File:Cash-bond-stock.jpg

Hypothetical mixes, in 10% increments, of 3-month T-bills and stocks (lozenges), as well as 10 year Govt. of Canada bonds and stocks (circles). The bold curve mixes stocks, in 10% increments, with a half-and-half combination of T-bills and bonds (Xs, 0-30% stocks shown only for clarity). Coloured squares show the three FPX indices. Nominal annualized asset class returns assumed to be 3-month T-bill, 0.6% (Bank of Canada, 2015-01-27); 10 year bond, 1.4% (Bank of Canada, 2015-01-27); stock, 7% (we can hope!). Standard deviations: 3-month T-bill, 2%; bond, 6%; stock, 17% (corresponds approximately to the 1993-2013 Libra data for 3-month T-bills, all Canadian bonds, and S&P/TSX Comp). Correlations: bill-bond 0.37; bill-stock 0.05; bond-stock 0.07 (1993-2013 Libra data).