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BMO InvestorLine: Asset Allocation Plays a Critical Role in Successful Investing


TORONTO, ONTARIO--(Marketwire - Nov. 7, 2012) - BMO Investorline reminds Canadians that one of the keys to successful investing and portfolio management is choosing the right "mix" of assets.

Asset allocation is the distribution of money invested in different asset types within a portfolio. Major asset classes include equities (e.g. stocks and mutual funds), fixed income (e.g. bonds, guaranteed investment certificates) and cash investments; other investment categories can include real estate, precious metals and commodities.

"Studies have shown that properly proportioned asset allocation can have a significant impact on an investor's success," said Viki Lazaris, President & CEO, BMO InvestorLine. "While stocks have been the best performing asset class over the long term, they have also been the riskiest. It's important to choose a mix of investments that fit with your financial goals, time frame and risk tolerance."

BMO InvestorLine offers the following tips to help investors create a balanced portfolio:

  • Know Your Investing Timeframe: If you have a longer investing timeframe, consider putting a significant percentage of your funds in equities. Stocks typically have the best potential for earning returns that outpace inflation and other investments, and, even if markets decline, your portfolio will have time to rebound. If, however, you do not have a long time horizon (e.g. fewer than 5 years), consider a portfolio that consists of more short-term bonds and cash investments.
  • Diversify: No single investment class will perform well all the time; to mitigate your financial risk, allocate funds to more than one asset class. Fixed-income investments, such as bonds, may help cushion your portfolio if stock values drop. Consider a mix of short-, medium- and long-term bonds.
  • Define Your Goals: Your portfolio is a tool to help you achieve your financial goals. Determine what your end goal is and proportion your assets accordingly.
    • To preserve capital and generate income, your portfolio should have a higher allocation in fixed income investments such as bonds and guaranteed investment certificates (GICs).
    • In order to maximize growth, consider heavily weighting your portfolio with equities, which generally have the highest expected returns.
    • For long-term growth, with moderate volatility, take a balanced approach with roughly equal amounts of stocks and bonds.

"While these are good tips to live by, investors may not know exactly where their assets are allocated within their portfolio or may need reassurance that they are choosing the right investments that meet their unique needs," said Ms. Lazaris. "To give online investors increased confidence in their investment choices, BMO InvestorLine recently introduced adviceDirect™, a service designed for investors who want control of their investment portfolios but require validation of their decisions. adviceDirect features the Portfolio Optimizer, a robust quantitative engine that performs a rigorous review of the investor's current portfolio and then provides buy and sell recommendations based on the investor's personalized profile. Asset allocation plays a key role in the Portfolio Optimizer process."

For more information on online investing, please visit www.bmoinvestorline.com.

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About BMO InvestorLine

BMO InvestorLine is an online investing service that provides clients with two ways to invest online. Clients can choose from BMO InvestorLine's top ranked Self-Directed service that provides tools to help investors make independent decisions on how to invest. BMO InvestorLine's other service, adviceDirect™ provides investors with online advice and investment recommendations for their portfolios. Clients have access to trading, quotes and account information 24 hours a day through a website or Automated Telephone Trading. BMO InvestorLine also provides users with third party research, along with leading edge tools that are informative and easy to use. As an all-in-one investment source, it is a constantly evolving, cost-efficient platform that is fully compatible with tablets.

BMO InvestorLine Inc. and BMO Ligne D'action Inc. provide this commentary to clients for informational purposes only. The information contained herein is based on sources that we believe to be reliable, but is not guaranteed by us, may be incomplete or may change without notice. The comments included in this document are general in nature, and professional advice regarding an individual's particular position should be obtained.

An adviceDirect account is a non-discretionary fee based account which offers investment recommendations. adviceDirect does not provide portfolio management by a portfolio manager. The client makes their own investment decisions and manages their own investment portfolio. adviceDirect does not offer discretionary, managed accounts.

BMO InvestorLine Inc. is a member of BMO Financial Group.

® Registered trade-mark of Bank of Montreal, used under licence. BMO InvestorLine Inc. is a wholly owned subsidiary of Bank of Montreal Holdings Inc. Member - Canadian Investor Protection Fund and IIROC.

Media Contacts:
Rachael McKay, Toronto
416-867-3996
rachael.mckay@bmo.com

Valerie Doucet, Montreal
514-877-8224
valerie.doucet@bmo.com

Laurie Grant, Vancouver
604-665-7596
laurie.grant@bmo.com