Monday, October 24, 2011

Diversification 2012

My current and future asset allocation is represented in the following table:

It seems that I am overexposed to cash. I know that the stock markets all over the world are mostly disappointing and not encouraging at all.Quite frankly the only incentive to invest in stock market is that interest on savings accounts (deposits) at the banks very low. The most I could get out of mine is 2,5% gross annually. This does not even cover inflation.

This is what I want to do at the begging of next year - to re-balance my portfolio in terms of cash and various currencies.   Portfolio diversification:

Currency exposure - risk reduction and diversification:

Despite wide publicity Euro has received in recent months, I do now want to abandon it completely. What I will do - is to  invest some of the money in mutual funds (USD), but my annual savings for future investments will be kept in EUR.

After all restructuring and movements my portfolio should look like this:

This does not take into account any future market and the currencies moves.  I hope it will simplify monitoring and presentation as well.  I intend to keep my emergency fund (GBP) in amount of one year expenditures. 


  1. Sounds like a solid strategy. You will have a good portion in cash and stocks by next year. Have you thought about adding any fixed income to your portfolio? Something to look in to that might be suitable. Real Return Bonds are backed by the Canadian government and guarantees you will be paid interest that's higher than the inflation rate. Similar program called iBonds in the US.

  2. Liquid Independence,

    Canadian government is very stable and reliable partner, no doubt about that. However, investing in it would be almost the same as in energy ETF. Prime product of Canada is oil. Should the prices drop their will honor the bonds, but than devalue the currency : -)

    As an external investor, for me it will do very little good, I am afraid.