ncome and equity securities. More sophisticated portfolios may also include an international and derivatives asset class. We will provide basic descriptions of each of the asset classes excluding international and derivative asset classes. Cash – Includes currency, money market securities, Canada Savings Bonds, GIC’s, bonds with maturity of one year or less, and all other cash equivalents. All cash and cash equivalents are primarily used for liquidity purposes. As stated before, cash usually makes up at least five percent of a diversified portfolio's asset mix. The risk adverse may also hold as much as ten percent in cash. Fixed Income - The asset class consists of bonds due in more than one-year, strip bonds, mortgages, private placements and other debt instruments, and preferred shares but not convertible securities due to their risk. Their purpose is to primarily produce income with some safety of principal, although they also used for capital gains generation. Preferred shares are included in this asset class because of their price action and cash flow characteristics. To achieve diversification in this asset class several components of fixed income can used. For example government and corporate bonds with a range of credit qualities from AAA to lower grades and foreign bonds maybe added to domestic holdings. As well as, there can a variety of terms to maturity, or durations used. The amount of a portfolio allocated to fixed income securities is governed by several factors: The need for income over capital gains The basic minimum income required The desire for preservation of capital Other factors such as tax and time horizonFixed income generally accounts for at least 15% of a diversified portfolio, and under special circumstances may be as much as 95% of a portfolio. Equities – There are several different types of securities included in this ass...
