Investing

Market timing step 2: going back in

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  • Nov 23rd, 2020 7:52 am
[OP]
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florenntina wrote: @Freliona
Interesting Doug’s opinion yesterday:

“...However, it is true that investors will need to take more risk in the future with their fixed income holdings to achieve better rates of return.

A 40% fixed income component being composed predominately of US Treasuries or Government of Canada bonds will no longer work. More exposure to corporate bonds, for instance, will likely be required instead.”

And it comes in right time as I just made decision about my portfolio rebalance. Maybe he reads RFD? Face With Tears Of Joy
John Heinzl, too! Face With Tears Of Joy Read his GM article along the same lines yesterday:
According to the iShares website, the weighted average YTM of the bonds in XBB is 1.21 per cent – or less than half of the distribution yield. What’s more, the posted YTM is before fees. After subtracting the MER of 0.1 per cent, XBB’s net YTM falls to about 1.11 per cent.

This shouldn’t come as a huge surprise given how low government bond yields have sunk. Five-year government of Canada bonds, for example, were yielding about 0.33 per cent as of Friday morning, while 10-year bonds were yielding 0.49 per cent on a YTM basis. If it weren’t for higher-yielding corporate issues, XBB’s YTM would be even lower than it is.

Another thing to keep in mind is that the price of XBB – or any other bond fund – won’t be stable. It could move higher if interest rates drop or lower if rates rise.

I don’t mean to steer you away from bond funds. As long as you understand what the distribution yield means – and can accept some modest volatility – they are a fine solution for your fixed-income needs.

However, if you are comfortable taking on more risk, you may also wish to explore dividend-paying stocks, particularly those at the conservative end of the spectrum, such as utilities, power producers and telecoms.
And that’s what I’m learning towards as well with a portion of maturing GICs (reduce GIC allocation from ~20% to ~12-13% and start buying dividend stocks in the non-reg account instead) Yes, I’ve learned from experience that even “safe stocks” are not a substitute for GICs and bonds in the capital preservation sense, so will only be doing it with money that I won’t need to withdraw any time soon (hopefully never, so will be ok with less growth/higher yields - I’ll collect larger dividends and pay less taxes, and my daughter will pay less capital gains taxes when she inherits them :))
Btw. I already did some work:[...]
Good job! 👍🏻 :)
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florenntina wrote: I usually use https://www.morningstar.com/etfs/xtse/zdv/portfolio to get relevant information about ETF I’m interested in. This one works for me but there are a lot of other ways to find it out. You can also check the site of company who makes the particular ETF (Vanguard, BMO ect.). Also, pay attention on MERs since it can make a significant difference in total return on long run. Good luck Thumbs Up Sign
yes, MER is the biggest reason why I'm switching out of Mutual Funds.. it's killer..

I'm probably going to go with the XGRO/VGRO though.. one question though, they're both growth ETF correct? why wouldn't I want to invest with VGRO over XGRO even though it pays a small dividend?
"An essential aspect of creativity is not being afraid to fail." -- Edward Land
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This may be relevant to above. An all in one balanced ETF in the registered accounts is what we own.

July 09, 2020
Ignore “Experts” Building Coffins for the 60/40 Investment Model
Written By: Andrew Hallam

https://assetbuilder.com/knowledge-cent ... ment-model

"After 31 years of investing, here’s the most important thing I’ve learned: nobody can predict the future. Unfortunately, there’s no shortage of fortune-tellers. They claim to predict where stocks, bonds, gold, currencies or oil prices are going next. If I listened to those predictions, I might be broke today."

I've been investing for nearer forty years and darn, I can't predict the future either.
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faken wrote: I'm probably going to go with the XGRO/VGRO though.. one question though, they're both growth ETF correct? why wouldn't I want to invest with VGRO over XGRO even though it pays a small dividend?
Sorry you sound confused - XGRO and VGRO are nearly identical and pay similar distributions, it’s only Horizon total return ETFs that “convert” payouts into capital gains (that makes them easier for tax reporting in non-registered accounts, but no advantage in registered - sorry I mentioned HBAL! :)) Here might help: https://cutthecrapinvesting.com/2019/08 ... ortfolios/
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freilona wrote: Sorry you sound confused - XGRO and VGRO are nearly identical and pay similar distributions, it’s only Horizon total return ETFs that “convert” payouts into capital gains (that makes them easier for tax reporting in non-registered accounts, but no advantage in registered - sorry I mentioned HBAL! :)) Here might help: https://cutthecrapinvesting.com/2019/08 ... ortfolios/
Ok i did read into it more.. I actually looked at the asset allocation page: https://www.vanguardcanada.ca/individua ... n-etfs.htm.

Looks like i'm going with VEQT lol.
"An essential aspect of creativity is not being afraid to fail." -- Edward Land
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faken wrote: Looks like i'm going with VEQT lol.
Good choice! 👍🏻 More proper for a young guy who successfully short-term traded for fun ;)
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Stryker wrote: This may be relevant to above. An all in one balanced ETF in the registered accounts is what we own.
...
I've been investing for nearer forty years and darn, I can't predict the future either.
But you do also hold individual stocks (mostly Canadian dividend payers I gather) in your non-registered accounts, correct? What %-age of your overall portfolio are they? :)
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freilona wrote: But you do also hold individual stocks (mostly Canadian dividend payers I gather) in your non-registered accounts, correct? What %-age of your overall portfolio are they? :)
Correct. That's portfolio 2, started in 2003 not long after the mortgage on our wee house was paid off. The RRSP's were started in the early to mid 1980's. I started getting interested in investing a few years before that though. The TFSA's were begun in 2009. Let's just say that taxable portfolio is now almost as large as our non-registered accounts combined. I do treat them as separate entities though. Both simple and easy to run. For ourselves, I try not to make investing complicated anymore. More focus and less mistakes.
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MrMom wrote: @PaddyM77101

TY. EDV, bold choice. Why ETN's vs ETF's, for example https://stockcharts.com/freecharts/cand ... X,UVxY|B|0. Generalizing, but ETN's have lower volumes => liquidity and potentially less favourable tax treatment.

I came to RFD looking for "Hot Deals" and ended up in the Investing forum :rolleyes:. I do not look at any other investing forum's.
All of the shenanigans with DGAZF (https://www.thestreet.com/etffocus/mark ... a-few-days) yesterday reminded me of your msg - a highlight of why ETNs are scary
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Stryker wrote: This may be relevant to above. An all in one balanced ETF in the registered accounts is what we own.

July 09, 2020
Ignore “Experts” Building Coffins for the 60/40 Investment Model
Written By: Andrew Hallam

https://assetbuilder.com/knowledge-cent ... ment-model

"After 31 years of investing, here’s the most important thing I’ve learned: nobody can predict the future. Unfortunately, there’s no shortage of fortune-tellers. They claim to predict where stocks, bonds, gold, currencies or oil prices are going next. If I listened to those predictions, I might be broke today."

I've been investing for nearer forty years and darn, I can't predict the future either.
What is your cagr after 40 years of investing?
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fccoup wrote: What is your cagr after 40 years of investing?
No Idea. I don't benchmark. I can assure you the returns are nothing special though. Tried a little of this and a little of that in investing, and not really getting anywhere for a good half of those forty years. My wife and I were not high earners, so at least we didn't have a lot of money to blow on investments. We're now living fine in retirement, with a paid off house, totally debt free, and are able to live within our means. Basically it's indexed funds in the registered accounts for the past decade and individual Canadian dividend growth stocks in the taxable account starting in 2003. We have savings to maximize our contributions to the TFSA every year, and still able to add to our dividend growth portfolio. The government mandated RRIF withdrawals will be coming soon, but we'll just use the after tax money from there to invest into the non-registered portfolio. We feel very lucky.
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I totally forgot that my TFSA was 100% equities from mid-March. Does accidental market timing count? Face With Tears Of Joy Well, not completely accidental. Changed it to the 60-40 allocation, anyway.

There's at least two kind of opportunities to practice market timing without changing your overall portfolio allocation. For those days you kind of know you shouldn't change the big picture, but there's a feeling you must do something.
One is to shift risk between different taxable / not taxable accounts. Like here, by mid-March my TFSA was in the defensive stance and I loaded it up with equities (reducing equities elsewhere).

Another is tax loss harvesting on downturns, mentioned in another thread.
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yvrbanker wrote: I totally forgot that my TFSA was 100% equities from mid-March. Does accidental market timing count? Face With Tears Of Joy
But of course - it’s the best kind! Face With Tears Of Joy
There's at least two kind of opportunities to practice market timing without changing your overall portfolio allocation. [...]
One is to shift risk between different taxable / not taxable accounts. Like here, by mid-March my TFSA was in the defensive stance and I loaded it up with equities (reducing equities elsewhere).
That’s what I’m doing. Positioned my RRSP and LRSP more defensively to accommodate yearly withdrawals. But will be moving cash from maturing bonds and GICs to joint margin account (where the taxes are attributable to me) and purchasing dividend stocks and/or ETFs there (from both more favourable taxation and supplemental income perspective)

But my TFSA and husband’s registered accounts will remain high in equities, mostly index ETFs (after I redeploy cash in mine - where’s that second bottom or at least a deep dip?! Face With Tears Of Joy)

My Spousal RRSP will remain in 3 year GIC ladder purely for “safe income” withdrawals. And our new UL investment account will be on a more aggressive side, 25% bonds/75% S&P 500 (as we don’t plan to cash it until one of us passes)

So yeah, different purpose - different strategy & holdings in all ten or so accounts, but all somehow ties together overall Face With Tears Of Joy
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Nov 27, 2019
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freilona wrote: But of course - it’s the best kind! Face With Tears Of Joy



That’s what I’m doing. Positioned my RRSP and LRSP more defensively to accommodate yearly withdrawals. But will be moving cash from maturing bonds and GICs to joint margin account (where the taxes are attributable to me) and purchasing dividend stocks and/or ETFs there (from both more favourable taxation and supplemental income perspective)

But my TFSA and husband’s registered accounts will remain high in equities, mostly index ETFs (after I redeploy cash in mine - where’s that second bottom or at least a deep dip?! Face With Tears Of Joy)

My Spousal RRSP will remain in 3 year GIC ladder purely for “safe income” withdrawals. And our new UL investment account will be on a more aggressive side, 25% bonds/75% S&P 500 (as we don’t plan to cash it until one of us passes)

So yeah, different purpose - different strategy & holdings in all ten or so accounts, but all somehow ties together overall Face With Tears Of Joy
Do you prefer any particular dividend ETF? I analyzed a few of them and finally started a position in ZDV. I found this https://dividendearner.com/canadian-dividend-etfs/ as a good starting point for the research but double check the info. Things have changed since February.
Btw. proudly owner of 10% ZAG here 🤪

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