Asset Classes and Your Portfolio

Asset Classes and Your Portfolio

In the last CH Minute, we looked at how CH Financial protects its investments on the downside, which can be read here. One of the most important tools we use is diversification within a client’s portfolio, and to achieve true diversification we use multiple asset classes, including both Real Estate Income Trusts (REITs) and Alternative Strategies. In this edition, we focus on why CH uses these two asset classes.

What are asset classes?

Asset classes, or asset class categories, in their simplest form, are groupings of comparable financial instruments. For example, when a client buys a mutual fund that invests in large global companies, they are investing this portion of their wealth in a large-cap (companies with a market capitalization value of more than $10 billion), international equity asset class. As another example, Canadian bonds fall within the Canadian fixed income asset class.  For the most part, there is very little correlation between different asset classes. Correlation is when one type of asset is doing poorly, another class is there to help the overall portfolio remain more stable and to grow. Broadly speaking asset classes have historically fallen into three categories: equities, fixed-income, and cash (or cash and cash equivalents). As investing has evolved, there has been a greater need to further group similar type investments. Understanding different risk and return characteristics, as well as an investment’s performance in any given market environment, has allowed investors to divide these general categories into more specific ones.

Defining Real Estate Income and Alternative Strategies

Real Estate Income is unlike any other investment as it offers a lower correlation to other asset classes. Solid long-term real estate investments get most of their income from rent, meaning its focus is on cash flow. Income from other types of equity, on the other hand, usually relies in part on hoping that the stock prices will go up. Since real estate is more about collecting rent than having the price of the building and land go up, it acts a lot like a bond. But since the owners of REITs are actual owners of those buildings and land, it is also a bit like equity, but less volatile in its price.

The second asset class we will look at is Alternative Strategies. The term “alternative strategy” is a catch-all term to categorize mutual funds with mandates that are not categorized into the conventional equities or fixed income asset classes. Commodities, private equity or venture capital, hedge funds, and even unusual real assets like toll roads, cell phone towers, and other similar types of property are examples that fall within the alternative strategy asset class category.

Why does CH use both?

Not only do real estate and alternative investing further diversify a client’s portfolio, but both offer clients the opportunity to earn more income directly from the cash flow of these investments rather than waiting for the price to go up. This means the mutual funds within both of these asset classes are deployed in client portfolios to generate cash, either to meet monthly client budget needs or in the form of reinvested rents and dividends, which then purchase more units of the mutual funds, allowing them to own even more real estate and alternatives. As an example, if the mutual funds earn a return of 6% per year but the fund’s price is down 4% for the year, our clients still earn 2%. This provides a “cushion” for the mutual fund, which thus protects our client’s capital.


CH uses Real Estate Income Trusts and Alternative Strategies to provide a “cushion” for clients’ portfolios and to diversify them with assets that have some of the best qualities of fixed income (cash flow), and stock ownership (price growth). By using diversification and cash flow we aim to protect our client’s capital and provide downside capture. If you’d like to discuss this further, please don’t hesitate to reach out to your advisor.

As always, we welcome any questions or comments.


All the best,

Devin Gorgchuck, Financial Advisor

& Your CH Financial Team


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We’re looking for aspirational clients who require the whole spectrum of financial services because managing the whole is how we’re able to deliver unbeatable value – it’s our “secret sauce.”If this describes you, let’s set up a meeting andget to know each other.

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When I became a client of CHF it was a real game-changer as I was going through a very difficult time both professionally and personally.

I went through a divorce and the loss of a job and a parent, all within a 12-month period. While it was very tough to deal with at the time, I was reassured by the fact that the team at CHF had my back and really cared about me and what I was going through.

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As an investment industry professional, I am constantly on the go and maximizing my peak career earning years in my 40s. With travel and work commitments I am very limited for time to spend with family and do the things I love to do and chose CH Financial to allow me more freedom and lifestyle balance.

Being in the investment industry my whole career and an extremely busy professional, I know I could probably do a good job at managing my money as I work in the industry after all while I rely on and trust the CH Financial team that they will take care of the details, both growing my assets as well as taking care of every aspect of my financial situation, including my tax, investments and insurance, they simply take away the stress of having to worry about it all and help me to navigate the complexities for me so it all meshes together and importantly saves me valuable time and headaches.

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Kevin & Sharron, Calgary

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Prior to joining CH Financial as a client, I had been partially managing our investments and using a bank-owned broker for many years, with moderate success. When we became clients of CHF, I quickly realized how little I knew about the complexities of managing investments and the importance of seeking out the best specialists in the industry to assist with my family’s full financial picture.

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freeing up valuable time is essential to allow us to do the things we love to do. The team at CHF takes care of the details and today my wife and I enjoy a comfortable, stress-free financial situation.

Over the years as a client of CHF, both our portfolio and wealth has grown exponentially, more than we could have ever imagined. Now that we are both happily retired, having the CHF team in our corner helps us to sleep better at night knowing that our somewhat complex financial puzzle is being looked after by a team of people that really care, as opposed to being treated like a number by a big bank.

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Ian C, Calgary

Comfortably retired thanks to CH Financial