Asset Allocation Loss Ratio (AALR) – What Is It & How Does It Help You? When you go to any investment firm in Canada, they require you to sign a risk tolerance questionnaire to prevent you from investing too aggressively. However there are two important questions: What prevents you from investing too conservatively? Can you achieve your life goals with more conservative investments? These are critical questions, since almost nobody can retire comfortably with a typical balanced portfolio with 40-50% in bonds. This is where the AALR comes in. With any financial decision, it’s important to understand how it affects your life – both the risk & the return. The Asset Allocation Loss Ratio (AALR) estimates the effect of a more conservative portfolio or suboptimal asset allocation on your long-term investment returns. In my latest podcast episode I give you examples of case studies, as well as the formula for asset allocation loss ratio, so you can determine exactly how you should invest for your future.