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Best Portfolio Asset Allocation

The best portfolio asset allocation takes planning, should be simple and will change over time. Treat your portfolio as you would a child as outlined on my website The most important thing to me is capital preservation. If you diversify your asset classes and are thoughtful about how much capital you allocate to each class, you stand a very good chance of consistent profits and when economic challenges occur, capital preservation.

I use what I call the “Unit System” where each dollar equals 1 (one) unit. Divide the starting capital by 100 which makes each unit equal to 1%. The $ value per unit will fluctuate, but with the readjusting nature of the strategy, you will always have 100 units and therefore can never run out of money.

Division of Units Per Asset Class: Allocation will fluctuate as one ages and as re balancing occurs. More about that another time.

1. Growth Stocks:

40 Units

4-6 units per position = 6-10 positions

(Note: I sometimes have Growth stocks that I love and will invest units from Class 2 and buy the Bonds or Preferred Shares of Class 1 growth stocks)

2. Fixed Income: (Bonds, Debentures, Preferreds, REIT’s, Gold) and Core Holdings: (Large cap dividend companies)

20 Units

4-6 units per position = 3-5 positions

3. Foreign Equities: ETF’s and diversify

15 Units

4-6 units per position = 2-4 positions

4. Commodities: ETF’s and diversify

10 Units

3-5 units per position = 2-3 positions

5. Hedge: Options, Inverse ETF’s.

10 Units

2-3 units per position = 3-5 positions

6. Junior and Speculative Equities, Warrants:

5 Units

1 (one) unit per position = 5 positions maximum.

The range of positions in this portfolio could be 21-32 however; rarely do I hold more than 20 positions.

The main point is that you want to maximize exposure in areas of safety (1, 2 and 3 = 75% of your portfolio) and have exposure (but minimize potential damage) in the riskier areas of the market. (4, 5 and 6)

The best portfolio asset allocation takes a plan, should be simple and will change over time. I’ll talk more in the future about how to manage positions for maximum gain and protection.

Greg Hall


Discipline With Your Portfolio

Being disciplined with your portfolio isn’t as easy as it sounds. In life, we can be spontaneous, which in and of itself is great. With your financial portfolio however, it is important to set some rules and stick to them. Like I said earlier on my website, , the order of my investment plan is not sequential and I want to start with Discipline. The idea of position size and diversification is key to success.

“If you don’t bet, you can’t win. If you lose all your chips, you can’t bet.” – Larry Hite

So with this in mind, you understand you must invest and you realize if you lose all of your money, you are back to square one. The point about portfolio size is this; it does not matter how big it is when you start,  it is what it is. If you start with $5000, $100,000 or more, you have to start somewhere.

This next point is very important; however much you start with or have at any point in the life of your portfolio, you must divide the dollar amount into 100 units. For example, if you have $10000 in your portfolio, divide it by 100 units and therefore each unit is worth $100; if you have $36,758, each unit would be worth $367.58 and so on.

It is important to never invest more than 5 or 6 units to any one position, not necessarily sector, but any one holding.I have an excel program that keeps track of the total dollars in my portfolio and auto calculates the maximum amount I can hold in any one position and auto adjusts as gains or losses occur. I’m happy to send it to you if you wish, just make contact on the contact form.

The exception to this rule is if you are just starting out with under $5000. In this instance, it would not be a bad idea to choose a basket of index and sector specific ETF’s (including fixed income) and divide the funds between them. If you want to move forward with a specific portfolio, understand that commission costs need to be monitored. There are service providers that have commissions from $1.00 to $9.99.

Next blog, I will continue with the division of asset strategy. I dedicate a certain number of units to each part of the portfolio to spread out the risk.

Until next time remember to use discipline with your portfolio!

Greg Hall