B10 G THE GLOBE AND MAIL | WEDNESDAY, FEBRUARY 25, 2026 GLOBE INVESTOR | REPORT ON BUSINESS T he recommended split be- tween stocks and bonds has taken a battering in recent years, particularly in 2022 as infla- tion soared, equity markets turn- ed rocky and bonds failed to pro- vide stability. It got so bad that some observ- ers declared that the traditional 60/40 portfolio – where a 60 per cent allocation to stocks provided long-term growth and a 40 per cent allocation to bonds provided income and stability – was dead. Even though the drumbeat for more stocks has died down since then, as the bond market found stability over the past couple of years and fixed income yields proved enticing, the question re- mains. What is the right asset mix for you, based on age, risk tolerance, savings and income? The traditional 60/40 split ig- nores a lot of information about you. Simply subtracting your age from 100 to get your equity alloca- tion is similarly one-dimensional. James Choi, a finance professor at Yale University, has taken a tai- lored approach with a recent working paper, co-authored with Canyao Liu and Pengcheng Liu and released through the Nation- al Bureau of Economic Research in December. Be warned! The paper is thor- oughly academic. But the premise is accessible. In determining the right mix of stocks and bonds, it’s important to include future earnings, either through wages or pensions, in ad- dition to age and risk tolerance. The best part: The paper in- cludes a spreadsheet so that you can make the calculation yourself and tweak your information, along with expected returns, to see how the results will change. Surprise surprise, a 30-year-old earning $100,000 a year with $50,000 saved up can probably af- ford a more stock-heavy asset mix than someone who is on the verge of retirement with $1-mil- lion in savings. I played around with the spreadsheet (the link is here) and discovered that I should have a 65 per cent allocation to stocks, which is slightly higher than where I’m sitting currently, as- suming both my partner and I re- tire at 65. The more money we have saved up, and the higher our pen- sions, the more conservative the recommendations. That makes sense. When you have more money, why take un- necessary risks? If I had a billion dollars, I’d probably put my mon- ey into GICs. I think the spread- sheet would tell me something similar. The Wall Street Journal (sub- scription required), where I first read about Mr. Choi’s paper, in- cluded an example to illustrate the point. A 70-year-old couple with US$1-million in investable assets (that is, house not included) and a medium risk tolerance should have a stock allocation of 38 per cent. That same couple with a high risk tolerance, though, might consider 64 per cent in stocks, according to the example. Either way, that’s high next to some other popular models, in- cluding subtracting your age from 100 – which is why Mr. Choi’s paper adds another argument in favour of holding more stocks than some traditional models suggest. A few caveats are in order here, though. For starters, defining your ideal equity exposure and maintaining it is no easy matter. That’s because equity and bond values are constantly changing, forcing you to reba- lance your holdings regularly – or risk having your equity and bond mix miss their targets. As well, some holdings might not be easily classified. Some in- vestors might consider high-yield bonds to be risky and strongly correlated with stocks, and there- fore not appropriate for the bond portion of their portfolio. Same goes with some preferred shares, where high yields can sug- gest an equity-like risk. More importantly, the stock market has been on a ripping tear for the past year, leading to some concerns about over-valuation or even a dangerous bubble. That could encourage some investors to become more conservative with their investments, out of fear of a nasty downturn. Others, though, might be happy riding the momentum. The easiest solution to many of these concerns is to hold all-in- one exchange-traded funds, or funds of funds, that do the heavy lifting for us. In Canada, Vanguard launched three versions in 2018. The Vanguard Balanced ETF Portfolio maintains an approxi- mate 60/40 split between equi- ties (Canadian, U.S., international and emerging markets) and bonds (Canadian, U.S. and inter- national). The growth fund maintains a 80/20 split in favour of equities. The conservative version favours bonds, with a 40/60 split. Competing money manage- ment firms have introduced simi- lar products, including asset allo- cation ETFs from Bank of Mon- treal and BlackRock. You won’t be able to fine-tune your equity exposure with these funds if you’re aiming for some- thing more specific than, say, 60 per cent equity allocation. But there’s something to be said for one-stop shopping and automat- ic rebalancing. Is a 60% stock allocation right for you? Here is a new way to fine-tune your asset mix based on age, risk tolerance, savings and income DAVID BERMAN OPINION Simply subtracting your age from 100 to get your equity allocation is similarly one-dimensional. S imilar to how families must save and invest for emergen- cies, education and retire- ment, countries must also set aside a portion of today’s produc- tion to secure long-term prosper- ity. And it’s not solely how much is saved that matters, but how it is invested. The quality and direc- tion of investment ultimately shape a nation’s economic trajec- tory. To better understand where major economies stand, we ex- amined four indicators across the world’s 20 largest economies in 2024: Gross domestic product (GDP), gross domestic savings, gross fixed capital formation and the share of investment directed toward residential real estate. GDP measures economic size. Gross domestic savings represent the share of output not con- sumed but set aside for future use. Gross fixed capital formation captures investment in produc- tive fixed assets such as buildings, machinery, infrastructure and in- tellectual property. The final measure shows the share of that investment allocated to residen- tial real estate. Although statistical methodol- ogies vary somewhat between countries, the magnitude of these differences still points to mea- ningful structural contrasts. Several patterns stand out. The largest Asian economies, exclud- ing Japan, all have investment rates greater than 29 per cent of GDP. China is particularly strik- ing, with gross domestic savings equal to 43 per cent of GDP and investment at 39 per cent. By con- trast, investment rates in the G7 countries range between 19 per cent and 26 per cent. The differ- ence reflects China’s position as a net lender to the rest of the world. The relatively modest savings and investment rates across much of the G7 warrant concern. Excluding Japan, none exceed 25 per cent. Britain stands out, with savings and investment both be- low 20 per cent. Canada sits in the middle, with savings and investment both at roughly 23 per cent of GDP. The real issue, however, is not the amount, but where that invest- ment goes. In 2024, Canada allocated a larger share of its total fixed cap- ital formation to residential real estate than any of the other top 20 economies. While strong pop- ulation growth helps explain ele- vated housing investment, the trend has been building for nearly two decades, peaking in 2021 be- fore moderating slightly. Yet despite substantial resi- dential construction in Canada, affordability challenges persist. Of that total investment, roughly one-third flows into resi- dential real estate, leaving only about 15 per cent for machinery, infrastructure and intellectual property. That imbalance may constrain the productivity growth needed to sustain higher wages and living standards. It could also help explain the con- tinued dominance of legacy firms in the Canadian economy. Rebalancing investment to- ward more productive sectors should be a policy priority. Stron- ger tax incentives for intellectual property, advanced manufactur- ing and startups, combined with regulatory reforms that reduce barriers for small businesses, could help mobilize private cap- ital. Without a shift toward produc- tivity-enhancing investment, Canada risks falling behind fas- ter-investing economies. Canada’s capital is stuck in the wrong assets. Why that’s a problem HANIF BAYAT OPINION CEO and founder of WOWA.ca, a Canadian personal finance platform Gross domestic savings and investment rates for the 20 largest economies As of 2024 1 U.S. $28.8T 17% 21% 19% 2 China $18.7T 43% 39% 22% 3 Germany $4.7T 25% 20% 31% 4 Japan $4.0T 25% 26% 15% 5 India $3.9T 29% 30% 29% 6 Britain $3.7T 18% 19% 21% 7 France $3.2T 21% 22% 26% 8 Italy $2.4T 25% 22% 31% 9 Canada $2.2T 23% 23% 34% 10 Brazil $2.2T 17% 17% 30% 11 Russia $2.2T 32% 22% 20% 12 South Korea $1.9T 34% 30% 16% 13 Mexico $1.9T 19% 24% 25% 14 Australia $1.8T 26% 24% 22% 15 Spain $1.7T 25% 20% 28% 16 Indonesia $1.4T 37% 29% 17% 17 Turkey $1.4T 31% 31% 23% 18 Saudi Arabia $1.2T 34% 31% 20% 19 Netherlands $1.2T 31% 20% 26% 20 Switzerland $0.9T 37% 25% 16% COUNTRY GDP (US$ TRILLIONS) GROSS DOMESTIC SAVINGS (% OF GDP) GROSS FIXED CAPITAL FORMATION (% OF GDP) RESIDENTIAL INVESTMENT (% OF TOTAL INVESTMENT) THE GLOBE AND MAIL, SOURCE: WORLD BANK; GOVERNMENTS OF CHINA, INDIA, BRAZIL, THE RUSSIAN FEDERATION, BRAZIL, INDONESIA AND SAUDI ARABIA W ith the fog of uncertainty around U.S. President Donald Trump’s tariffs suddenly thickening again, for- eign investors’ appetite for U.S. as- sets is under renewed scrutiny. Yet capital from overseas keeps flow- ing into U.S. markets at a record rate. So is the “Sell America” trade overblown? Probably. Mr. Trump’s controversial pol- icies and erratic decision-making may dim the allure of U.S. assets, yet the hard numbers show that foreign capital inflows have risen, not fallen, during the volatile first year of his second administration. Treasury International Capital figures published last week showed that net foreign purchas- es of U.S. stocks and bonds in cal- endar year 2025 totaled a record US$1.55-trillion. That was up 30 per cent from the year before. Almost all of that came from private sector investors who more than doubled their purchases of equities from the year before to more than US$650-billion, a pow- erful tailwind that pushed the S&P 500 and Nasdaq to all-time highs. Foreign private sector investors also bought over US$440-billion of U.S. Treasury notes and bonds last year, dwarfing the modest net sales by foreign official institu- tions. That was a bit less than in 2024, but still a hefty amount that punctures the argument that the world is unwilling to lend to Uncle Sam. Even claims about China dumping U.S. Treasuries – which seem accurate on first glance – are likely overstated. True, Beijing’s official holdings fell US$76-billion last year to a 17-year low of US$683 billion. But that’s because China is instead funneling vast quantities of foreign assets, including Trea- suries, into its state banks, argues Brad Setser of the Council on For- eign Relations. These holdings, swollen by Chi- na’s record US$1.2-trillion trade surplus last year, are potentially worth trillions of dollars, Mr. Sets- er reckons. Put all this activity together, add in the Federal Reserve’s three rate cuts last year, and it is clear why Treasury yields, including on the ultra-long 30-year bond, fell last year, despite rising “debase- ment” fears. If Treasuries performed rela- tively well against their global peers in 2025 and have continued to hold their own over the past two months, the same cannot be said of U.S. stocks. They lagged be- hind their global peers last year and are already playing catch-up in 2026. This may seem counterintui- tive given all the news about the U.S. artificial intelligence capex boom. A handful of U.S. tech gi- ants are set to spend roughly US$650-billion on AI this year alone, which, all things being equal, should boost the U.S. econ- omy and its tech-heavy markets. But the S&P 500 is flat in the year to date, and the Nasdaq is down 2.5 per cent. Meanwhile, the benchmark stock indexes in chip- making hubs Taiwan and South Korea, where significant AI invest- ment is flowing, are up 20 per cent and 40 per cent, respectively. Wall Street is also lagging the major European, UK and Japa- nese indices, which are up around 6 per cent, 8 per cent, and 12 per cent this year, respectively. So someone is selling America, but it appears to be U.S.-domiciled investors. They have pulled US$52-billion from U.S. equity products since the start of this year, the most in the first eight weeks of any year since at least 2010, according to LSEG/Lipper data. For the rest of the world, Wall Street’s liquidity, historical re- turns, scale, dynamism and rela- tive “safety” still make it an attrac- tive place to be. Even if foreign in- vestors are more nervous about their U.S. exposure than they used to be and more willing to hedge dollar risk, they remain reluctant to actively sell U.S. stocks. To be sure, there are reasons to doubt whether last year’s record pace of foreign inflows will be sus- tained. But as long as the U.S. runs a large balance of payments defi- cit - last year’s trade deficit was a record US$1.24-trillion - capital from abroad will be required to plug the shortfall. Foreign inves- tors, it seems, will not be selling America any time soon. REUTERS Why the ‘Sell America’ trade may just be hype JAMIE McGEEVER ORLANDO OPINION Treasury International Capital figures published last week showed that net foreign purchases of U.S. stocks and bonds in calendar year 2025 totaled a record US$1.55-trillion. That was up 30 per cent from the year before.