None taken, but please contribute something to the discussion.Originally Posted by blin10
None taken, but please contribute something to the discussion.
I never said diversification does not work, I said it doesn't work too well, when things go down everything goes down, sure some sectors go down more and some less... obviously going all in into let's say oil is not a good idea, but neither is splitting 100k into 30 pieces especially splitting to etf's that do not move, bouncing 2-3$ up and down for years with almost no chance of doubling money...
This is the essence of concentration, not diversification. As in: the risk you are describing is one that diversification protects against, not brings into being.
WaterBoy4800 - Well done with your savings. If you are going to hold a portfolio that includes interest-earning investments (bonds, GICs) you are best to have these within your TFSA, first, then your RRSP. Investments that have a dividend, Capital Gain/Loss potential should be held first in your non-registered account. The best account for long-term investments is the TFSA, then the RRSP and non-registered accounts. So maybe change your view of the TFSA from an emergency cash reserve to your long-term retirement fund. (If you are unlike most Canadians and reinvest the resulting RRSP income tax refunds, then the RRSP is better than the non-registered - assuming tax rates do not increase in future years.)
A couple of thoughts. First, at your young age you have demonstrated a tremendous ability to save ($50,000 for a down payment, plus $100,000 of surplus savings for your long-term goals, all by 27 years of age), so why take on any investment risk at all. Why invest in the stock market? People always say the younger a person is, the more investment risk they can tolerate. Young investors should invest 100% in the stock market because they have a long investment time-horizon. But this is actually a bit backwards. The longer your investment time-horizon the less risk you will need to take. If you have the discipline and ability to save (as you clearly have demonstrated) I doubt you need to take on any investment risk.
I know I will get a lot of negative comments about rising inflation, rising interest rates, ..... The same comments that have been made for over 30 years. Who knows where interest rates will be in 2, 5, 10 or 30 years. But bonds and GICs should be held until they mature, bonds, if held in a non-registerd account should be purchased at or under $100, and the maturity ladder should have a portion coming due each year for reinvestment. If rates do go up, that is great, your maturing bond/GIC can be reinvested. (Rising interest rates are just as negative for stocks as they are for bond market prices.)
Second, bonds have outperformed stocks and an investment portfolio that includes bonds provides a lot of advantages, beyond investment returns - less volatility, greater consistency of performance, greater flexibility to adjust stock market exposure, greater peace of mind, etc. Most that are against owning bonds (& preferred shares) have little experience in owning either of these investment types or are stock-centric in their beliefs.
Here are a couple of articles that might be of interest. They are from Russell Investments (a company that makes the majority of it's money by investing in the stock markets.)
1) Comparing single-asset to multiple-asset portfolios. You will notice that investment portfolios balanced with bonds have the better historical risk-weighted investment returns -lower standard deviation without much lower returns.
2) Better than 20/20 hindsight: a 35/65 asset mix for retirement That is not 35% bonds, but 35% stocks!
Again, Well done on your discipline.
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