Maximize Your Portfolio’s Diversification
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Increase Rates of Return
Investing should start with an objective – and in most cases the highest priority is to make a return. When it comes to traditional investing, there are a tremendous amount of investment options to generate a potential return. Increasing sources of return may or may not mean increasing the portfolio’s overall return. That said, investors seeking to increase overall portfolio returns may need to explore new asset types to enhance portfolio returns.
It’s not only important to explore how you will generate return in your portfolio, but also what you’ll be left with after taxes are paid. This can include using registered plan accounts like RRSPs and TFSAs in Canada. It can also include thinking more deeply about the characteristics of your returns. These may include capital appreciation, dividends or interest payments. Know how these will be taxed, may help you plan differently. But did you know that some investments are considerably more “tax efficient” than others – and as your tax planning needs become more significant, this can save you significant money or increase your after-tax returns.
Successful investing is generally measured by how much return the investment made relative to the risk taken. An important measure of risk is the correlation of returns between investments in a portfolio. It can be important to find investments that behave differently to varying economic and market events. Having investments that go up and down at different times will reduce the risk of a portfolio overall.
Cash Flow Needs
Diversifying your sources of cash flow allows you to potentially make your overall cash flow more resilient. Though cash flow is one of the forms of potential return in any investment, we’ve broken out the following seven types of cash flow:
❑ Capital Gains
Cash flow diversification can be very important, especially for those drawing on their investment cash flow to meet their lifestyle needs. In our experience, we find few investors can check all the above boxes. By diversifying cash flow sources, you may make your overall cash flow more resilient.
Investment Options that can Help Diversify your Portfolio
Since most people own public equities, you may have to think more deeply about diversifying this part of your portfolio. This could include investing in companies or stock markets in other countries or changing the mix of types, industry or size of companies you are invested in.
Conventional Fixed Income
Historically, bonds behave differently than stocks under certain market conditions and over different periods of time. Their values are generally less volatile than equities, so can also smooth out portfolio returns.
Public Real Estate (REITs)
These investments diversify a portfolio because they have different characteristics than operating businesses. Typically, they are less correlated to equities and bonds, so may behave differently to certain economic and market factors. We also find that investors gravitate to buying real estate directly, but that may come with significant operating and sub market risks.
Hedgefunds, Options & Derivatives
These investments by their nature can have high, low or no correlation to your other investments, and as such can provide significant diversifying benefits within a portfolio.
These investments may provide you with access into sectors or industries where there are no publicly available comparables – providing natural diversification to unique return sources. Also, some studies show that private equity may be lower correlated to public equities.
Private Fixed Income
With the low interest rates offered by government and public corporate fixed income, private debt may assist you in enhancing the yield in your fixed income allocation of your portfolio.
Commodity prices fluctuate daily based on supply and demand and may be affected by all sorts of factors including economic, social, weather and a variety of other things. The can often have lower correlation to the overall stock market, but higher volatility, so be prepared that the prices may go up and down frequently.
Private Real Estate (REITs)
Private REITs are generally valued based on the underlying real estate held and may be revalued less frequently than public investments trading on a stock exchange. Additionally, developments are often project specific, so you can choose whether you like the investment prospects and whether the project is diversified from your other investments.
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The following discloses our information gathering and dissemination practices for the raintreeFS.com website. Please note that when you access any external links, they may have different privacy policies specific to those sites. We encourage you to read all applicable privacy policies.
As an organization that collects, uses and discloses personal information, Raintree Financial Solutions is subject to the federal Personal Information Protection and Electronic Document Act (or by similar laws in the provinces of Alberta, British Columbia and Québec), effective January 1st, 2004. In complying with these laws, it is important that Raintree Financial Solutions provide you with information so that you may fully understand the purposes for which your personal information is collected.
What Personal Information Do We Gather From Those Who Visit Our Site?
When you visit our website, you may provide us with two types of information: personal information you knowingly choose to disclose, and information that we automatically collect as you browse our website.
Information You Voluntarily Submit
We collect and store any information you enter on our website, or provide to us in offline contacts we have with you. Information is collected from visitors to the website in the following areas:
- Email Forms – If you use our email forms, we will generally ask you to provide contact information.
- Surveys – At times, you may be asked to complete survey questions that appear on the website.
Information Collected and Stored Automatically
When you browse our website, you and your web browser may also transmit information that we automatically collect. We do log your IP address (the Internet address of your computer), the web pages you visit and the time of your visit, and other click-stream data. This information may be combined with other personal information you have provided. The only other type of information automatically provided to us is the type of computer, operating system and browser you are using. This information is provided by your browser, which we us to improve the performance of our site.
We may also place small data files, called “cookies,” in the browser file of your computer’s hard drive. These cookies automatically identify your browser to our server whenever you interact with the website. We use the cookies to record website statistics. Most browsers automatically accept the cookies, but you usually can change your browser setting to prevent the acceptance of cookies. Certain web pages may not function properly if you choose not to accept cookies.
How We Use Your Personal Information
We use your personal information to communicate with you, if and when necessary, in connection with your use of our website, to respond to your questions, or to send you material and information you request. We may use your information to:
- Consider your suggestions
- Possibly respond directly to you for clarification
- Process your request for materials if you make one
- Try to and answer your questions if you ask them
We may also use your website information in order to help diagnose problems with our site. We may use all information we collect to analyze statistical use patterns and demographic data (basically, where our visitors come from and what demographic characteristics they have) and to improve our site to better serve our customers. We use your IP address to help diagnose problems with our servers, and to administer our website. Your IP address is used to help identify you to gather broad demographic information.
Information Given via Conversation, Direct Email or Through the Investment Process
Over the course of your relationship with Raintree Financial Solutions and your Private Wealth Advisor, personal information will be collected in order to administer your account. This information typically includes your financial information, net worth, income and investment objectives, in addition to your current investments, banking information and your social insurance number.
Purposes of Collection
Information of a personal nature allows us to meet our regulatory duty to “know our client” and act in your best interests in recommending the purchase or sale of investments on your behalf. It also allows us to report to you and administer your account in a manner that complies with regulations.
Disclosing Your Personal Information To Others
Raintree Financial Solutions respects your privacy. We protect your personal information and adhere to all privacy regulations. We do not rent, sell, or trade our mailing lists. The information you provide will be used to deliver services and to keep you informed and up to date on the activities of Raintree Financial Solutions.
At times, Raintree Financial Solutions may be required to provide this information to investment manufacturers and trust companies as well as securities and other regulators or law enforcement agencies. In particular, Raintree Financial Solutions is regulated by various securities commissions in Canada. These regulators may require access to the personal information of current and former clients, employees, agents, directors, officers, partners and others that has been collected or used by Raintree Financial Solutions. Regulators collect, use or disclose such personal information for regulatory purposes, including:
- Surveillance of trading-related activity,
- Sales and financial compliance review and other regulatory audits,
- Investigation of potential regulatory and statutory violations,
- Regulatory databases,
- Enforcement or disciplinary proceedings,
- Information-sharing with securities regulatory authorities, regulated Marketplaces and law enforcement agencies in any jurisdiction in connection with any of the above.
Please note: Raintree Financial Solutions must decline to accept or administer an account if you do not consent to collection, use or disclosure of personal information for these purposes. Therefore, by maintaining your account with Raintree Financial Solutions, you have impliedly consented to our collecting, using and disclosing your personal information in the limited manner described above.
Since we are committed to your privacy and security, we have put in place physical, electronic, and managerial procedures to attempt to safeguard and help prevent unauthorized access, maintain data security, and correctly use the information we collect online and through more direct contact. However, please remember that no transmission of data over the Internet or any wireless network can be guaranteed to be 100% secure. As a result, while we strive to protect your personal information, we cannot ensure or warrant the security of any information that you transmit to us or from us, and you do so at your own risk.
The activation of certain links on this website may, under certain circumstances, cause the user to leave the Raintree Financial Solutions website. Raintree Financial Solutions has not reviewed all the sites linked to the Raintree Financial Solutions website and accepts no responsibility for the contents thereof or for any products, services or other offers available on them. The inclusion of a link does not imply endorsement by Raintree Financial Solutions. This also applies to websites that offer links to the Raintree Financial Solutions website. Furthermore, explicit prior authorization must always be obtained for a link leading from an external website to the Raintree Financial Solutions website.
Your Private Wealth Advisor’s Outside Businesses Activites
In representing Raintree Financial Solutions in providing recommendations to you for the purchase and sale of investments, your Private Wealth Advisor is acting on behalf of Raintree Financial Solutions. However, your Private Wealth Advisor may also be licensed to sell other products or services that are not the business of Raintree Financial Solutions and are not supervised by Raintree. Should they do so, your Private Wealth Advisor will communicate with you directly regarding any additional use or disclosure of your personal information.
Exempt market investments are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. Investment products sold in the exempt market are considered high risk because:
- They are not covered by deposit or investor protection insurance;
- Regulators do not review any of the offering documents for completeness and, in jurisdictions where an Offering Memorandum is filed, Regulators may not review them for completeness or accuracy;
- Issuers of exempt products are not subject to the same ongoing disclosure obligations as public issuers;
- Many exempt products are not as liquid as publicly-traded securities;
- Exempt products are often subject to a greater degree of “key person” risk than more widely held securities;
- They are purchased pursuant to an exemption from the usual protections accorded to investors in publicly-traded securities and under a prospectus offering; and
- There may be risks other than these related to the specific investments purchased. It is the Dealing Representative’s obligation to discuss or otherwise provide the Client with access to information relating to some of those risks.
There can be no assurances that the investment will be able to maintain its net acquisition value or to produce projected income. Investment values change frequently and past performance may not be repeated.
Using borrowed money to finance the purchase of securities involves greater risk than a purchase using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same if the value of the securities purchased declines.
All non-investment related business conducted by Representatives of Raintree Financial Solutions is not in the capacity of an employee or agent of Raintree Financial Solutions. Non-investment related business includes, without limitation, advising in or selling any type of insurance product, advising in or selling any type of mortgage service, estate and tax planning or tax return preparation. Accordingly, Raintree Financial Solutions is not liable and/or responsible for any non-investment related business conducted by Representatives of Raintree Financial Solutions. Such business is the responsibility of the individual alone.
References on this website to third party goods or services should not be regarded as an endorsement of these goods or services. By accessing any of the links provided you will be leaving this site. Raintree Financial Solutions is not responsible for the information contained on these websites.
This web site is intended for Canadian residents only and the information contained herein is subject to change without notice. This Website does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation.
This web site is for general information only and is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please consult an appropriate professional regarding your particular circumstances.