blog04mar2007

Hot Off the Web
The past week was a reminder to us that stock markets go down as well as up. However, it is the target asset allocation of our portfolios that determines the overall risk that we are taking and hopefully the target was selected to be consistent with our risk tolerance. If we allowed the market run-up over the past few years to shift our portfolio significantly away from the target range (a good signal would be if we became very uncomfortable last week) then it’s time to rebalance back to target. Here is a sampling of the many articles addressing this subject:
Clements of the WSJ, in “When the wolf is polite enough to knock”  and “Yesterday’s market lesson: Maybe you’re overstocked”  make the point that we are lucky to get such a “small” reminder about risk and it’s an opportunity to dial back a little on some of the overvalued (and possibly over-weighted) asset classes in our portfolios(REITS, junk bonds and emerging markets)
In “Daily flaps mean little to RRSP plans” the message is the same, that those adding to their RRSP after a correction, acquire assets at a lower price; and, that you should not worry much about the corrections, since what’s important is risk control that is achieved with an asset allocation consistent with risk tolerance. If anything needs to be reviewed is risk tolerance.
Globe and Mail’s Rob Carrick in “Risk is everywhere: know where you stand” discusses a website RiskGrades.com where you can get not only a quantification of the risk associated with individual securities trading on the public exchanges, but also of weighted combinations of these securities. He then uses ETFs representing various asset class indexes to construct portfolios of increasing risk. You can actually use such a tool to help build your portfolio.
In my February 23rd blog I talked about the Property Tax Crisis in Florida. This week Barrons in “In Florida, a juicy tax revolt”  exposes “Florida’s loony property taxes” for all to see. The article is a lot more encouraging about the expected relief to snowbirds than I am, as neither the voters (the full-time residents of Florida) nor the votees (the Florida politicians whose horizon is the next election) have any near term incentive to address the property tax inequity beyond that affecting the voters of Florida. Florida’s economy and real estate prices may have to take a lot more battering (than the rest of the U.S.) before snowbird issue will be addressed.
And finally, in “Name your wife as beneficiary of RRSP, not the kids”  you are reminded to name your spouse as the beneficiary of your RRSP so that it does not have to be deregistered upon your death.
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