Diversified
Minimizing Overlap
Most people who hold mutual funds don’t just hold one fund. Most portfolios consist of several funds that give the investor diversification. The problem is that most mutual fund portfolios combine funds that weren’t designed to be together. When this happens, it is very common that the underlying holdings overlap. This means that the same stocks may exist in two of more of the funds.
This can lead to disproportionate losses when widely held stocks take a beating. As was the case with the decline in Nortel Networks, investors often end up paying multiple times for the same loss.
Investments in Polaris Financial portfolios are allocated according to the relative size of each stock in the overall market. There is no overlap. In addition, due to the style allocation emphasizing small-cap and value stocks, the effect of large declines in single equities tend to be less pronounced.
Geographic Allocation
If your portfolio is underweight in Canadian stocks, you are assuming more currency risk than we would normally recommend. If the Canadian dollar increases in value relative to foreign currency, your portfolio will lose value.
If your portfolio is overweight in Canada, you are very sensitive to changes in the Canadian market, which is relatively small compared to the global market. You may be missing out on an opportunity for better returns in foreign markets. Geographic allocation depends on a number of factors and we will design an allocation that is optimal for your needs.
Eliminating Guesswork
Most mutual fund managers try to beat the market by picking the winners and avoiding the losers. However, the market return is often the result of a few big gainers that take everyone by surprise. Polaris Financial portfolios give you broad market coverage so that you can efficiently capture gains wherever they occur. There's no guesswork.