The Claymore Investment website has a nifty asset allocator tool that lets investors construct model portfolios by mixing different asset classes and examine how they would have performed in the past. The tool is similar to the asset mixer available on Norm Rothery’s Stingy Investor website. The Claymore asset allocator tool though includes asset classes such as REITs and commodities not found in the Stingy Investor website. However, Claymore’s asset allocator doesn’t seem to go as far back in time as Norm’s calculator.

I tried out Claymore’s asset allocator because I was interested in finding out whether it would make sense to add commodities to the Sleepy Portfolio. According to the Claymore asset allocator, between 2003 and 1/31/2011, the Sleepy Portfolio (Cash – 5%, Short Bonds – 15%, Real Return Bonds – 15%, REITs – 5%, Canadian stocks – 20%, US stocks – 22.5%, Developed markets – 22.5%, Emerging markets – 5%) returned 6.62% with a Standard deviation of 9.13%. Allocating 5% to commodities and reducing the exposure to Canadian stocks to 15% would have reduced returns to 6.08% and risk to 8.84%.

The report produced by the Claymore asset allocator also contains a very useful table of correlation between various asset classes. The least correlated assets with Canadian equities are Short-Term bonds (-0.17), Cash (0.00) and Real-return bonds (0.32). In the 2003-10 time period, the asset class with the highest correlation to Canadian equities was emerging markets.

Asset allocation tools are useful to see how mixing different asset classes boosts returns or lowers risk but they should be used with caution. Asset class returns and correlations could vary dramatically from one period to the next.

[Quick reminder: The deadline for entering the UFile Giveaway is Tuesday, 8 p.m. EST.]

This article has 7 comments

  1. I agree with the last paragraph in the post. Portfolio allocators are fun to play with and may spark a few ideas but past returns and correlations will not likely be indicative of future returns and correlations.

  2. I agree Larry. I found it interesting that as expected, investors would have got the most diversification benefits by adding bonds to their portfolio. I also found it interesting that among stocks Canadian investors get the most diversification benefit out of US markets.

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  4. Yes I like. Thanks Claymore.

  5. Thanks for the reminder about this tool Ram.


  6. Your choice share I am attract you thinking is a right Your information very usefully .

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