollars has always been stronger and we need the export as a nation so it’s only a matter of time before the Canadian dollar comes down. Note that I am not in a rush, my dollar goes a long way for personal items.

It’s worth pointing out that my dividend portfolio does not consist of my entire investment portfolio due to my defined contribution plan. My dividend portfolio represent approximately 35% of my overall investments and my fixed income safety net lives in my define contribution plan. This portfolio is all about generating income.