Financial Planning Assumptions for Market-Cap Weighted & Factor-Tilted Portfolios (Methodology Guide)

This guide describes PWL Capital’s methodology for estimating the expected returns, standard deviations,
and correlations of major asset classes over a 30-year planning horizon. These parameters enable
Canadian financial planners to produce financial projections for their clients. We discuss the expected
risk and return for market-cap-weighted and factor-tilted portfolios. Factor-tilted portfolios are designed
to replicate the factor exposure of the DFA Global Allocation funds. Since a dollar of return earned in the
form of ordinary income, Canadian dividend, foreign dividend, and capital gains do not have the same
after-tax value, this document addresses how we estimate the composition of expected returns. We also
discuss our methodology to estimate the primary residence’s expected price appreciation and standard
deviation. Unless mentioned otherwise, all the data in this document is dated December 31, 2022.