Capital Allocator

Consider: 1) Risk tolerance - how much drawdown can you handle? 2) Time horizon - when do you need the money? 3) Goals - growth vs income? 4) Capacity - can you afford losses? Start with a standard allocation (e.g., 60/40) and adjust.

Minimum 5-10% for opportunities and buffer. More (15-20%) if markets are uncertain or if you're an active trader needing dry powder. Less (0-5%) only if fully invested strategy with long horizon.

Yes - asset location matters. RRSP: US stocks (withholding tax treaty), bonds. TFSA: Canadian dividend stocks, high-growth stocks. Non-registered: Canadian dividend stocks (tax credit). View all accounts as one portfolio.

Strategic: annually or with major life events. Tactical: monthly or quarterly. Operational: weekly for active traders. Always review after major market moves that may have changed your allocation.

Age-based rule: 100 - your age = equity %. So age 30 = 70% equity, 30% bonds. Or start with 60/40 (equity/bonds) for balanced approach. Adjust based on your actual risk tolerance and goals.

Set tactical bands around strategic targets (e.g., ±10%). Adjust within bands based on: valuations (reduce expensive), momentum (favor trending), volatility (reduce in high vol). Have clear rules; don't be emotional.

Adjust allocation to maintain consistent portfolio volatility. When market vol rises, reduce exposure; when it falls, increase. Example: Target 10% vol; if market moves to 20%, cut position size in half. Provides more consistent risk experience.

Options: 1) Lump sum - research favors this for long horizon. 2) DCA - invest over 6-12 months if anxious about timing. 3) Value averaging - invest to maintain growth path. Balance optimal (lump sum) with psychological comfort.

Treat strategies like asset classes. Allocate based on expected Sharpe ratio, capacity, and correlation with other strategies. Higher Sharpe = higher allocation. Lower correlation = better diversification. Size to survive worst-case drawdown.

When any asset class drifts 5% or more from target (threshold method), or on a schedule (calendar method - quarterly/annually). Hybrid: check quarterly, rebalance if 5%+ drift. Rebalance with new money when possible for tax efficiency.

Calculate: f* = (bp - q) / b where b = win/loss ratio, p = win rate. Use fractional Kelly (25-50%) to reduce volatility. Apply per strategy. Recalculate as edge estimates change. Be conservative with edge estimates.

Risk parity equalizes risk contribution from each asset (vs equal dollars). Often requires leverage to achieve balanced risk with reasonable returns. Best for sophisticated investors who understand leverage management. Provides true diversification.

Key elements: 1) Written investment policy statement. 2) Strategic allocation with rebalancing bands. 3) Governance and review process. 4) Risk budgeting. 5) Factor-based thinking. Apply these at individual level with proper documentation.

Consider leverage when: 1) Risk parity requires it for balance. 2) Strategy has strong edge but low capital requirements. 3) Capital efficiency improves risk-adjusted returns. Never without: stress testing, margin buffer, deleveraging plan.

Calculate historical/expected correlations between strategies. Weight to maximize Sharpe ratio or minimize variance. Lower correlation = can have larger combined allocation. Monitor correlations - they change, especially in crisis (tend to spike).