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what should old folks invest in

12K views 41 replies 16 participants last post by  AltaRed 
#1 ·
I have to start a rrif, so next year money will have to come out of taxprotected.
Bloomberg says stocks only go up now cos of buybacks that make the bosses bonuses even bigger. We wont see any growth in my lifetime, just like japan for the last decades.
The essential retirement guide is worth a read.
The money is for when I am older a dodderier!
So what gives a good return nowadays.
Balanced portfolio does not make sense now
Thanks all
 
#3 ·
We've discussed strip bonds, GIC's, and REITs with you in other threads.
Now you are asking, 'what gives a good return these days'.

To help this thread out a bit:

What is your RRSP/RRIF invested in now, and why don't you want to leave it invested as it is now and just make the annual minimum withdrawl from it?

How dependent are you on the income from the RRIF? Is this income you don't really need?
 
#7 ·
tables and chart from http://portfoliodb.theglobeandmail.com/

I still like balanced funds, although my most recent purchase was a Bond Fund.

A short list from the many bond funds available; sorted by MER%




Fund with lowest MER also has highest 15-year return.




PH&N Total Return Bond Fund handily beat the 5% Fixed Rate Index over 15 years.


image hosting over 5mb
 
#9 ·
Zylon has some great examples of bond funds. I though believe there is risk in longer term bond funds and would more likely pick Mawer balanced funds as the 'goldilocks' scenario. Imagine that, all or most of the portfolio in one Mawer balanced fund.
 
#11 ·
thanks all. how did your balanced funds etc do in 2015?
do you take into account Bloomberg says stocks only go up now cos of buybacks that make the bosses bonuses even bigger.
We wont see any growth in my lifetime, just like japan for the last decades.
 
#13 ·
Do not rely on the fifteen year performance of a bond fund to indicate future performance.

Fifteen years ago, bond returns were much higher than they are now. We have just gone through a long period of falling interest rates during which bond prices have risen. If rates rise, longer term bond prices will fall and bond funds will struggle to break even. For the fixed income portion of your portfolio, you may be better off with GICs. However, you should not be invested totally in fixed income. You are guaranteeing yourself a zero return after accounting for inflation. Adding some REITs and blue chip dividend paying stocks will improve your returns without adding very much risk.

If you are totally risk averse, you might consider buying an annuity (they can be very tax efficient). But remember that inflation will erode its value over time, so you will need to save in the early years to maintain equal, inflation adjusted, income. A TFSA would work very well as a savings vehicle in that case.

By the way, starting a RRIF does not take you out of the tax protected regime. RRIFs are not taxed until withdrawal (same as RRSPs).

I don't know your personal situation, whether you are well off or just surviving on your present income. Are you married? Do you have kids that you want to leave an inheritance? Do you have any pension outside of CPP or OAS?

My RRIF is invested 100% in dividend stocks and REIT's. I take out the dividends and leave the capital intact, except for an amount that I withdraw to top up our TFSAs every year. I firmly believe that this approach will minimize any risk of running out of money before I die.
 
#23 ·
My RRIF is invested 100% in dividend stocks and REIT's. I take out the dividends and leave the capital intact, except for an amount that I withdraw to top up our TFSAs every year. I firmly believe that this approach will minimize any risk of running out of money before I die.
Exactly my approach as I get older.
 
#14 ·
I note that nobody wants to say how their investments did in 2015!
I read far more than a couple of articles. the ones I pointed out are they ones about reality that few people wish to face.
yes I have considered an annuity.
it is in cash right now while I decide.
the global investment situation has greatly changed in the last few years. the book I mentioned is one of the clearest on that point.
the money coming out of the RRIF is for our future when we are doddier than now. I am aware that in a rrif it is tax protected.
thanks all.
 
#16 ·
It does not matter what anyone's investment portfolio performance did in 2015. They will be all over the map depending on how people were invested in terms of asset allocation and geographical distribution. Even then, one year performance numbers are meaningless. If you want to talk about 5 or 10 year annual averages that is another matter.

I do agree that future global GDP growth is likely to be slower than historically but that is an assumption that the growth in services will not accelerate to overcome slowdown in demand in goods. It will also depend on whether there will be increasing barriers to trade. To hear Trump say it, he would rip up trade agreements and that will have a very significant negative effect on global GDP growth. Time will tell.

IMO, a balanced global fund such as MAW104 is one's best shot at getting things, on average, just right. It is a solid and reasonable marker for global market performance.

http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN05MRR&region=can&culture=en-CA

5, 10 and 15 yr performance net of fees is 10.33%, 7.47% and 7.56% respectively. Note that the 10 and 15 year performances include the effects of the 2008-2009 crisis, so it is representative of both up and down markets. Going forward, I would expect performance in the range of 5-6% (knocking off 1-2 points for bonds and 1 point on equity), or vice versa depending on how/when interest rate increases come our way in the next 10 years. I am resigned to believing interest rates will stay low for a very long time (relative to recent history).

And to your other question, note that 2015 performance for that fund specifically was 10.54%.

Why not commit your RRIF to MAW104?
 
#18 ·
IMO, a balanced global fund such as MAW104 is one's best shot at getting things, on average, just right. It is a solid and reasonable marker for global market performance. ... 5, 10 and 15 yr performance net of fees is 10.33%, 7.47% and 7.56% respectively. Note that the 10 and 15 year performances include the effects of the 2008-2009 crisis
Yes it's good that the time range includes the 2008 bear market, since those aren't very rare.

TD Monthly Income (another balanced fund)'s performance for 5, 10 and 15 years is: 5.45%, 5.22%, 8.09% -- pretty amazing 15 year performance, but this is not as globally diversified as MAW104
 
#19 · (Edited)
Anon125, about a year ago you started a thread titled "sell my strip bonds". At that time you mentioned that your adviser said you should sell your strip bonds that were in your RRSP.

So my question is, do you still have an adviser, and what are they suggesting you do?

We know very little about your overall situation so it is difficult to make an informed suggestion. All we can do is answer your fairly narrow question(s). You seem to feel that you need/want a higher return in your RRIF but also seem to believe that the markets will not or cannot deliver it.

We don't know if your adviser is good or not, but we do know that everyone's financial decision making ability declines as we age. So it becomes an increasingly good idea to have a second opinion when we are considering changes (particularly large changes) to our investments.

--------------------------------------------------------------------------------------------------------------------------------------

This is something that I have only recently been reading about and it is interesting that while our financial cognition declines, we typically don't recognize it and we remain confident of our decision making ability. I'm probably 10 yrs younger than you but I have made a note to review our RRIF plans with my son when the time gets closer. Here are a couple of interesting articles on the subject:

...Households aged 60 years and older control more than half of the wealth in the United States. Since fewer employers provide pensions than ever before, more people are dependent entirely on their retirement savings...
“This was originally one of the most surprising and alarming findings from the study,” Finke said. “As we get older, our ability to answer basic financial questions that include knowledge, and the ability to apply that knowledge, gets worse. But we have no idea this is happening. It’s very similar to the research on driving skills. Since it happens so gradually, we’re not aware our abilities are getting worse over time.”

Old Age and Decline in Financial Literacy: http://today.ttu.edu/posts/2016/03/financial-literacy

The findings confirm that declining cognition ... is associated with a significant decline in financial literacy. The study also finds that large declines in cognition and financial literacy have little effect on an elderly individual’s confidence in their financial knowledge, and essentially no effect on their confidence in managing their finances. Individuals with declining cognition are more likely to get help with their finances. But the study finds that over half of all elderly individuals with significant declines in cognition get no help outside of a spouse. Given the increasing dependence of retirees on ... savings, cognitive decline will likely have an increasingly significant adverse effect on the well-being of the elderly.
How Does Aging Affect Financial Decisin Making: http://crr.bc.edu/wp-content/uploads/2015/01/IB_15-1-508.pdf
 
#20 ·
Bond Funds : charts from theglobeandmail.com

In case anyone holding a bond fund is getting nervous about rising rates sooner or later; one thing I'll be keeping an eye on is the 30-month moving average.
The average has been good support for price in the past; if price falls below the 30-month average, it will be a time to rethink the wisdom of holding on.






images hosting
 
#21 · (Edited)
remember that interest rates will never rise! yes I know that sound odd.
major changes happened some years ago. first in Japan and now the west and china.
growth wont happen- can't happen.
the reasons for growth and high interest rates have all gone.
read fred vettese book at least chapter 6.
the essential retirement guide. for a starter of this new understanding.
high paying jobs are being replace with low pay jobs etc. etc

as always the past does not necessarily forecast the future as many mutual funds say - surely ETFs are better now?
also according to Bloomberg the main or only reason that shares have increased is company buybacks which just mean the CEO gets more pay. no more is put into investment.

thank for everyone's ideas
I took a while to reply cos of that password chaos
 
#22 ·
The reason for asset allocation, and sticking to allocations, is that you never know how assets will do.

The end of the bond bubble was called many years ago, possibly as far back as 2007 when global debt levels were sky high. Well guess what ... treasury bonds have performed incredibly well since 2007. They've attained prices (and low yields) that nobody ever guessed.

In Europe, there are negative interest rates. My guess is still that Canadian treasury yields will approach zero, and I think our short end of the curve will go to negative yield, same as US and Europe. Global growth is grinding to a halt and yields will go negative.

But why speculate on this? Just stick to your asset allocation. You do the same for stocks after all. Just maintain the target levels of exposure, rebalance once a year (maybe even less), and do this long-term. None of us can predict interest rates or the stock market
 
#24 ·
What should old folks invest in?

It's a good question but if one asking by the time one turns 71, than it's not realistic to worry about investments, but rather how much money does the person(s) need to meet their expenses. Do they have work pensions, other sources of income, have they accumulated a reasonable amount of savings, do they need to draw from their saving to meet expenses?

Knowing the above one can determine where or what one might invest in.
 
#25 ·
What should old folks invest in?

Depends how much money you have, and how much you need, to cover expenses.

If you're 70, need $40k per year, and have millions, and a pension - you can invest in GICs (or whatever you want) to meet your needs because you don't need growth or income, you can draw down your capital as you please.

If you're 70, need $40k per year, and have $100k, and no pension but do have government programs to rely on - you need to think about growth and some safety.

Personally, I think as you get older, you need to focus on income from your portfolio and not the capital. You need to think this way because a) old folks only have so many good years left to enjoy income and b) you need income to live from; you can't depend on capital gains to get you through.

Just my take of course.
 
#26 ·
What should old folks invest in?

Depends how much money you have, and how much you need, to cover expenses.

If you're 70, need $40k per year, and have millions, and a pension - you can invest in GICs (or whatever you want) to meet your needs because you don't need growth or income, you can draw down your capital as you please.

If you're 70, need $40k per year, and have $100k, and no pension but do have government programs to rely on - you need to think about growth and some safety.

Personally, I think as you get older, you need to focus on income from your portfolio and not the capital. You need to think this way because a) old folks only have so many good years left to enjoy income and b) you need income to live from; you can't depend on capital gains to get you through.
We do think alike, but I believe all investors should be focusing on "Income", even during their accumulation phase. Then by the time one is ready to retire they will know what their income from their investments will be. Invested wisely the income will be a growing amount rather than fixed.
 
#34 ·
PH&N Bond D - PHN110

Not clear to me what this means, but I'm sure management is trying to reassure investors.

Snip from 2016 year-end management overview:

"While the pull-back in returns in the
fourth quarter was extensive, the Fund still
managed a modest positive return for the year,
and is now in a better position via a higher yield to
provide a higher level of income going forward.
Ultimately, higher yields will benefit the Fund and
its investors over the long term.
"
http://funds.rbcgam.com/pdf/fund-pages/quarterly/rbf1110_e.pdf

The 30-month moving average is still holding as support.
- chart from Globe-and-Mail portfolio:



- the Morningstar view:
http://quote.morningstar.ca/QuickTa...rf.aspx?t=0P0000706X&region=CAN&culture=en-CA
 
#35 ·
I have moved a lot of my portfolio to preferred shares . I am retired and invest 100% in fixed income. There are some relatively safe preferred share options that provide a dividend much higher than the present gic rates. One example is CGI.PR.D. It has a retraction date of June 15 2022. The yield to maturity is approx. 3.4% and the DBRS rating is Pfd-1L which I believe makes it the highest rated preferred share in Canada. I only look at specific preferred shares and do not buy the ETFs which can have more volatility in some cases.
 
#37 ·
Yeah, if you want to stick to 100% fixed, it's a reasonable move to boost your income with preferred shares. There aren't many retractables left unfortunately, and as such, their yield is rather low, but certainly higher than GIC's, so they're a worthwhile addition to juice returns for income investors. The straights have wonderful cash flow, but if absolute capital preservation is a concern, you of course would avoid that route in anticipation of higher interest rates in the future. There are also the new minimum fixed resets to consider as 5 year money compared against GIC's. Most don't boast Pdf-1L, but a tiny portion of these (i.e. TRP.PR.J) wouldn't hurt either.

ltr
 
#39 ·
AltaRed...the secret word...dividend growth...makes inflation go away and the living easy. But most would not believe people claiming yield on costs with blue chip companies over 10% and growing 8% faster than inflation. Better to lose money guaranteed.
 
#40 · (Edited)
Yield on cost is meaningless. Never have calculated it, never will calculate it and never will conduct a conversation with anyone about it.

What really matters is the growth in the overall dividend stream in the recent past and going forward, I will happily discuss that. XIU is not a bad proxy for dividend growth stream for the past 10 or so years. Financials have done well while resources have not while back in the last decade, resources did well in the super commodity cycle. At least some diversification there to avoid biased cheerleading.

http://www.dividendchannel.com/symbol/xiu.ca/ has a pretty neat chart (and table) to show the overall trend...mostly trending up with some hiccup years but essentially a doubling of dividend in 17 years (2000-2016). Not shabby at all.

Added: I hopefully have about 20 years of investing life left in me before I start taking a fork in the road. I certainly can live with a doubling of my current dividend stream over that period of time.
 
#41 ·
Not meaningless, just an illustration of the power of dividend growth...for millennial's buy RY (or BCE,TRP etc) today yielding 4% and forget about it...20 years down the road your dividend has doubled ...far ahead of inflation or a 4% SWR. Worked for me (retired 8 years) and will work for anyone.
A road to success.
 
#42 ·
The answer is different for someone who bought TRP 5 years ago versus 20 years ago. What matters is what the dividend stream itself has done over the period, not the relationship with the cost of the stock at any time in the past. CMF has had this debate multiple times.
 
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