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INVESTING ESSENTIALS CENTRE

Power of diversification

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Put Diversification to Work

Diversification is key to managing risk. No single asset class is consistently among the top performers, and the best and worst performers change from one year to the next.

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Balanced Portfolio
40% FTSE Canada Universe Bond Index
30% S&P/TSX Composite Total Return Index
30% MSCI World Index
Highest
Lowest

Diversification table organised left-to-right by increasing years and top-to-bottom by decreasing returns.

Source: Morningstar. Priced in Canadian currency, as at December 31, 2022. Assumes reinvestment of all income and no transaction costs or taxes. Annual returns compounded monthly. The asset classes are represented by their indicated indices and the balanced portfolio is hypothetical in nature. This information is for illustrative purposes only. It is not possible to invest directly in an index.

Asset classes and balanced portfolio are represented by the following (indexes parenthesized): Canadian Small Cap (BMO Small Cap Index); U.S. Equities (S&P 500 Index); Canadian Equities (S&P/TSX Composite Total Return Index); Canadian Bonds (FTSE Canada Universe Bond Index); International Equities (MSCI EAFE Index); Emerging Markets (MSCI Emerging Markets Free Index); U.S. Small Cap (Russell 2000 Index); Global Bonds (Barclays Global Aggregate Bond Index); Canadian Home Prices (Teranet-National Bank National Composite House Price Index - Composite 11); Balanced Portfolio (40% FTSE Canada Universe Bond Index, 30% S&P/TSX Composite Total Return Index, 30% MSCI World Index).

Going Global

A diversified portfolio that includes exposure to global stocks can help reduce concentration risk - at the sector and company level - compared to investing in Canadian stocks alone.

Top 10 stocks

Top 10 stocks in Canada (% of index): 35.69%

Canada - 35.69%

Top 10 Global Stocks (% of index): 13.86%

Global - 13.86%

Top 3 sectors

Top 3 Canada Sectors (% of index): 62.17%

Canada - 62.17%

Top 3 Global Sectors (% of index): 48.56%

Global - 48.56%

Source: 1832 Asset Management L.P. as at December 31, 2022. Top 10 stocks and top 3 sectors information for Canada is represented by the S&P/TSX Composite Index. Global top 10 stocks and top 3 sectors information is represented by the MSCI All Country World Index. Information is for illustrative purposes only and is subject to change. It is not possible to invest directly in an index.

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Put Diversification to Work

Diversification is key to managing risk. No single asset class is consistently among the top performers, and the best and worst performers change from one year to the next.

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
31.1% 75.1% 38.5% 9.7% 16.0% 48.1% 23.9% 21.6% 35.4% 28.7% 7.7% 24.8% 17.9% 27.6% 2.3%
6.4% 52.0% 20.2% 8.3% 15.3% 41.3% 14.4% 19.5% 21.1% 17.4% 4.2% 22.9% 16.6% 25.1% -5.8%
-0.8% 35.1% 17.6% 6.8% 13.8% 31.6% 11.2% 16.2% 17.1% 13.8% 2.5% 19.2% 16.3% 24.8% -7.8%
-16.1% 15.9% 13.0% 4.6% 13.4% 13.3% 10.6% 14.6% 12.3% 9.1% 1.4% 19.2% 14.4% 15.5% -9.2%
-17.2% 12.5% 10.1% 0.4% 7.9% 13.0% 9.7% 6.5% 8.2% 8.9% -2.0% 16.5% 10.0% 13.8% -9.8%
-21.2% 8.0% 9.1% -1.8% 7.2% 7.8% 8.8% 4.4% 8.1% 8.2% -3.0% 16.1% 9.4% 12.4% -10.2%
-28.8% 7.4% 6.7% -8.7% 3.6% 4.3% 7.0% 3.5% 7.7% 7.1% -5.6% 12.9% 8.7% 10.8% -11.7%
-33.0% 5.4% 3.5% -9.6% 3.1% 3.9% 5.4% 2.4% 1.7% 6.4% -6.5% 6.9% 7.3% -2.5% -12.2%
-41.4% 5.0% 2.6% -14.2% 2.5% 3.8% 4.1% -8.3% -1.5% 2.5% -8.9% 2.0% 6.4% -3.1% -13.9%
-46.6% -9.2% 0.0% -16.2% 2.0% -1.2% -0.1% -13.8% -2.0% 0.3% -18.2% 1.4% 5.6% -5.5% -14.7%
  Asset Class Index
  Canadian Small Cap BMO Small Cap Index
  U.S. Equities S&P 500 Index
  Canadian Equities S&P/TSX Composite Total Return Index
  Canadian Bonds FTSE Canada Universe Bond Index
  International Equities MSCI EAFA Index
  Emerging Markets MSCI Emerging Markets Free Index
  Asset Class Index
  U.S Small Cap Russel 2000 Index
  Global Bonds Barclays Global Aggregrate Bond Index
  Canadian Home Prices Teranet-National Bank Composite House Price Index - Composite 11
  Balanced Portfolio 40% FTSE Canada Universe Bond Index, 30% S&P/TSX Composite Total Return Index, 30% MSCI World Index

Dynamic Funds® is a registered trademark of its owner, used under license, and a division of 1832 Asset Management L.P. Source: Morningstar. Priced in Canadian currency, as at December 31, 2022. Assumes reinvestment of all income and no transaction costs or taxes. Annual returns compounded monthly. The asset classes are represented by their indicated indices and the balanced portfolio is hypothetical in nature. The illustration is hypothetical and does not reflect actual results or the future returns or future value of a mutual fund or any other investment. The information provided is not intended to be investment advice. Investors should consult their own professional advisor for specific investment advice tailored to their needs when planning to implement an investment and/or tax strategy to ensure that individual circumstances are considered properly and action is taken based on the latest available information.

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