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Rona Birenbaum is a certified financial planner at Caring For Clients. We asked her to construct an ideal retirement portfolio for a Canadian in their 40s.

If you are in your 40s, your investment time horizon is 50 years or so assuming mortality at age 90. A solid allocation to investments that can generate a return in excess of inflation is essential. The asset mix below is what I call a neutral position and should be flexible and altered based on a range of considerations. Staying disciplined during market downturns should result in a commensurate adjustment to the allocation to equity funds versus fixed-income funds and cash.

When the stock market is under-valued, equity funds should be increased from the neutral position, and when over-valued, they should be decreased from an over-weight position. On the fixed-income side, we have a larger cash allocation in client portfolios than we have historically had. This is driven by valuation concerns and our desire for clients to have liquidity to take advantage of buying opportunities.

Ours is a global economy now, and selecting investments based on where their head office is located is a faulty starting point. Portfolio managers consider the merits of companies based on their earnings potential over time, current valuation, and ability to withstand economic recessions.

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