# Is the market going to come back?



## Bruins63

Opinions please...I’m 78% equities, 22% bonds, banks, utilities, telecom, reits, oil...down 6 percent...do u think the tsx will recover much this year or is there more downside coming? Do u think it depends on if the DOW recovers Or do you think with rates going up, equities are going to sell off for bonds? Thanks


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## cainvest

Who knows ... I do think a little more of a downside trend is good right now, might minimize the potential for a serious crash in the near future.


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## Bruins63

cainvest said:


> Who knows ... I do think a little more of a downside trend is good right now, might minimize the potential for a serious crash in the near future.


My gut tells me it depends if bond yields come into favour which depends on inflation and interest rates...I know one thing... need to ride this out now, not selling...


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## OnlyMyOpinion

Bruins63 said:


> ...I know one thing... need to ride this out now, not selling...


That's the right attitude. 
This decline shouldn't matter. If it does, then either your risk tolerance or your income needs are mismatched to your investments. 
I don't believe you indicated in other threads what MF your advisor has you in or whether you have a 'cash wedge' as you enter retirement. But hopefully you can sit back during this market decline and establish your expected spending and income needs vs your retirement income sources - then revisit whether your allocations need changing. By then, with luck, we'll have regained some of your MF value.


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## gibor365

> Do u think it depends on if the DOW recovers


 100%, but even if DOW recovers, imho, TSX will underperform


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## Bruins63

OnlyMyOpinion said:


> That's the right attitude.
> This decline shouldn't matter. If it does, then either your risk tolerance or your income needs are mismatched to your investments.
> I don't believe you indicated in other threads what MF your advisor has you in or whether you have a 'cash wedge' as you enter retirement. But hopefully you can sit back during this market decline and establish your expected spending and income needs vs your retirement income sources - then revisit whether your allocations need changing. By then, with luck, we'll have regained some of your MF value.


2 year cash wedge + 1 year bond wedge = 3 year wedge


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## 1980z28

In my opinion it will keep in a negative direction ( sell off will continue )
I am all in 100% equities
I have just under 87k in savings to allow some more downside,my cost per month is about 1100 includes everything,so living is cheap for me,so 87k will last a long time,,,,
Markets go up and down
I have been in from early 80`s
Made lots of bad trades
Have only sold at a loss for tax reasons
Again in my opinion it will be a wild ride for 2018
So hang on
If the case arrives you can sell gains and rebalance.captial gains are taxed very nice in canada


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## Eder

Well the TSX will under perform until it out performs right? Given sufficient iterations everything can and will eventually happen...even the Improbability Drive.


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## Koogie

1980z28 said:


> In my opinion it will keep in a negative direction ( sell off will continue )


Agreed. Trend is your friend.



1980z28 said:


> I am all in 100% equities.


No frigging way. 



1980z28 said:


> Again in my opinion it will be a wild ride for 2018. So hang on


Agreed.


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## 1980z28

Koogie said:


> No frigging way.


Have always done it this way,,no problem

Investing is gambling nothing more,,,i have always believe that if i can not afford to play i should take my ball and go home,,life is to short

I retired this year at 56 shooting for 80 plus so really nothing for me to do but gamble


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## GreatLaker

I expect the market will have positive long term returns, with a high probability that equities will dramatically outperform all other asset classes, although with higher volatility. I don't know what it will do short term.

I will rigorously adhere to my investment policy statement and stay within an asset allocation with which I am comfortable.

There is pretty much always some worrisome news somewhere. The trick for index investors is to ignore it. The stock market is a random walk short-term and an upward trend long term.

It is helpful to look at history to understand how the stock market recovers from corrections and bear markets:

May 1946 to May 1947. Stocks plunge 28.4%.
June 1948 to June 1949. Stocks decline 20.6%.
June 1950 to July 1950. Stocks fall 14%.
July 1957 to October 1957. Stocks fall 20.7%.
January 1962 to June 1962. Stocks plunge 26.4%
February 1966 to October 1966. Stocks fall 22.2%. 
November 1968 to May 1970. Stocks plunge 36.1%.
April 1973 to October 1974. Stocks plunge 48%
September 1976 to March 1978. Stocks fall 19.4%.
February 1980 to March 1980. Stocks fall 17.1%.
November 1980 to August 1982. Stocks fall 27.1%.
August 1987 to December 1987. Stocks fall 33.5%.
July 1990 to October 1990. Stocks fall 19.9%.
July 1998 to August 1998. Stocks fall 19.3%. 
March 2000 to October 2002. Stocks plummet 49.1%. 
November 2002 to March 2003. Stocks fall 14.7%
October 2007 to March 2009. Stocks plummet 56.8%.
April 2011 to October 2011. Stocks fall 19.4%.
June 2015 to August 2015. Stocks fall 11.9%
Stocks gained +1,100-fold during this 70-year period.
Source

Lesson learned: Stay-the-Course


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## Mukhang pera

1980z28 said:


> Have always done it this way,,no problem
> 
> Investing is gambling nothing more,,,i have always believe that if i can not afford to play i should take my ball and go home,,life is to short
> 
> I retired this year at 56 shooting for 80 plus so really nothing for me to do but gamble


I tend to agree that investing is gambling, even though the common lore on this board is that if you study hard and make a life's work out of "how to invest" then mere "gambling" becomes elevated to "investing". 

As well, I agree with the notion of know your limit, play within it as the lottery sellers like to say. If you cannot afford to lose what you "invest", don't do it. As the leader of a dance band I was once part of would say about ad libbing: "When in doubt, stay out." That rule applies equally to investing. 

Anyway, 1980, you are in a good position to sit on the sidelines and not give a hoot. You are living happily on $1,100/mo. Your $87K nest egg will get you through about 6 years and, soon after that, unless something is radically wrong, your $1,100/mo. nut should be covered by things such as CPP, OAS, GIS. In fact, you'll probably do better. Soon, when interest rates return to a more normal 10% or so, even a saving account will boost that $87K.

P.S.: You should write a book about how to live in Canada on $1,100 a month. I have lived in third world countries (owning my own home) and never got by on that kind of budget. Admirable.


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## jargey3000

Bruins63 said:


> Opinions please...I’m 78% equities, 22% bonds, banks, utilities, telecom, reits, oil...down 6 percent...do u think the tsx will recover much this year or is there more downside coming? Do u think it depends on if the DOW recovers Or do you think with rates going up, equities are going to sell off for bonds? Thanks


"down 6%"- from what?
since last week sometime?
year-to-date?
your all-time high?
from book value?


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## Bruins63

jargey3000 said:


> "down 6%"- from what?
> since last week sometime?
> year-to-date?
> your all-time high?
> from book value?


Sorry, down 6 percent from the recent high in the last 3-4 months, which happens to be my all time high


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## Bruins63

1980z28 said:


> In my opinion it will keep in a negative direction ( sell off will continue )
> I am all in 100% equities
> I have just under 87k in savings to allow some more downside,my cost per month is about 1100 includes everything,so living is cheap for me,so 87k will last a long time,,,,
> Markets go up and down
> I have been in from early 80`s
> Made lots of bad trades
> Have only sold at a loss for tax reasons
> Again in my opinion it will be a wild ride for 2018
> So hang on
> If the case arrives you can sell gains and rebalance.captial gains are taxed very nice in canada


How do u manage to live on $1100/month?


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## Bruins63

GreatLaker said:


> I expect the market will have positive long term returns, with a high probability that equities will dramatically outperform all other asset classes, although with higher volatility. I don't know what it will do short term.
> 
> I will rigorously adhere to my investment policy statement and stay within an asset allocation with which I am comfortable.
> 
> There is pretty much always some worrisome news somewhere. The trick for index investors is to ignore it. The stock market is a random walk short-term and an upward trend long term.
> 
> It is helpful to look at history to understand how the stock market recovers from corrections and bear markets:
> 
> May 1946 to May 1947. Stocks plunge 28.4%.
> June 1948 to June 1949. Stocks decline 20.6%.
> June 1950 to July 1950. Stocks fall 14%.
> July 1957 to October 1957. Stocks fall 20.7%.
> January 1962 to June 1962. Stocks plunge 26.4%
> February 1966 to October 1966. Stocks fall 22.2%.
> November 1968 to May 1970. Stocks plunge 36.1%.
> April 1973 to October 1974. Stocks plunge 48%
> September 1976 to March 1978. Stocks fall 19.4%.
> February 1980 to March 1980. Stocks fall 17.1%.
> November 1980 to August 1982. Stocks fall 27.1%.
> August 1987 to December 1987. Stocks fall 33.5%.
> July 1990 to October 1990. Stocks fall 19.9%.
> July 1998 to August 1998. Stocks fall 19.3%.
> March 2000 to October 2002. Stocks plummet 49.1%.
> November 2002 to March 2003. Stocks fall 14.7%
> October 2007 to March 2009. Stocks plummet 56.8%.
> April 2011 to October 2011. Stocks fall 19.4%.
> June 2015 to August 2015. Stocks fall 11.9%
> Stocks gained +1,100-fold during this 70-year period.
> Source
> 
> Lesson learned: Stay-the-Course


Great perspective! Thanks


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## P_I

Pullbacks, corrections and even bear markets are not unusual. A very good read on the subject is How to navigate through market volatility | Vanguard Canada.


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## 1980z28

Bruins63 said:


> How do u manage to live on $1100/month?


Before i retired in 2017
I purchased 126 acres of land
Built a new house 1200 sq ft on the ocean
Built a garage 2 story total sqft 2400sqft
Purchased a new backhoe,car,atv,etc,lots of stuff
Own water well,sewer,own hydro poles
Land has 100 acres of trees
Heat from firewood in garage,also have 1000sqft greenhouse,also grow own root crops
Because i own everything insurance is less than 100 per month for property house and vehicles,,i worked as a mechanic for 38 years
Phone,cable,internet is about 120 per month
Food bill less than 500 per month
Hydro about 130 per month
Fuel cost for tractor,vehicle,atv is about 100
I run about 7KM per day,,always outside,,also fish and hunt,,i love outside just got a GSD puppy as my GSD died after 14 years old,,very said for me to say goodbye
I love my life ,also so lucky to plan for my retirement
Amazon and Costco are my friends


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## Eder

Sorry about your dog...


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## 1980z28

Eder said:


> Sorry about your dog...


Thanks

My GSD was like family 14 years of your best friend,,,was very hard for me 
My replacement is now 6 month female,my first female GSD
We are good for at less 8 hours outside each day and life is good
Did not understand how much females are different from male GSD`s


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## Bruins63

1980z28 said:


> Thanks
> 
> My GSD was like family 14 years of your best friend,,,was very hard for me
> My replacement is now 6 month female,my first female GSD
> We are good for at less 8 hours outside each day and life is good
> Did not understand how much females are different from male GSD`s


We have 2 pugs, no children...they are family...lost our 10 year old pug last year, never cried so hard in my life...


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## Benting

1980z28 said:


> In my opinion it will keep in a negative direction ( sell off will continue )
> *I am all in 100% equities
> *I have just under 87k in savings to allow some more downside,my cost per month is about 1100 includes everything,so living is cheap for me,so 87k will last a long time,,,,
> Markets go up and down
> I have been in from early 80`s
> Made lots of bad trades
> Have only sold at a loss for tax reasons
> *Again in my opinion it will be a wild ride for 2018
> *So hang on
> If the case arrives you can sell gains and rebalance.captial gains are taxed very nice in canada


1+

70+, with 100% equities since mid 90s. My approach is 'no pain, no gain'. I have 3 yr + cash for reserve only, the rest are all equity. Yearly expense so far after I retired is from 60k to 180k, very flexible. 30k+ from pension and OAS. So all I need is about 40k/yr to get to 60k net for my min expense. One thing you people keep forgetting, if you need money and have to sell, you are not selling ALL at once ! Just sell what you need. And you still have the rest of the investment working for you.

Greatlaker, great stats. Wish they break down the % gain too in between to make this 1100+ in 70 yrs. To me, we need just to look back 50 yr. These days, with the government constantly watch out the market, chances for the long declined will not happen. I do not even think we should consider the big crash of 2007-2008. The credit crisis was man made and involved with the worst and sensitive sector, financial. Since then, all loop holes are well covered that it will never happen. Granted, it may for some reasons and happens. But it definitely will not be in that kind of magnitude.

To me, the current drop is just those 'big boys' in the Wall Street toying with each others. Try to push out smaller outfits and out wit each others. There is absolutely no reasons to had this kind of run, record breaking day after day last yr. And, of course, what goes up must go down, big crash. A lot of people blamed the interest rate and bond yields. It was not news, everybody knew long times ago !. Now, the fun begins. It will be up and down like a yo-yo for little while. Down probably more than gain. Lot of suckers will get in for bargains. Just to find out it is not so and the market will keep going down. Also a lot will sell because they just cannot hold on longer afford to lost more. And, all of a sudden, the 'big boys' would buy them all in bargain price and drive up the market for huge gain in a hurry. When, your guess is as good as mine. As for myself, sure the market affect my nest egg. I lost 6% just in one week. Panic, absolutely not ! I am prepared to lost all my 15% gain from last year, which may happen from the way the market went up last year. One thing I know for sure, the money I lost will come back because I have 100% equities.

My $0.03.


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## hboy54

I don't see investing as even remotely gambling if you talk about the whole process over a lifetime. Quite the opposite actually. 

I see gambling and investing as exercises in expected value. Gambling has an EV under unity by definition. Investing has an EV over unity, and if you do it half way sensibly, well over unity.

If what I do is gambling, then I have managed do the equivalent of tossing about a dozen consecutive heads. Possible, but very unlikely.

Hboy54


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## Jimmy

Most markets now are oversold and undervalued. RSI for the S&P /tsx was below 30 ( oversold) . From the news the big reaction is to bond yields getting near 3% so $ going to bonds. Also people readjusting their expected returns higher as the US hikes the risk free interest rates . Earnings for US company's are beating forecasts and still coming in at 10+ % growth so the earnings are there and it will come back. Even higher in other areas of the world.

S&P/TSX should still grind out a 7-8% return this year even w the declines recently. It is mainly banks who make more $ as interest rates rise too.


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## jargey3000

....it's different this time.......


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## james4beach

Bruins63 said:


> Opinions please...I’m 78% equities, 22% bonds, banks, utilities, telecom, reits, oil...down 6 percent...do u think the tsx will recover much this year or is there more downside coming?


Nobody can predict it, but maybe look at it from the perspective of things that you can control. You are in command of your own asset allocation. I would also include your cash amounts in your asset allocation %s, because if you have a ton of cash lying around, _you're not really 78/22_.

It's a very individual decision about how much risk/reward you want to take on. It all depends a lot of whether you are living off the portfolio (extracting cash/dividends from it) or just leaving the portfolio alone, and also where you are in retirement. It's very different if you've just started retirement vs you're already 20 years into living off your capital. Too many factors and there is no single right answer to an ideal asset allocation.

Looking at a historical backtest calculator like this one, you can at least see some historical statistics (using US Stock Market and 10- Year Treasury)

50% equities, 50% bonds : CAGR of 9.34%, worst year -12%, maximum drawdown -24%
78% equities, 22% bonds : CAGR of 10.08%, worst year -24%, maximum drawdown -38%

So when using the allocation you've chosen, one should be prepared for worst years and temporary losses (high to low) of those magnitudes. If you decide that this is more risk or unpleasantness than you're comfortable with, it's just a matter of adjusting your asset allocation to whatever the right point is -- something you can stick with long term.



GreatLaker said:


> I will rigorously adhere to my investment policy statement and stay within an asset allocation with which I am comfortable.


Right on! Mine is 25% equities, 25% bonds, 25% gold, 25% cash/GIC. Currently I'm a bit low on bonds and will add more.

Since I don't own real estate these are %s of my entire net worth. I'm noticing that many people posting their investment mixes are excluding cash amounts. Someone who says they're 100% equities but with 3 years of cash isn't really investing with 100/0. It's important to figure out your actual %s because this is what determines your overall risk level. This business of cash wedges etc complicates the accounting... if you've got 200k in stocks and 50k in cash wedges, why not simplify it and call it what it is: 80/20


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## Bruins63

jargey3000 said:


> ....it's different this time.......


Why is it different this time?


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## Bruins63

james4beach said:


> Nobody can predict it, but maybe look at it from the perspective of things that you can control. You are in command of your own asset allocation. I would also include your cash amounts in your asset allocation %s, because if you have a ton of cash lying around, _you're not really 78/22_.
> 
> It's a very individual decision about how much risk/reward you want to take on. It all depends a lot of whether you are living off the portfolio (extracting cash/dividends from it) or just leaving the portfolio alone, and also where you are in retirement. It's very different if you've just started retirement vs you're already 20 years into living off your capital. Too many factors and there is no single right answer to an ideal asset allocation.
> 
> Looking at a historical backtest calculator like this one, you can at least see some historical statistics (using US Stock Market and 10- Year Treasury)
> 
> 50% equities, 50% bonds : CAGR of 9.34%, worst year -12%, maximum drawdown -24%
> 78% equities, 22% bonds : CAGR of 10.08%, worst year -24%, maximum drawdown -38%
> 
> So when using the allocation you've chosen, one should be prepared for worst years and temporary losses (high to low) of those magnitudes. If you decide that this is more risk or unpleasantness than you're comfortable with, it's just a matter of adjusting your asset allocation to whatever the right point is -- something you can stick with long term.
> 
> 
> 
> Right on! Mine is 25% equities, 25% bonds, 25% gold, 25% cash/GIC. Currently I'm a bit low on bonds and will add more.
> 
> Since I don't own real estate these are %s of my entire net worth. I'm noticing that many people posting their investment mixes are excluding cash amounts. Someone who says they're 100% equities but with 3 years of cash isn't really investing with 100/0. It's important to figure out your actual %s because this is what tell you your overall risk level.


Thank you...when you say -38% maximum drawdown, what does that mean? Sorry to ask...


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## james4beach

Bruins63 said:


> Thank you...when you say -38% maximum drawdown, what does that mean? Sorry to ask...


No problem. It means the % loss between any high point, down to the next lowest point. It's the worst loss you will ever experience, when you look at your accounts and say: "I've lost X% in my investment"

Here's a graphical view of XIU showing total return in TSX 60: http://schrts.co/zZj5Nh

The max drawdown in the last 4 years was from the 2015 high at 21.03, down to the next low at 16.54. So that's a -21% drawdown.

Similarly if you were to chart an entire portfolio, the maximum drawdown is the measure of worst loss from a high to low. -38% max drawdown on the 78/22 allocation means that for that portfolio, historically, you can see a loss as bad as -38%.


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## james4beach

Maybe I should add, some people (including myself) interpret the maximum drawdown as a good reflection of the "risk" (or maybe just perceived risk). This max drawdown is the thing that causes pain and causes people to second guess their investments, or even to abandon them.

Others will argue that max drawdown isn't a big deal because markets recover, and that long term returns are the bigger factor. However my experience has been that the human brain really cares about those losses, as temporary as they might be. For example if your investments are down 50%, it doesn't give you too much comfort that "as long as I wait another 20 years my overall returns will probably be fine".

And these are the underlying reasons that allocations such as 60/40 or 50/50 are so popular. They strike a middle ground between pretty strong long term returns, and tame max drawdowns... so that people don't lose sleep and can stay invested long term.


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## Bruins63

james4beach said:


> Maybe I should add, some people (including myself) interpret the maximum drawdown as a good reflection of the "risk" (or maybe just perceived risk). This max drawdown is the thing that causes pain and causes people to second guess their investments, or even to abandon them.
> 
> Others will argue that max drawdown isn't a big deal because markets recover, and that long term returns are the bigger factor. However my experience has been that the human brain really cares about those losses, as temporary as they might be. For example if your investments are down 50%, it doesn't give you too much comfort that "as long as I wait another 20 years my overall returns will probably be fine".
> 
> And these are the underlying reasons that allocations such as 60/40 or 50/50 are so popular. They strike a middle ground between pretty strong long term returns, and tame max drawdowns... so that people don't lose sleep and can stay invested long term.


That max draw down is scary...I’d like to re balance...I have a 3 year cash wedge now...if I re balance now, I’m going to take a hit...i’m Starting retirement probably this year...isn’t that what my wedge is for? Use the wedge now, hope for partial recovery, then re balance...?


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## james4beach

Bruins63 said:


> That max draw down is scary...I’d like to re balance...I have a 3 year cash wedge now...if I re balance now, I’m going to take a hit...i’m Starting retirement probably this year...isn’t that what my wedge is for? Use the wedge now, hope for partial recovery, then re balance...?


As you read my response, keep in mind that I'm in my 30s and don't have experience with retirement planning. There so many factors here, including whether you have a pension somewhere. Others may have some better advice for you.

Just to clarify something, don't get rid of that cash wedge. You absolutely need the cash amount.

But regarding taking a hit in changing to a less aggressive asset allocation like 60/40 (i.e. reduce equities), I would not be concerned about that. Your 78/22 portfolio is probably about unchanged from 1 year ago. In the span of 2 years, it's probably up about 20%. The current correction is very minor so far in the big scheme of things and you would be selling equities near all time highs.

Again nobody can predict how markets will go, but you should absolutely decide on the asset allocation that is right for you. I would encourage you to shift towards 60/40, especially if the drawdowns are causing you discomfort.


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## Bruins63

james4beach said:


> As you read my response, keep in mind that I'm in my 30s and don't have experience with retirement planning. There so many factors here, including whether you have a pension somewhere. Others may have some better advice for you.
> 
> Just to clarify something, don't get rid of that cash wedge. You absolutely need the cash amount.
> 
> 
> 
> But regarding taking a hit in changing to a less aggressive asset allocation like 60/40 (i.e. reduce equities), I would not be concerned about that. Your 78/22 portfolio is probably about unchanged from 1 year ago. In the span of 2 years, it's probably up about 20%. The current correction is very minor so far in the big scheme of things and you would be selling equities near all time highs.
> 
> Again nobody can predict how markets will go, but you should absolutely decide on the asset allocation that is right for you. I would encourage you to shift towards 60/40, especially if the drawdowns are causing you discomfort.


Now that’s interesting...u r suggesting to rebalance now even tho I’m off my highs BUT still ahead of the game...that’s a fresh perspective with the lens of a -38% drawdown...so rather than dip into the wedge, rebalance now? Or r u suggesting to dip into the wedge and rebalance in parallel?


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## james4beach

Bruins63 said:


> Now that’s interesting...u r suggesting to rebalance now even tho I’m off my highs BUT still ahead of the game...that’s a fresh perspective with the lens of a -38% drawdown...so rather than dip into the wedge, rebalance now? Or r u suggesting to dip into the wedge and rebalance in parallel?


Wait a second, we might be talking about different things. I'm not sure what you mean by "rebalance".

The first question is, what is your target allocation? What % equity, % bonds do you want for the long tern?

What I'm saying is that IF you decide to switch to a 60/40 allocation, then today is a good time to shift from 78/22 to 60/40. To do this you would leave your cash wedge alone -- leave the cash untouched -- and shift among the currently invested amounts. That means selling some equities and buying more bonds or GICs until you achieve 60/40. Nothing bad happens in doing so.

Again the whole question comes down to, what target allocation do you want? If your plan is to stay with 80/20 then there's no action required.


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## OnlyMyOpinion

Personally, I would be spending my 3 yr cash wedge up front and let the 78/22 balance recover, shifting it to 60/40 over the 3 years.
Knowing we have several years of cash (actually maturing strip bonds) is what allows us to have entered retirement and not fuss the market.
Cash wedge discussion here: https://www.boomersblueprint.com/blog/2013/07/the-cash-wedge-an-income-delivery-process/
And by Mark a few years ago: https://www.myownadvisor.ca/cash-wedge-opening-investment-taps/


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## robfordlives

gibor365 said:


> 100%, but even if DOW recovers, imho, TSX will underperform


Oh probably. I was very overweight Canada and for years kept thinking surely things will revert back to the mean so I'll just keep it as is. Anyways I slowly started getting my allocation more diversified in November and some big chunks in January before the drop. Of course since I have done that the TSX has outperformed the S&P LMAO

Should we not think of a pullback in terms of our expected future annualized returns just went up? The market is just a massive discounted cash flow machine. Pay me now or pay me later type thing. Of course this depends on ever higher earnings over time and avoiding a Japan like ending


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## robfordlives

And WTF is a cash wedge? You're just playing semantics. There is cash, bonds and equities as asset classes


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## Bruins63

All good advice folks, thank you...I will take it all into consideration...this is an awesome forum! It’s nice to sound board!


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## OnlyMyOpinion

robfordlives said:


> And WTF is a cash wedge? You're just playing semantics. There is cash, bonds and equities as asset classes


Yes, there are asset classes, and then there is the manner in which you use them to provide cash flow in retirement - but I may be getting too in-depth?


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## Gordo99

1980z28 said:


> Before i retired in 2017
> I purchased 126 acres of land
> Built a new house 1200 sq ft on the ocean
> Built a garage 2 story total sqft 2400sqft
> Purchased a new backhoe,car,atv,etc,lots of stuff
> Own water well,sewer,own hydro poles
> Land has 100 acres of trees
> Heat from firewood in garage,also have 1000sqft greenhouse,also grow own root crops
> Because i own everything insurance is less than 100 per month for property house and vehicles,,i worked as a mechanic for 38 years
> Phone,cable,internet is about 120 per month
> Food bill less than 500 per month
> Hydro about 130 per month
> Fuel cost for tractor,vehicle,atv is about 100
> I run about 7KM per day,,always outside,,also fish and hunt,,i love outside just got a GSD puppy as my GSD died after 14 years old,,very said for me to say goodbye
> I love my life ,also so lucky to plan for my retirement
> Amazon and Costco are my friends


Awesome. Congrats on this retirement. Enjoy it and the puppy.

Trying to figure if we can retire on $5K per month.


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## BigMonkey

1980z28 said:


> Before i retired in 2017
> I purchased 126 acres of land
> Built a new house 1200 sq ft on the ocean
> Built a garage 2 story total sqft 2400sqft
> Purchased a new backhoe,car,atv,etc,lots of stuff
> Own water well,sewer,own hydro poles
> Land has 100 acres of trees
> Heat from firewood in garage,also have 1000sqft greenhouse,also grow own root crops
> Because i own everything insurance is less than 100 per month for property house and vehicles,,i worked as a mechanic for 38 years
> Phone,cable,internet is about 120 per month
> Food bill less than 500 per month
> Hydro about 130 per month
> Fuel cost for tractor,vehicle,atv is about 100
> I run about 7KM per day,,always outside,,also fish and hunt,,i love outside just got a GSD puppy as my GSD died after 14 years old,,very said for me to say goodbye
> I love my life ,also so lucky to plan for my retirement
> Amazon and Costco are my friends


This sounds so peaceful!


----------



## gibor365

Gordo99 said:


> Awesome. Congrats on this retirement. Enjoy it and the puppy.
> 
> Trying to figure if we can retire on $5K per month.


From my calcs we need $6,666 , but life in NL is cheaper, isn't it?!


----------



## lonewolf :)

Bruins63 said:


> Opinions please...I’m 78% equities, 22% bonds, banks, utilities, telecom, reits, oil...down 6 percent...do u think the tsx will recover much this year or is there more downside coming? Do u think it depends on if the DOW recovers Or do you think with rates going up, equities are going to sell off for bonds? Thanks


 Rates have been going up for about 18 months which was seen as good for stocks now higher rates are bad for stocks. Same thing happened going into 1987 crash rates were going up for 18 months which was seen as a positive then higher rates were seen as a negative same with the 2000 top.

I like to take risk/reward into consideration as well as where I think the market is headed. If the market retraces aprox fib .618 of the decline in 3 wave price pattern would look to going short might not be right but the big money would be made if the market falls in a third wave down by shorting the market with OTM puts. 

Put option premiums will drop in a wave 2 rally & explode higher if we get 3rd wave down. If the market continues higher there will not be as much money to be made as compared to 3rd wave down. 

It takes a lot of money to keep the market well oiled. If your not the best player @ the poker table playing long term will result in losing more money. The money will flow to the strongest player/players someone has to lose.

Same is true for stocks if your not the strongest or one of the strongest players you will lose for every winner there is a loser as well as the fee to play. The worst thing that a poor or average player can do is keep playing the game. Saying to play long term makes no sense as the longer an average player plays the more money they lose. Best bet is to walk away


----------



## Bruins63

lonewolf :) said:


> Rates have been going up for about 18 months which was seen as good for stocks now higher rates are bad for stocks. Same thing happened going into 1987 crash rates were going up for 18 months which was seen as a positive then higher rates were seen as a negative same with the 2000 top.
> 
> I like to take risk/reward into consideration as well as where I think the market is headed. If the market retraces aprox fib .618 of the decline in 3 wave price pattern would look to going short might not be right but the big money would be made if the market falls in a third wave down by shorting the market with OTM puts.
> 
> Put option premiums will drop in a wave 2 rally & explode higher if we get 3rd wave down. If the market continues higher there will not be as much money to be made as compared to 3rd wave down.
> 
> It takes a lot of money to keep the market well oiled. If your not the best player @ the poker table playing long term will result in losing more money. The money will flow to the strongest player/players someone has to lose.
> 
> Same is true for stocks if your not the strongest or one of the strongest players you will lose for every winner there is a loser as well as the fee to play. The worst thing that a poor or average player can do is keep playing the game. Saying to play long term makes no sense as the longer an average player plays the more money they lose. Best bet is to walk away


Thanks, so take some losses from my highs, move to a more conservative equity/bond ratio, and protect myself from further losses? I’m trying to do that but my simple mind won’t let me...with that being said if I lose much more, I’ll probably get there...the other side of this is to use my 3 year cash wedge and hope for some sort of recovery over the next 3 years...


----------



## pwm

Retired 12 years, 100% equities and not paying any attention to the market drop. Been expecting it; made some purchases at better prices. At the same time as the market dropped, two of my largest holdings, GWO and BCE, raised their dividend by 5.5% and 6% which means my dividend income just went up considerably. That's why equities are best for the long term.


----------



## OptsyEagle

Bruins63 said:


> Thanks, so take some losses from my highs, move to a more conservative equity/bond ratio, and protect myself from further losses? I’m trying to do that but my simple mind won’t let me...with that being said if I lose much more, I’ll probably get there...the other side of this is to use my 3 year cash wedge and hope for some sort of recovery over the next 3 years...


In my experience the biggest risk to almost any portfolio is the person that owns it. What do they do, when things are going well and what do they do things are falling apart? Bruin, don't take this the wrong way, but from your numerous posts it is clear to me that *your risk tolerance is well below what your current portfolio require**s*. Everything you have said, tells me that unless luck shines on you tremendously for the life of the portfolio (and it almost never does) you are probably going to end up doing the wrong thing at the wrong time.

These forums are wonderful, but if you look back at the responses, you have a series of people giving difference advice about all or specific pieces of your portfolio and questions. They talk about what they do and have done, but it would be impossible to know their personal circumstances, portfolio size, age, years of experience and most importantly risk tolerances. Some of those people have experienced everything they are saying and some of those people have read books on other people experiencing what they say. There is a big difference. You are basically on the book reading phase, even those you are using forums like this in replacement of books, but it is the same in the end. Your experience is very limited. Don't feel bad, everyone's experience was very limited at one time in their life. I for example was born at a very young age. lol

Keeping a portfolio that requires a risk tolerance higher than you have because it is not currently at some peak number that it hit at some time in the past...*is greed*. That is all it is. It cannot be smart money management because the only way it can be smart money management is for some future event (like a quick rise in the stock market) to happen for it to be, and you don't control those events. Good money management is the things that you can do and control. A bad event can happen just as easily, and then what would you call hanging on to an overly aggressive portfolio. Certainly not good money management.

The first and oldest rule in good money management is to structure a portfolio that is in line with your personal risk tolerance. This is to eliminate you making mistakes at the wrong times. It reduces your personal negative effect on your portfolio, even though you never intended to be a negative factor. No one ever does, and almost everyone is, to some degree.

With this in mind, my strongest recommendation falls in line with what J4B has been suggesting, but I will be a little more blunt. On the first trading day that comes next (Monday), *you should **REDUCE your equity weighting significantly*. I am not going to suggest what amount that should be but any more then 60% is crazy, in my opinion. I think 50:50 might work, but if I recall from other posts, you don't need much return, so 30% or 40% probably would be better.

Keep your cash wedge separate from these asset allocations. Whatever your equity weighting is, unless it is zero, your portfolio will fluctuate and you will benefit from the cash wedge, by not having to take income from the portfolio in some of the bad years, that you will experience. If it doesn't fluctuate much, because you reduced your equity weighting significantly, you should be able to maintain a mindset, to leave it alone and allow it to come back, without sending in a new slew of questions to these forums and then making a whole bunch of changes, at the worst possible time.

Remember, we didn't hear from you when your portfolio was at its peak. You only showed up after it went down. This is what I am talking about. Do you go away and then come back after it is down another 10%, 20%, etc., and get another slew of conflicting responses to your questions, when again the right answer will be to get out of that portfolio that does not match your risk tolerance. Think about that for the rest of the day.

That is my opinion. Sorry for the long post. Good luck to you.


----------



## Bruins63

OptsyEagle said:


> In my experience the biggest risk to almost any portfolio is the person that owns it. What do they do, when things are going well and what do they do things are falling apart? Bruin, don't take this the wrong way, but from your numerous posts it is clear to me that *your risk tolerance is well below what your current portfolio require**s*. Everything you have said, tells me that unless luck shines on you tremendously for the life of the portfolio (and it almost never does) you are probably going to end up doing the wrong thing at the wrong time.
> 
> These forums are wonderful, but if you look back at the responses, you have a series of people giving difference advice about all or specific pieces of your portfolio and questions. They talk about what they do and have done, but it would be impossible to know their personal circumstances, portfolio size, age, years of experience and most importantly risk tolerances. Some of those people have experienced everything they are saying and some of those people have read books on other people experiencing what they say. There is a big difference. You are basically on the book reading phase, even those you are using forums like this in replacement of books, but it is the same in the end. Your experience is very limited. Don't feel bad, everyone's experience was very limited at one time in their life. I for example was born at a very young age. lol
> 
> Keeping a portfolio that requires a risk tolerance higher than you have because it is not currently at some peak number that it hit at some time in the past...*is greed*. That is all it is. It cannot be smart money management because the only way it can be smart money management is for some future event (like a quick rise in the stock market) to happen for it to be, and you don't control those events. Good money management is the things that you can do and control. A bad event can happen just as easily, and then what would you call hanging on to an overly aggressive portfolio. Certainly not good money management.
> 
> The first and oldest rule in good money management is to structure a portfolio that is in line with your personal risk tolerance. This is to eliminate you making mistakes at the wrong times. It reduces your personal negative effect on your portfolio, even though you never intended to be a negative factor. No one ever does, and almost everyone is, to some degree.
> 
> With this in mind, my strongest recommendation falls in line with what J4B has been suggesting, but I will be a little more blunt. On the first trading day that comes next (Monday), *you should **REDUCE your equity weighting significantly*. I am not going to suggest what amount that should be but any more then 60% is crazy, in my opinion. I think 50:50 might work, but if I recall from other posts, you don't need much return, so 30% or 40% probably would be better.
> 
> Keep your cash wedge separate from these asset allocations. Whatever your equity weighting is, unless it is zero, your portfolio will fluctuate and you will benefit from the cash wedge, by not having to take income from the portfolio in some of the bad years, that you will experience. If it doesn't fluctuate much, because you reduced your equity weighting significantly, you should be able to maintain a mindset, to leave it alone and allow it to come back, without sending in a new slew of questions to these forums and then making a whole bunch of changes, at the worst possible time.
> 
> Remember, we didn't hear from you when your portfolio was at its peak. You only showed up after it went down. This is what I am talking about. Do you go away and then come back after it is down another 10%, 20%, etc., and get another slew of conflicting responses to your questions, when again the right answer will be to get out of that portfolio that does not match your risk tolerance. Think about that for the rest of the day.
> 
> That is my opinion. Sorry for the long post. Good luck to you.


Thanks for the candid advice...I will let it sink in...the other strong influence is an advisor who believes they are giving unbias advice, has built a strong relationship with me, and has currently influenced me to have my current equity position...I’ll admit, it’s hard to say no to my advisor as for every reason I give to lower the equity position, I get an opposite argument...I guess I just need to be stronger...Again, thanks for the candid advice...it is appreciated


----------



## OptsyEagle

If you think you might want to reduce that equity weighting and want an interesting and very simple suggestion for doing it, Vanguard has come to the rescue:

The following EFTs have the following equity/fixed income asset allocations. I would suggest the conservative one for you but the balanced one might also work:

Vanguard Conservative ETF (Trading Symbol: VCNS): MER = 0.22%, Asset Allocation 40% Equity / 60% Fixed Income
https://www.vanguardcanada.ca/individual/mvc/loadImage?country=can&docId=12394

Vanguard Balanced ETF (Trading Symbol: VBAL): MER = 0.22%, Asset Allocation 60% Equity / 40% Fixed Income
https://www.vanguardcanada.ca/individual/mvc/loadImage?country=can&docId=12397

The US stock market dropped about 10% to 12% in the last couple weeks. I believe the conservative portfolio was down around 3% and the balanced was down around 4%. Again, only 0% equity would ever give you a chance to not go down to some degree during these types of markets. That might be a little too conservative for anyone.

Anyway, it doesn't get anymore simpler than this. One simple purchase, one single investment entry in your account, for all of the money you have that is not part of your cash wedge, in any account that you have it. If the ETFs are positive at the end of the year, take your income from them and if they are down, whatever amount that is, take your income from the cash wedge and wait until they are back up to refill the wedge from the ETFs.

Simple, done, go enjoy your life.


----------



## OptsyEagle

Bruins63 said:


> Thanks for the candid advice...I will let it sink in...the other strong influence is an advisor who believes they are giving unbias advice, has built a strong relationship with me, and has currently influenced me to have my current equity position...I’ll admit, it’s hard to say no to my advisor as for every reason I give to lower the equity position, I get an opposite argument...I guess I just need to be stronger...Again, thanks for the candid advice...it is appreciated


and he is not necessarily wrong with the advice. He is wrong with the client. He is a hammer hitting everything like they are all nails. Clients are not identical. Move on or get a better advisor.


----------



## Bruins63

OptsyEagle said:


> If you think you might want to reduce that equity weighting and want an interesting and very simple suggestion for doing it, Vanguard has come to the rescue:
> 
> The following EFTs have the following equity/fixed income asset allocations. I would suggest the conservative one for you but the balanced one might also work:
> 
> Vanguard Conservative ETF (Trading Symbol: VCNS): MER = 0.22%, Asset Allocation 40% Equity / 60% Fixed Income
> https://www.vanguardcanada.ca/individual/mvc/loadImage?country=can&docId=12394
> 
> Vanguard Balanced ETF (Trading Symbol: VBAL): MER = 0.22%, Asset Allocation 60% Equity / 40% Fixed Income
> https://www.vanguardcanada.ca/individual/mvc/loadImage?country=can&docId=12397
> 
> The US stock market dropped about 10% to 12% in the last couple weeks. I believe the conservative portfolio was down around 3% and the balanced was down around 4%. Again, only 0% equity would ever give you a chance to not go down to some degree during these types of markets. That might be a little too conservative for anyone.
> 
> Anyway, it doesn't get anymore simpler than this. One simple purchase, one single investment entry in your account, for all of the money you have that is not part of your cash wedge, in any account that you have it. If the ETFs are positive at the end of the year, take your income from them and if they are down, whatever amount that is, take your income from the cash wedge and wait until they are back up to refill the wedge from the ETFs.
> 
> Simple, done, go enjoy your life.


Thank you!


----------



## Bruins63

OptsyEagle said:


> If you think you might want to reduce that equity weighting and want an interesting and very simple suggestion for doing it, Vanguard has come to the rescue:
> 
> The following EFTs have the following equity/fixed income asset allocations. I would suggest the conservative one for you but the balanced one might also work:
> 
> Vanguard Conservative ETF (Trading Symbol: VCNS): MER = 0.22%, Asset Allocation 40% Equity / 60% Fixed Income
> https://www.vanguardcanada.ca/individual/mvc/loadImage?country=can&docId=12394
> 
> Vanguard Balanced ETF (Trading Symbol: VBAL): MER = 0.22%, Asset Allocation 60% Equity / 40% Fixed Income
> https://www.vanguardcanada.ca/individual/mvc/loadImage?country=can&docId=12397
> 
> The US stock market dropped about 10% to 12% in the last couple weeks. I believe the conservative portfolio was down around 3% and the balanced was down around 4%. Again, only 0% equity would ever give you a chance to not go down to some degree during these types of markets. That might be a little too conservative for anyone.
> 
> Anyway, it doesn't get anymore simpler than this. One simple purchase, one single investment entry in your account, for all of the money you have that is not part of your cash wedge, in any account that you have it. If the ETFs are positive at the end of the year, take your income from them and if they are down, whatever amount that is, take your income from the cash wedge and wait until they are back up to refill the wedge from the ETFs.
> 
> Simple, done, go enjoy your life.


Is the best way to set these up via TDDI or Questtrade or...? Thanks


----------



## OptsyEagle

Bruins63 said:


> Is the best way to set these up via TDDI or Questtrade or...? Thanks


I don't really know much about Questtrade. I doubt $9.99 for a trading cost (That TDDI charges) is going to make much of a difference to you and if your bank accounts are at TD then there will be significant benefits by using TDDI, by being able to move money to and from your bank accounts, in real time. If your bank accounts are at another bank, I would suggest their discount brokerage arm.


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## Bruins63

OptsyEagle said:


> I don't really know much about Questtrade. I doubt $9.99 for a trading cost (That TDDI charges) is going to make much of a difference to you and if your bank accounts are at TD then there will be significant benefits by using TDDI, by being able to move money to and from your bank accounts, in real time. If your bank accounts are at another bank, I would suggest their discount brokerage arm.


Thanks, yes, all with TD Waterhouse, all sheltered with the exception of tfsa...


----------



## My Own Advisor

pwm said:


> Retired 12 years, 100% equities and not paying any attention to the market drop. Been expecting it; made some purchases at better prices. At the same time as the market dropped, two of my largest holdings, GWO and BCE, raised their dividend by 5.5% and 6% which means my dividend income just went up considerably. That's why equities are best for the long term.


Love reading this stuff.


----------



## james4beach

OptsyEagle said:


> The first and oldest rule in good money management is to structure a portfolio that is in line with your personal risk tolerance. This is to eliminate you making mistakes at the wrong times. It reduces your personal negative effect on your portfolio, even though you never intended to be a negative factor. No one ever does, and almost everyone is, to some degree.
> 
> With this in mind, my strongest recommendation falls in line with what J4B has been suggesting, but I will be a little more blunt. On the first trading day that comes next (Monday), *you should **REDUCE your equity weighting significantly*. I am not going to suggest what amount that should be but any more then 60% is crazy, in my opinion. I think 50:50 might work, but if I recall from other posts, you don't need much return, so 30% or 40% probably would be better.
> 
> Keep your cash wedge separate from these asset allocations.


I agree 100% with OptsyEagle here. The 80/20 allocation you currently have is a very aggressive stock allocation that will see big swings. Some people will be OK with that level of risk, but like OptsyEagle says, I get the impression that you need a less risky portfolio (just going by what you are posting).

I'm glad he's more blunt about it. I think you will benefit from shifting your allocation and as OptsyEagle says, 50/50, 40/60, or 30/70 may all be suitable. First step is to decide on your desired allocation.

What I was describing about the last 1 and 2 year performance is that you have a window of opportunity here to make this shift with no penalty. You're basically selling stocks near all time highs. And even if you're down to a 30% equity allocation (30/70), you will still benefit from stock market gains.

Just FYI - a 30% stock 70% bond allocation historically had a worst year of -6% and max drawdown of -14%. Compare that to your current portfolio's possible drawdown of -38% !


----------



## Bruins63

james4beach said:


> I agree 100% with OptsyEagle here. The 80/20 allocation you currently have is a very aggressive stock allocation that will see big swings. Some people will be OK with that level of risk, but like OptsyEagle says, I get the impression that you need a less risky portfolio (just going by what you are posting).
> 
> I'm glad he's more blunt about it. I think you will benefit from shifting your allocation and as OptsyEagle says, 50/50, 40/60, or 30/70 may all be suitable. First step is to decide on your desired allocation.
> 
> What I was describing about the last 1 and 2 year performance is that you have a window of opportunity here to make this shift with no penalty. You're basically selling stocks near all time highs. And even if you're down to a 30% equity allocation (30/70), you will still benefit from stock market gains.
> 
> Just FYI - a 30% stock 70% bond allocation historically had a worst year of -6% and max drawdown of -14%. Compare that to your current portfolio's possible drawdown of -38% !


Good perspective...I’ll set my TDDI accounts up this week to get started...I know it’s just me, it has to be done, but hard to do it when I just lost 30 percent of my gains from the last 2.5 years in 6 weeks...I guess the lens I have to look thru is I don’t want to lose 50 percent of those gains in the next 6 weeks...could you clarify for me one more time why I wouldn’t use my 3 year cash wedge now, wait for a bit of recovery and then move the portfolio from 80/20 to 30/70?


----------



## TomB16

hboy54 said:


> I don't see investing as even remotely gambling if you talk about the whole process over a lifetime.


I couldn't agree more. Speculating is gambling. Investing is owning productive businesses.

If you want to own a business, the daily valuation isn't as important as how the business is executing it's plan.


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## james4beach

Bruins63 said:


> Good perspective...I’ll set my TDDI accounts up this week to get started...I know it’s just me, it has to be done, but hard to do it when I just lost 30 percent of my gains from the last 2.5 years in 6 weeks...I guess the lens I have to look thru is I don’t want to lose 50 percent of those gains in the next 6 weeks...could you clarify for me one more time why I wouldn’t use my 3 year cash wedge now, wait for a bit of recovery and then move the portfolio from 80/20 to 30/70?


Why the 3 year cash wedge might not be enough in your case:

- You might really get stressed out if the declines continue. In the big scheme of things this is a tiny decline and it's already causing you discomfort. Let's say we really do enter a serious bear market, you could lose all your gains from the last few years and then some (go negative). With the stress of seeing these big declines you may decide to completely abandon stocks, locking in the huge losses.

- Bear markets can last more than 3 years. We got "lucky" that the 2008 market crash rebounded quickly, but historically speaking there can be stretches of 10+ years where stocks stay low. Recoveries are not always a matter of just waiting a bit. For example it took the S&P 500 six full years just to get back to its 2000 high. That means staring at losses and hearing bad news for 6 years, and there are more severe cases in past decades.

Ultimately your asset allocation should match your risk tolerance level. This is the big point... if 80% equities is too risky for you, then this is not something you should try to tough out or wait (which is timing the market). You have to make that change immediately. Right now there is a big mismatch between your risk tolerance level and how you're invested.


----------



## Bruins63

james4beach said:


> Why the 3 year cash wedge might not be enough in your case:
> 
> - You might really get stressed out if the declines continue. In the big scheme of things this is a tiny decline and it's already causing you discomfort. Let's say we really do enter a serious bear market, you could lose all your gains from the last few years and then some (go negative). With the stress of seeing these big declines you may decide to completely abandon stocks, locking in the huge losses.
> 
> - Bear markets can last more than 3 years. We got "lucky" that the 2008 market crash rebounded quickly, but historically speaking there can be stretches of 10+ years where stocks stay low. Recoveries are not always a matter of just waiting a bit. For example it took the S&P 500 six full years just to get back to its 2000 high. That means staring at losses and hearing bad news for 6 years, and there are more severe cases in past decades.
> 
> Ultimately your asset allocation should match your risk tolerance level. This is the big point... if 80% equities is too risky for you, then this is not something you should try to tough out or wait (which is timing the market). You have to make that change immediately. Right now there is a big mismatch between your risk tolerance level and how you're invested.


Thank you...I will discuss with my advisor who insists the stocks I own are not risky and they always recover...ie Banks, utilities etc. As I mentioned, I need to get tougher and start and complete the change


----------



## james4beach

Bruins63 said:


> Thank you...I will discuss with my advisor who insists the stocks I own are not risky and they always recover...ie Banks, utilities etc. As I mentioned, I need to get tougher and start and complete the change


The stocks will recover given enough time. Look at the US banking sector stocks for example. Starting from their peak value in 2007, they dropped as much as 80%, and then only *10.5 years later* they got back to their original value. It took them more like 11 years to actually show a gain again. Stocks are dangerous, no matter how great the stock is. They can fall a lot and can take a long time to recover after falling.


----------



## OnlyMyOpinion

james4beach said:


> The stocks will recover given enough time. Look at the US banking sector stocks for example. Starting from their peak value in 2007, they dropped as much as 80%, and then only *10.5 years later* they got back to their original value. It took them more like 11 years to actually show a gain again. Stocks are dangerous, no matter how great the stock is. They can fall a lot and can take a long time to recover after falling.


Good analogy. Probably reflective of today's markets. I think all of us should sell all of our equities tomorrow.


----------



## james4beach

OnlyMyOpinion said:


> Good analogy. Probably reflective of today's markets. I think all of us should sell all of our equities tomorrow.


Maybe I should say... I don't intend to scare anyone here. Stocks could keep rallying this year, maybe go up another 20%... who knows! This could turn out to be the best year for stocks ever.

I'm just saying that one should be prepared for the possible declines, because it's certain they will eventually decline sharply. Let's say you're a 100% stock investor. If you are comfortable with the fact your stocks could decline 60% and then take another 10 years to recover, and this won't make you lose sleep at night, then absolutely fine to invest 100% in stocks.

Everyone has a different comfort level. It's critical to figure out what % stock allocation works for you, making sure you are comfortable with the level of risk.


----------



## Jimmy

james4beach said:


> The stocks will recover given enough time. Look at the US banking sector stocks for example. Starting from their peak value in 2007, they dropped as much as 80%, and then only *10.5 years later* they got back to their original value. It took them more like 11 years to actually show a gain again. Stocks are dangerous, no matter how great the stock is. They can fall a lot and can take a long time to recover after falling.


This was one bargain area after the crash. Just bought some BANK BMO Global bank ETF as their P/Es are still ~ 13 and lots of room to run.


----------



## OnlyMyOpinion

james4beach said:


> ... I'm just saying that one should be prepared for the possible declines, because it's certain they will eventually decline sharply. Let's say you're a 100% stock investor. If you are comfortable with the fact your stocks could decline 60% and then take another 10 years to recover, and this won't make you lose sleep at night, then absolutely fine to invest 100% in stocks.
> Everyone has a different comfort level. It's critical to figure out what % stock allocation works for you, making sure you are comfortable with the level of risk.


Thanks James. :applouse: Understand your choices and choose accordingly. This is more typical of your well-considered comments. As you have pointed out in the past, the other side of the coin has risk as well - a portfolio fully invested in FI will gain very little real value over time.


----------



## james_57

I just dropped by to see what the crowd is thinking about this market. Back ten years ago, I used to think of myself as a 'sophisticated' investor, but today no longer. Last Thursday I cashed out of all equities, having ridden most of them up since 2009, so selling triggered a substantial capital gain. I didn't do a lot of thinking or analyzing prior to selling. I acted on gut feeling, same when I dumped everything Oct 02 2008, then watched the crash unfold.

Being somewhat uneducated to the huge number of factors weighing in on today's market, way more than I have the mind to encompass, i went principally on a gut feeling. Emotion drove my decision. So in that sense I got 'shaken out'. Underlying the emotion was the perception that P/E ratios are at an all time high. I compared two possible outcomes, one where I stayed in, and one where I got out safe. If it turns out that I cashed out early, and missed the upward draft of a continued bull market, I can live with that. Whereas I would be seriously upset if I stayed in and watched 2008 unfold again. This way I can sleep at night, comfortably.

I notice this thread has evolved into mainly a portfolio discussion. The thread starting question ' Is the Market Going To Come Back' kind of got sidelined, probably because most people feel uncomfortable making a prediction.

So here's my prediction, which is worth nothing because usually get it wrong (except in 2008). The market is going to unwind, and we will see great volatility as it benches down to P/E ratios that the market feels comfortable with. There will be bear traps along the way. There will be some sudden air pockets, the largest drops over the next 2 months. Eventually the equities correction will bottom at 40% to 50% of the 2017 highs. It could take 6 to 8 months, and then flat-line for another year or two. How much contagion this will have in the debt markets is beyond my understanding. I'm long property assets, and hopeful they will hold value, but no surprise if a 20% to 30% correction occurs this year. RE is another bubble, and the rates have to go up eventually. Will Italy's banks survive? The questions are too numerous to list, let alone answer predicatively by anyone. In short, I believe the shite is hitting the fan, so look out below. I don't think the central banks can prevent the fallout, although they will certainly try.

Tomorrow, Monday, will be very interesting to watch. The market Vs the PPT etc.


----------



## james4beach

Predictions... I think we might see a period similar to 2006-2007 looking ahead (see graph). Stocks are on the top, VIX is at the bottom.









There are some similarities to what we're seeing now. Central banks are on a tightening path, and bond yields are increasing significantly. At the same time we have this spike in VIX as markets get a little bit spooked. I think that, similar to 2007, we're going to see volatility (VIX) trend higher and a lot of sideways action in stocks. I bet that a lot of people will get faked out this year.


----------



## Daniel A.

There is more downside coming for over a year now its been climbing without being supported by fundamentals, 7% in January alone. 
A year ago it was around 20,000 and nothing there to support or justify those increases 25% to the high lately. 
Planned rate increases both here in Canada and in the USA will have an impact.

Someone fully invest in Canada or USA should really start looking at international markets to spread risk around.


----------



## james4beach

Isn't this exciting though, when the market _has a bit of character_? For several years now those derivative bombs (XIV and SVXY) were artificially suppressing volatility by selling VIX any time it went higher. But last Monday the system flushed that artificial effect away, and now we're seeing more true market colours. I think it's great! And yes it's a bit scary, but stocks are supposed to be a bit scary.

Ooh, post # 9,999. I spend too much time on this site.


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## Bruins63

james_57 said:


> I just dropped by to see what the crowd is thinking about this market. Back ten years ago, I used to think of myself as a 'sophisticated' investor, but today no longer. Last Thursday I cashed out of all equities, having ridden most of them up since 2009, so selling triggered a substantial capital gain. I didn't do a lot of thinking or analyzing prior to selling. I acted on gut feeling, same when I dumped everything Oct 02 2008, then watched the crash unfold.
> 
> Being somewhat uneducated to the huge number of factors weighing in on today's market, way more than I have the mind to encompass, i went principally on a gut feeling. Emotion drove my decision. So in that sense I got 'shaken out'. Underlying the emotion was the perception that P/E ratios are at an all time high. I compared two possible outcomes, one where I stayed in, and one where I got out safe. If it turns out that I cashed out early, and missed the upward draft of a continued bull market, I can live with that. Whereas I would be seriously upset if I stayed in and watched 2008 unfold again. This way I can sleep at night, comfortably.
> 
> I notice this thread has evolved into mainly a portfolio discussion. The thread starting question ' Is the Market Going To Come Back' kind of got sidelined, probably because most people feel uncomfortable making a prediction.
> 
> So here's my prediction, which is worth nothing because usually get it wrong (except in 2008). The market is going to unwind, and we will see great volatility as it benches down to P/E ratios that the market feels comfortable with. There will be bear traps along the way. There will be some sudden air pockets, the largest drops over the next 2 months. Eventually the equities correction will bottom at 40% to 50% of the 2017 highs. It could take 6 to 8 months, and then flat-line for another year or two. How much contagion this will have in the debt markets is beyond my understanding. I'm long property assets, and hopeful they will hold value, but no surprise if a 20% to 30% correction occurs this year. RE is another bubble, and the rates have to go up eventually. Will Italy's banks survive? The questions are too numerous to list, let alone answer predicatively by anyone. In short, I believe the shite is hitting the fan, so look out below. I don't think the central banks can prevent the fallout, although they will certainly try.
> 
> Tomorrow, Monday, will be very interesting to watch. The market Vs the PPT etc.


Thanks for the prediction, that is part of what I was looking for in the original post but I do appreciate all the other advice from everyone...anyone else care to predict what 2018 will bring? Continue sell off? Thanks again folks...


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## GoldStone

Bruins63 said:


> Thanks for the prediction, that is part of what I was looking for in the original post but I do appreciate all the other advice from everyone...anyone else care to predict what 2018 will bring? Continue sell off? Thanks again folks...


Predictions are worthless. No one knows anything. Develop an investment plan and follow it.


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## Bruins63

GoldStone said:


> Predictions are worthless. No one knows anything. Develop an investment plan and follow it.


“Worthless” might be a bit strong...if I had the knowledge of an Economist, I might have had more insight into the fact that as the US economy heated up, inflation would “potentially” have an impact, bond yields “may” rise and stock “could” fall out of favour...I got your point but I don’t think there is anything wrong with asking for insight...this is a great place to sound board as the only opinion I get is from my advisor...


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## pwm

GoldStone said:


> Predictions are worthless. No one knows anything. Develop an investment plan and follow it.


Finally the voice of reason. Thank you. The market is down, so sell your stocks? That's the biggest mistake novice investors make.


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## GoldStone

Bruins63 said:


> “Worthless” might be a bit strong...if I had the knowledge of an Economist, I might have had more insight into the fact that as the US economy heated up, inflation would “potentially” have an impact, bond yields “may” rise and stock “could” fall out of favour...I got your point but I don’t think there is anything wrong with asking for insight...this is a great place to sound board as the only opinion I get is from my advisor...


The stock market is not the economy. Suppose I wave a magic wand and hand you a sheet of key economic numbers 6 months from now. Would you know how to trade them? Me... I wouldn't know where to begin. The same number can be interpreted as good or bad. Wages rising? Great for stocks! Consumers are spending more! No, it's bad for stocks! Wages are pressuring profit margins! Stock market sees a few dozen new economic numbers every single day. The numbers themselves matter little. What matters is how investors collectively react to the numbers. That part is unknowable.

S&P 500 went up 7.5% in the first 3 weeks of 2018. Then it dropped 10.5% in the next 3 weeks. Has anything changed in the economy to explain these moves? Of course not. The stock market is a bipolar beast. It does what it does. Predictions are not merely worthless. They are dangerous if you act on them.

Develop an asset allocation that meets your risk tolerance. Stick to it through thick and thin. Do not pay any attention to the news and predictions. Paying too much attention to the noise is how investors get in trouble.


----------



## OptsyEagle

GoldStone said:


> Predictions are worthless. No one knows anything. Develop an investment plan and follow it.


No Bruin. Predictions are worthless. Another rule that you need to follow after you take Goldstones advice above "Never listen to anything that you KNOW that no one can ever know".

It doesn't matter whether the prediction goes along with what you were thinking or feeling or is against it or anything in between. No one can ever know where the stock market will be even 3 hours from now, let alone at the end of the year or the end of your life. So why would you want to read it or listen to it?

Formulate your plan, execute it, then enjoy your life. Your plan should be able to withstand virtually every good, bad and mediocre outcome that the world can throw at it. If it can't, then come up with a new plan.


----------



## GoldStone

Bonus post:










This stock fund manager has been short or hedged since the Great Financial Crisis. He missed the entire bull market of the last 9 years. S&P 500 has doubled in 10 years, despite the GFC. His fund is down 58%.

The fund manager has a *Ph.D. in Economics from Stanford*. He forgot more about economics than most members here will ever know. His problem? He made a bunch of economic predictions and he stuck to them.


----------



## Bruins63

OptsyEagle said:


> No Bruin. Predictions are worthless. Another rule that you need to follow after you take Goldstones advice above "Never listen to anything that you KNOW that no one can ever know".
> 
> It doesn't matter whether the prediction goes along with what you were thinking or feeling or is against it or anything in between. No one can ever know where the stock market will be even 3 hours from now, let alone at the end of the year or the end of your life. So why would you want to read it or listen to it?
> 
> Formulate your plan, execute it, then enjoy your life. Your plan should be able to withstand virtually every good, bad and mediocre outcome that the world can throw at it. If it can't, then come up with a new plan.


Ok, all good points from everyone...I’m getting there...I’ve been in the market for 32 months now with nice gains...I went from a 9 percent annual return to a 5 percent annual return...I need to take the 5 percent (it’s still far head of a 1.5 percent GIC) and realign my risk tolerance.


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## GreatLaker

Trying to guess where markets will go will just stress you out and may cause you to make mistakes. Over the long term equity markets have shown an upward trend and have dramatically outperformed other asset classes. Over the short term they are highly unpredictable. And they can get disconnected from fundamentals for years, even decades, as they did in the stagflationary 1970s, and in the lost decade of the 2000s that included the tech crash and the financial crisis (the equity market did not recover from the tech crash until after the financial crisis). *Trying to guess where markets will go will just stress you out and may cause you to make mistakes.*

Instead, spend your time understanding how markets move and how volatile they can be, not to be spooked by corrections and not to be mislead by recency effect. Then pick an asset allocation you can live with through the worst corrections and bear markets. If you must withdraw capital from your accounts for living expenses then have enough cash and/or fixed income so you won't have to sell equities when they are down. (Note if you have enough govt or workplace pension income to cover all non-discretionary expenses, or have a large enough portfolio to live off just dividends with a good margin of safety, then 100 % equities is a valid portfolio allocation. But it WILL be very volatile.)

Take a look here at the standard deviation and lowest 12 month return and pick an asset allocation you think you can live with:
http://canadiancouchpotato.com/wp-content/uploads/2018/01/CCP-Model-Portfolios-ETFs-2017.pdf




> And WTF is a cash wedge? You're just playing semantics. There is cash, bonds and equities as asset classes


That's the way I look at it. I have equities and fixed income, in an asset allocation I think I can live with, and that should survive a 30 year or maybe longer retirement. I really don't keep cash (chequing or saving accounts or broker HISA) other than what I need to get through a year, plus a reasonable emergency fund. But if calling it a cash wedge makes some people feel better I won't argue.




> I’d like to re balance...


Do you mean rebalance or change your asset allocation because you think your current portfolio is too risky and volatile. You said you have 78% equities. That's quite high for someone that isn't an experienced investor and does not have a high risk tolerance.

Rebalancing is a risk management technique that keeps your asset allocation within a target range. Say someone has a $100k in a 50/50 equity/fixed income allocation target. Then equities crash 20% but bonds stay the same. Now they have $40k equities and $50k FI, so the allocation is 44% equities and 56% FI. To rebalance, sell FI and buy equities until you are back to 50/50. It enforces a buy low/sell high approach and keeps risk within a target range.

This would be a good time to rebalance. But it is a poor time to change to a less aggressive asset allocation, since you would sell equities to buy FI, thereby selling low. That's why choosing an asset allocation you can live with is so important.




> I have a 3 year cash wedge now...if I re balance now, I’m going to take a hit...i’m Starting retirement probably this year...isn’t that what my wedge is for? Use the wedge now, hope for partial recovery, then re balance...?


Basically when you need spending cash in retirement, you sell whatever is above it's target allocation, again reinforcing buy low, sell high behaviour. If your allocation is on target, then sell some of each asset class. So yes, your cash wedge (and fixed income) is for spending when equities are low. (But don't confuse that with an emergency fund, which you should always have for unexpected expenses.)




> Why the 3 year cash wedge might not be enough in your case:
> ...
> - Bear markets can last more than 3 years. We got "lucky" that the 2008 market crash rebounded quickly, but historically speaking there can be stretches of 10+ years where stocks stay low. Recoveries are not always a matter of just waiting a bit. For example it took the S&P 500 six full years just to get back to its 2000 high. That means staring at losses and hearing bad news for 6 years, and there are more severe cases in past decades.


I agree with that. Markets can get seriously out of synch with fundmentals. John Maynard Keynes said "The Market Can Remain Irrational Longer Than You Can Remain Solvent". I don't have a workplace pension, just my savings plus CPP/OAS. I have built a retirement investment portfolio to last 40 years and withstand markets like the stagflationary 1970s and the lost decade of the 2000s. I think investors that talk about getting by on 2 or 3 years of cash are suffering from recency effect.


----------



## My Own Advisor

GoldStone said:


> Bonus post:
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> This stock fund manager has been short or hedged since the Great Financial Crisis. He missed the entire bull market of the last 9 years. S&P 500 has doubled in 10 years, despite the GFC. His fund is down 58%.
> 
> The fund manager has a *Ph.D. in Economics from Stanford*. He forgot more about economics than most members here will ever know. His problem? He made a bunch of economic predictions and he stuck to them.


+1

Make an investment plan so you can stay invested good, bad or indifferent. 

If you worry about getting out at the right time or fear of missing out like the kids say these days (FOMO) - you have the wrong financial plan.


----------



## GreenAvenue

1980z28 said:


> Have always done it this way,,no problem
> 
> Investing is gambling nothing more,,,i have always believe that if i can not afford to play i should take my ball and go home,,life is to short
> 
> I retired this year at 56 shooting for 80 plus so really nothing for me to do but gamble


I think how 'bad' the market performs depends on your risk tolerance.


----------



## canew90

Mentioned before, but we are retired, 100% Cdn equities and earn more in dividends than our annual expenses. We hope the market continues down and stays down for a while. The real benefit to us is that we may recover some of our OAS clawback and we'll be buying more shares with our dividend reinvestments, thereby continuing to increase our annual income.


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## Benting

james4beach said:


> The stocks will recover given enough time. Look at the US banking sector stocks for example. Starting from their peak value in 2007, they dropped as much as 80%, and then only *10.5 years later* they got back to their original value. It took them more like 11 years to actually show a gain again. Stocks are dangerous, no matter how great the stock is. They can fall a lot and can take a long time to recover after falling.


J4b. How did you come up with the number of the banking sector dropped 80% and needed over 10 yrs to recover from 2007 crash ? I just checked the summaries of my own investment that have more than 70% of bank stocks. According to BMOIL, I lost 8.05% in 2007 and 32.11% in 2008. But it went up 61.12% in 2009 and it's been up in double digits ever since, except -1.05 % in 2011 and -3.81% in 2015. By the way, I did not trade between 2007 to 2009 except DRIP. It was good at that time the stock price dropped so much, so I can get a few bargains from the DRIP.


----------



## Benting

canew90 said:


> Mentioned before, but we are retired, 100% Cdn equities and earn more in dividends than our annual expenses. We hope the market continues down and stays down for a while. The real benefit to us is that we may recover some of our OAS clawback and we'll be buying more shares with our dividend reinvestments, thereby continuing to increase our annual income.


So I am not alone ! Finally a few of us 100% club showing in this board !


----------



## gibor365

Benting said:


> J4b. How did you come up with the number of the banking sector dropped 80% and needed over 10 yrs to recover from 2007 crash ? I just checked the summaries of my own investment that have more than 70% of bank stocks. According to BMOIL, I lost 8.05% in 2007 and 32.11% in 2008. But it went up 61.12% in 2009 and it's been up in double digits ever since, except -1.05 % in 2011 and -3.81% in 2015. By the way, I did not trade between 2007 to 2009 except DRIP. It was good at that time the stock price dropped so much, so I can get a few bargains from the DRIP.


looks like james is talking about US banking sector and about local .
XLF 10y returns is +3%, and Citigroup 10 years return is -71%



> 100% Cdn equities


 Kill me , but i don't get why to have 100% Cdn equities :blue:


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## Benting

1980z28 said:


> Before i retired in 2017
> I purchased 126 acres of land
> Built a new house 1200 sq ft on the ocean
> Built a garage 2 story total sqft 2400sqft
> Purchased a new backhoe,car,atv,etc,lots of stuff
> Own water well,sewer,own hydro poles
> Land has 100 acres of trees
> Heat from firewood in garage,also have 1000sqft greenhouse,also grow own root crops
> Because i own everything insurance is less than 100 per month for property house and vehicles,,i worked as a mechanic for 38 years
> Phone,cable,internet is about 120 per month
> Food bill less than 500 per month
> Hydro about 130 per month
> Fuel cost for tractor,vehicle,atv is about 100
> I run about 7KM per day,,always outside,,also fish and hunt,,i love outside just got a GSD puppy as my GSD died after 14 years old,,very said for me to say goodbye
> I love my life ,also so lucky to plan for my retirement
> Amazon and Costco are my friends


1980z, you are really in good shape ! From one of your post I vaguely remember you said you get over 40k dividend per yr in one of your previous post. And yet you only need 11k for expense a year ? And also in addition, you have about 7yr+ expense in cash ? What for ? You really need to live it up a bit. Take a (or more) trip somewhere warm for the winter. Get the money circulate a bit, not just play 'the puck stops here' game !!!


----------



## Benting

gibor365 said:


> looks like james is talking about US banking sector and about local .
> XLF 10y returns is +3%, and Citigroup 10 years return is -71%
> 
> Kill me , but i don't get why to have 100% Cdn equities :blue:


So sorry J4B, my bad :shame:


----------



## Eder

gibor365 said:


> l
> 
> Kill me , but i don't get why to have 100% Cdn equities :blue:


I'm 70-30 right now but I wont own anything not traded on the TSX. I doubt I have much less international exposure than you do.


----------



## Jimmy

GoldStone said:


> The stock market is not the economy. Suppose I wave a magic wand and hand you a sheet of key economic numbers 6 months from now. Would you know how to trade them? Me... I wouldn't know where to begin. The same number can be interpreted as good or bad. Wages rising? Great for stocks! Consumers are spending more! No, it's bad for stocks! Wages are pressuring profit margins! Stock market sees a few dozen new economic numbers every single day. The numbers themselves matter little. What matters is how investors collectively react to the numbers. That part is unknowable.
> 
> S&P 500 went up 7.5% in the first 3 weeks of 2018. Then it dropped 10.5% in the next 3 weeks. Has anything changed in the economy to explain these moves? Of course not. The stock market is a bipolar beast. It does what it does. Predictions are not merely worthless. They are dangerous if you act on them.
> 
> Develop an asset allocation that meets your risk tolerance. Stick to it through thick and thin. Do not pay any attention to the news and predictions. Paying too much attention to the noise is how investors get in trouble.


It doesn't take much to use some economic data to be part of your asset allocation decisions though. It takes little effort to look at some simple gdp and interest rate projections to see EM have enormous growth projections and would be a good place to invest for example or use them to compare CDN, EAFE, and US markets for weights.

Yes it is hard to predict what the market will react to but it shouldn't have come as a complete surprise to see what happened last week. Everyone was bracing for a correction to the overheated US market so no great mystery. 

You can listen to easy to digest explanations from the financial experts on networks like Bloomberg of market changes. They explained quite simply and clearly what triggered last week. The release of a US gdp report w growth near 4% annualized, then a labor report showing wages increased at 2.9%, the fastest rate in almost 10 yrs both showing higher than expected inflation. W more interest rate hikes likley, bonds sold, yields soared to near 3% raising borrowing costs for companies which dragged down their earnings forecasts and markets w them.

Maybe a little simplistic, but it isn't completely unknowable. What is hard though is knowing what is and isn't already priced into the market but you can't say you didn't see this coming either.


----------



## GreatLaker

canew90 said:


> Mentioned before, but we are retired, 100% Cdn equities and earn more in dividends than our annual expenses. We hope the market continues down and stays down for a while. The real benefit to us is that we may recover some of our OAS clawback and we'll be buying more shares with our dividend reinvestments, thereby continuing to increase our annual income.





Benting said:


> So I am not alone ! Finally a few of us 100% club showing in this board !


The OP has started three threads in about two weeks posting with concerns about risk and volatility in a 78% equity portfolio from which capital must be withdrawn to fund imminent retirement. Now posters are responding that their own portfolios contain 100% equities and have for a long time, indicating more investing experience and volatility tolerance than OP has.



james4beach said:


> Looking at a historical backtest calculator like this one, you can at least see some historical statistics (using US Stock Market and 10- Year Treasury)
> 
> 50% equities, 50% bonds : CAGR of 9.34%, worst year -12%, maximum drawdown -24%
> 78% equities, 22% bonds : CAGR of 10.08%, worst year -24%, maximum drawdown -38%
> 
> So when using the allocation you've chosen, one should be prepared for worst years and temporary losses (high to low) of those magnitudes. If you decide that this is more risk or unpleasantness than you're comfortable with, it's just a matter of adjusting your asset allocation to whatever the right point is -- something you can stick with long term.


*james4beach*: maybe you would be so kind as to also post the return, worst year, and max drawdown for a 100% equity portfolio to assist the OP in his or her decisionmaking. I could probably do it from the link you provided, but thought it would be better coming from you to ensure consistent data.


----------



## Bruins63

GreatLaker said:


> The OP has started three threads in about two weeks posting with concerns about risk and volatility in a 78% equity portfolio from which capital must be withdrawn to fund imminent retirement. Now posters are responding that their own portfolios contain 100% equities and have for a long time, indicating more investing experience and volatility tolerance than OP has.
> 
> 
> 
> *james4beach*: maybe you would be so kind as to also post the return, worst year, and max drawdown for a 100% equity portfolio to assist the OP in his or her decisionmaking. I could probably do it from the link you provided, but thought it would be better coming from you to ensure consistent data.


My gawd, all u folks are awesome...thanks for the help!


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## cainvest

Bruins63, do you have any sort of breakdown of where are your 78% equities are? 
S&P500, TSX, DOW, individual stocks (US or CDN?) or spread over a number of them?


----------



## GoldStone

Jimmy said:


> It doesn't take much to use some economic data to be part of your asset allocation decisions though. It takes little effort to look at some simple gdp and interest rate projections to see EM have enormous growth projections and would be a good place to invest for example or use them to compare CDN, EAFE, and US markets for weights.


That's way too simplistic. In theory, country's GDP growth and stock market returns should match closely. In the real world, dozens of studies have shown either a weak link, or no link at all.

For example, here's a chart from one study, but there are literally dozens of studies showing the same thing:










Purple squares are GDP growth by country - they are arranged in the ascending order. Vertical bars are stock market returns. There is no relationship between the two.




Jimmy said:


> Yes it is hard to predict what the market will react to but it shouldn't have come as a complete surprise to see what happened last week. Everyone was bracing for a correction for forever to the overheated US market so no great mystery.


I am not sure what your point is. 10-15% corrections are perfectly normal. They happen, on average, every 12-18 months (2017 was an exception). We always know that the next correction is not far away. So what? The exact timing is very hard to predict. What does "bracing for a correction" mean? To me, it means pick an investment plan that matches your risk profile. Once you've done that, you no longer need to "brace" for anything.




Jimmy said:


> You can listen to easy to digest explanations from the financial experts on networks like Bloomberg of market changes. They explained quite simply and clearly what triggered last week. The release of a US gdp report w growth near 4% annualized, then a labor report showing wages increased at 2.9%, the fastest rate in almost 10 yrs both showing higher than expected inflation. Bonds sold off, yields soared to near 3% raising borrowing costs for companies which dragged down their earnings forecasts and markets w them.


Okay, great. The picture in the rear view mirror is clear. Do you have a working crystal ball? This Friday-Monday was the best two days move for the S&P 500 since June 2016. S&P 500 is up more than 5% since lunchtime on Friday. Have you seen that coming in the middle of last week? If not, why not?


----------



## GoldStone

GreatLaker said:


> *james4beach*: maybe you would be so kind as to also post the return, worst year, and max drawdown for a 100% equity portfolio to assist the OP in his or her decisionmaking. I could probably do it from the link you provided, but thought it would be better coming from you to ensure consistent data.


The OP should learn to use this tool:

http://www.ndir.com/cgi-bin/downside_adv.cgi

It provides all the numbers you mentioned. It's better to play with the numbers yourself to get a better feel for them.


----------



## Bruins63

cainvest said:


> Bruins63, do you have any sort of breakdown of where are your 78% equities are?
> S&P500, TSX, DOW, individual stocks (US or CDN?) or spread over a number of them?


95 percent tsx except for Bank of America and JP Morgan...on tsx big banks, big telecom, energy utilities, Reits, oil (Suncor)...all divvy paying stocks...


----------



## Jimmy

GoldStone said:


> That's way too simplistic. In theory, country's GDP growth and stock market returns should match closely. In the real world, dozens of studies have shown either a weak link, or no link at all.
> 
> For example, here's a chart from one study, but there are literally dozens of studies showing the same thing:


There is a strong link between gdp and earnings. They are ~ 95% correlated for the S&P in fact. You can see the DJIA earnings too are exactly correlated to gdp

http://www.investorsfriend.com/djia-valuation/



GoldStone said:


> I am not sure what your point is. 10-15% corrections are perfectly normal. They happen, on average, every 12-18 months (2017 was an exception). We always know that the next correction is not far away. So what? The exact timing is very hard to predict. What does "bracing for a correction" mean? To me, it means pick an investment plan that matches your risk profile. Once you've done that, you no longer need to "brace" for anything.


My pt is again US markets were way overvalued and parabolic and everyone knew there was going to be a correction so it shouldn't have been as unpredictable as you first suggested. In fact , again, there were indicators that changed in the economy to explain why as discussed on Bloomberg from analysts who follow the US market as I mentioned. Many knew once interest rates edged up it would take some steam out of the market at some time eventually as well too. 'Bracing for a correction' means hold off on making US investments until the market is more fairly valued unless you just want to buy at the top for some reason



GoldStone said:


> Okay, great. The picture in the rear view mirror is clear. Do you have a working crystal ball? This Friday-Monday was the best two days move for the S&P 500 since June 2016. S&P 500 is up more than 5% since lunchtime on Friday. Have you seen that coming in the middle of last week? If not, why not?


Not talking about daily gyrations. Bloomberg just explained the events that led to the large drop last week. The drop everyone was expecting at some stage and just waiting for some -ve earnings or economic news to trigger it , like last week.


----------



## cainvest

Bruins63 said:


> 95 percent tsx except for Bank of America and JP Morgan...on tsx big banks, big telecom, energy utilities, Reits, oil (Suncor)...all divvy paying stocks...


Ok, so 95% is a hand picked basket of large cap CDN dividend paying stocks. So maybe something like the CDZ etf would be kind close, without knowing your exact holdings, for comparison.

For a quick comparison here is how CDZ did, 2008 - 2017
-29.98	
38.43	
15.69	
6.07	
8.84	
13.59	
12.96	
-11.53	
20.93	
5.19

You comfortable with those returns for 78% of your portfolio?


----------



## fireseeker

Jimmy said:


> There is a strong link between gdp and earnings. They are ~ 95% correlated for the S&P in fact. You can see the DJIA earnings too are exactly correlated to gdp
> 
> http://www.investorsfriend.com/djia-valuation/


I don't think "DJIA earnings" and GoldStone's "stock market returns" are the same thing. Not even close.
Yes, over long periods of time the stock market return will logically reflect companies' underlying earnings. But over periods of even a decade the market can deliver returns that have nothing to do with earnings -- and returns are what count. 
From 1969 to 1982 the DJIA _dropped_. Compare that with the GDP chart or the Dow earnings chart -- they don't match. 
Remember what Keynes said: "Markets can remain irrational for longer than you can remain solvent."


----------



## fireseeker

Jimmy said:


> ...everyone knew there was going to be a correction so it shouldn't have been as unpredictable as you first suggested.


If "everyone" knew this, why was anyone still invested?


----------



## Jimmy

fireseeker said:


> I don't think "DJIA earnings" and GoldStone's "stock market returns" are the same thing. Not even close.
> Yes, over long periods of time the stock market return will logically reflect companies' underlying earnings. But over periods of even a decade the market can deliver returns that have nothing to do with earnings -- and returns are what count.
> From 1969 to 1982 the DJIA _dropped_. Compare that with the GDP chart or the Dow earnings chart -- they don't match.
> Remember what Keynes said: "Markets can remain irrational for longer than you can remain solvent."


I wasn't talking about returns or even earnings to begin w. Just using economic data like gdp to compare markets in general or id ones w potential. But again if you read my chart earnings and the DJIA are highly correlated, except for the period you mention which was a time of record inflation and 18% interest rates. 

Either way , I wanted to see based on gdp growth what markets could be attractive, not compare historic returns. Ie would you invest where gdp is 4% or -1%? Not too complicated


----------



## Jimmy

fireseeker said:


> If "everyone" knew this, why was anyone still invested?


Did you sell all your investments because of a 10% correction? No. You likely weren't running out and adding US equities either. My pt was just this correction was coming sooner or later and everyone had been talking about it so it wasn't some big unforeseeable surprise. The S&P was trading at record multiples. Why is this such a mystery? But if you want to talk about investing, would you be dumping $ into the S&P when everyone is telling you it is overvalued and trading at 27x earnings before? No.


----------



## GoldStone

Jimmy said:


> There is a strong link between gdp and earnings. They are ~ 95% correlated for the S&P in fact. You can see the DJIA earnings too are exactly correlated to gdp
> 
> http://www.investorsfriend.com/djia-valuation/


This is what you wrote in post #87:

_It doesn't take much to use some economic data to be part of your asset allocation decisions though. It takes little effort to look at some simple gdp and interest rate projections to see EM have enormous growth projections and would be a good place to invest for example or use them to compare CDN, EAFE, and US markets for weights._

You are saying that "enormous growth projections" in the EM markets will lead to superior stock market returns. The data to support your assertion is weak or non-existent. 

Your last reference to the DJIA is *a single data point from a single country*. To prove your assertion, you need to show a stable relationship between GDP growth and stock market returns *that holds across countries*. Many studies have shown that this relationship doesn't hold. For example, see the chart in my last post. Have you spent any time looking at that data?

- you can find high bars (good stock market returns) on the left side of the chart (low GDP growth), the middle (modest GDP growth) and the right (high GDP growth).
- similarly, you can find low bars (poor stock market returns) across the entire chart.

I wish investing was as easy as picking a country or a region with the highest projected GDP growth. That would be a dream.


----------



## fireseeker

Jimmy said:


> Did you sell all your investments because of a 10% correction? No. But if you were smart you weren't running out and adding US equities either. My pt was just this correction was coming sooner or later and everyone had been talking about it so it wasn't some big unforeseeable surprise. The S&P was trading at record multiples. Why is this such a mystery? But if you want to talk about investing, would you be dumping $ into the S&P when everyone is telling you it is overvalued and trading at 27x earnings before? No.


The DJIA jumped roughly 1,000 points in the first 10 trading days of the year, or roughly 4% -- "everyone" was adding U.S. equities, not waiting for a correction. The markets are indeed a mystery.


----------



## Bruins63

cainvest said:


> Ok, so 95% is a hand picked basket of large cap CDN dividend paying stocks. So maybe something like the CDZ etf would be kind close, without knowing your exact holdings, for comparison.
> 
> For a quick comparison here is how CDZ did, 2008 - 2017
> -29.98
> 38.43
> 15.69
> 6.07
> 8.84
> 13.59
> 12.96
> -11.53
> 20.93
> 5.19
> 
> You comfortable with those returns for 78% of your portfolio?


I would have lost sleep in 2008, then never again, looking at those numbers...


----------



## fireseeker

GoldStone said:


> I wish investing was as easy as picking a country or a region with the highest projected GDP growth. That would be a dream.


Indeed. If it were that easy, everyone would invest all their money in the projected high-GDP countries, overvaluing their securities and ... making it a bad investment.


----------



## Jimmy

GoldStone said:


> This is what you wrote in post #87:
> 
> _It doesn't take much to use some economic data to be part of your asset allocation decisions though. It takes little effort to look at some simple gdp and interest rate projections to see EM have enormous growth projections and would be a good place to invest for example or use them to compare CDN, EAFE, and US markets for weights._
> 
> You are saying that "enormous growth projections" in the EM markets will lead to superior stock market returns. The data to support your assertion is weak or non-existent.
> 
> Your last reference to the DJIA is *a single data point from a single country*. To prove your assertion, you need to show a stable relationship between GDP growth and stock market returns *that holds across countries*. Many studies have shown that this relationship doesn't hold. For example, see the chart in my last post. Have you spent any time looking at that data?
> 
> - you can find high bars (good stock market returns) on the left side of the chart (low GDP growth), the middle (modest GDP growth) and the right (high GDP growth).
> - similarly, you can find low bars (poor stock market returns) across the entire chart.
> 
> I wish investing was as easy as picking a country or a region with the highest projected GDP growth. That would be a dream.


No I am not saying that you are. EM like India have real gdp growth of ~5% for ex and yes that will be also be reflected in individual company growth of course. But there are other factors that could effect returns to look at at the same time like if their interest rates are 7% for ex. There is a strong relationship between,again as I showed you for the DJIA, gdp growth and earnings. So find countries were gdp is growing is just a starting pt.

I am not talking about returns. Not sure why you are fixated on that. I look at gdp to compare markets like if one has gdp growth of 4% it is likely better than one w -1%. Your chart is meaningless for that. Not interested in historic country returns. Interested in countries w gdp growth projections as a starting pt, then look at more fundamental factors like P/Es.


----------



## GoldStone

Jimmy said:


> I am not talking about returns. Not sure why you are fixated on that.


Because you said:

"It doesn't take much to use some economic data to be part of your asset allocation decisions though. It takes little effort to look at some simple gdp and interest rate projections to see *EM have enormous growth projections and would be a good place to invest* for example or use them to compare CDN, EAFE, and US markets for weights."

What's the point of the exercise you proposed if not to earn better returns?


----------



## Jimmy

fireseeker said:


> The DJIA jumped roughly 1,000 points in the first 10 trading days of the year, or roughly 4% -- "everyone" was adding U.S. equities, not waiting for a correction. The markets are indeed a mystery.


"everyone ' likely wasn't. Some were who can't read P/e ratios perhaps . I wasn't and I hope you weren't. No analysts on BNN were recommending jumping into US equities that I heard either


----------



## Jimmy

GoldStone said:


> Because you said:
> 
> "It doesn't take much to use some economic data to be part of your asset allocation decisions though. It takes little effort to look at some simple gdp and interest rate projections to see *EM have enormous growth projections and would be a good place to invest* for example or use them to compare CDN, EAFE, and US markets for weights."
> 
> What's the point of the exercise you proposed if not to earn better returns?


I didn't propose anything. I said that as an 'example'. But they do have enormous growth projections for revenue and earnings. And I added some recently because P/es, inflation, interest rates and many other factors are also favorable

They returned ~ 20% last year so there you go. An area many are recommending for 2018 too


----------



## 1980z28

Benting said:


> 1980z, you are really in good shape !


Having zero debt for most of my life has helped
When i was 18 i live in homeless shelter
I donate money to the shelter every year
Donate 50% of my crops to local food bank
I spend most of my time outside(love outside),fish and hunt,cut firewood and hike a lot,property maintenance etc.
I love 2 channel vinyl music,i play league darts and pool 
I also clear snow for seniors
I live a very simple life
The reason i have some money is when i was in shelter i had no money,so i save it all,funny thing i still save money 
I am lucky health is great i am 151 lbs with no problems
I am lucky to live the life i am in hoping to get to 80 plus


----------



## cainvest

Bruins63 said:


> I would have lost sleep in 2008, then never again, looking at those numbers...


Maybe a first step for you is to ask for the last 10+ years (maybe go back to 1999?) of returns for your portfolio. I would gather it's a common one he uses for others so the numbers should be available. Then you can make an informed decision on whether to change your asset allocation if those returns are not to your liking.


----------



## Bruins63

cainvest said:


> Maybe a first step for you is to ask for the last 10+ years (maybe go back to 1999?) of returns for your portfolio. I would gather it's a common one he uses for others so the numbers should be available. Then you can make an informed decision on whether to change your asset allocation if those returns are not to your liking.


Thanks, sorry, you’re asking me to ask the CDZ etf folks for data from 1999?


----------



## cainvest

Bruins63 said:


> Thanks, sorry, you’re asking me to ask the CDZ etf folks for data from 1999?


Nope, was suggesting you ask your advisor for "your annual portfolio performance" since 1999. This way you can look at the volatility of your portfolio.


----------



## GreatLaker

Tom Bradley of Steadyhand has a good blog post for dealing with bad markets.

Everyone is scared and prices are down - and for long-term investors, it's a beautiful thing

A couple of good points in his post:


> 2. Despite the inevitability, there’s no certainty as to a bear’s timing, depth, shape or character. Therefore, it’s not to be avoided, at least not if you want to participate in the equally unpredictable up markets.
> 
> 3. You won’t know until after whether the initial declines (like last week’s) turn out to be an imperceptible blip on a long-term chart (most are), or the beginning of a more fundamental adjustment. Today, many argue that a serious decline is not possible because of the strong global economy. Others point to historically high valuations, rising interest rates and excessive speculation as catalysts for a bigger selloff. Unfortunately, Mr. Market doesn’t issue warnings or hand out a program.


His conclusion:


> The drama of last week may not amount to anything more than a blip, but it was a good wake up call. If you found it alarming and couldn’t sleep on Monday night, then you have some work to do. There’s no excuse for not being prepared for the next bear market.


----------



## Bruins63

cainvest said:


> Nope, was suggesting you ask your advisor for "your annual portfolio performance" since 1999. This way you can look at the volatility of your portfolio.


Thanks for clarifying...only been invested for 32 months...was tracking 8-9 percent annually before the recent drop, now more 5-6 percent annually


----------



## OptsyEagle

A good article from Ken Fisher on the difference between a bear market and bull market blip.

https://www.usatoday.com/story/mone...-tell-bear-market-bull-market-blip/321676002/

I guess I liked the article, not just because of the respect I have for this guy (and more for his father Phil Fisher) but because it is pretty much how I have seen things. Neither of which guarantees that he or I are right. Just some interesting observations for those who like to read. I suspect this article added to the gains we saw on Monday. It was published on Sunday and Ken Fisher is highly followed on Wall Street.


----------



## cainvest

Bruins63 said:


> Thanks for clarifying...only been invested for 32 months...was tracking 8-9 percent annually before the recent drop, now more 5-6 percent annually


Yes you've only been invested for 32 months with him but I would guess the portfolio he gave you has been used by other clients of his for many years (hopefully). If it has been used by others, he should have returns going back for years so it might be worthwhile to ask what those returns were to see how it did in the down times (2000, 2008, etc).


----------



## Bruins63

cainvest said:


> Yes you've only been invested for 32 months with him but I would guess the portfolio he gave you has been used by other clients of his for many years (hopefully). If it has been used by others, he should have returns going back for years so it might be worthwhile to ask what those returns were to see how it did in the down times (2000, 2008, etc).


Thanks, yes we have had the 2008 discussion, down about 30 percent...it’s a divvy paying portfolio paying about $32k in divvys of the annual $55k gross income I require...


----------



## james_57

Portfolio question, theoretical: after liquidating the Canadian equities last week, the portfolio is 80% liquid, 20% physical AU/AG. Assume to be in my shoes for a moment, 60's fellow, modest business income, sitting on some property: see high probability of equities market cratering in the next few short months, so keeping the powder dry in case. Tempted to buy US treasuries (or cash) on the bet that the dollar is bottoming. Wary of bond market, because rates could go either way. Mark Carney is indicating rates are going up. The Fed is indicating they will listen to the market. Hedgies are dumping equities. Speculate oil/nat gas could also tank. The PPT is active, intervening, supporting price in low volume trading while the 'experts' are calling for a crash. It's quite exciting actually. What would you do, given those ideas as loose parameters?


----------



## james4beach

james_57: Quick answer on what to do is: just stick to your asset allocation targets.



james_57 said:


> Wary of bond market, because rates could go either way. Mark Carney is indicating rates are going up.


Sorry for being repetitive and I've posted this many times, even though I realize everyone hates bonds and is afraid of rising interest rates.

The market _already knows_ that interest rates might go up. It's priced into bonds. The market isn't stupid, there are trillions of $ traded every day in the bond market and you're not the first person who's heard that interest rates may rise. The probability of rising rates is baked into the value of bond funds.

Additionally, bond funds still have good returns in rising rates, as long as rates rise gradually. Of course the opposite can happen and rates could fall, which nobody ever seems to think about (even though this is what has been happening for the last 35 years).

My point is that there's no good reason to avoid bond funds. It's a mistake to look at headlines about central bank wording when deciding whether to invest in bonds. Just stick to your asset allocation targets and buy what you have to in order to keep yourself at your % targets. If you're under weight bonds according to your target, then go buy some XBB or VAB.


----------



## Bruins63

Sold the portfolio to cash today folks...essentially monetized some returns during the last 32 months...now the hard part...what to do now...


----------



## like_to_retire

Bruins63 said:


> Sold the portfolio to cash today folks...essentially monetized some returns during the last 32 months...now the hard part...what to do now...


So you bought high and sold low?

ltr


----------



## Bruins63

like_to_retire said:


> So you bought high and sold low?
> 
> ltr


I’ve been invested for 32 months...even tho I was off the high when I sold, I still eeeeked out 6.1 percent annually...I’ll take it...


----------



## james4beach

So here you go Bruins, now the market is really flying high. Now you don't have to have any fear of "selling low". Nothing should hold you back from adjusting your allocation.

As I said before, make sure your asset allocation decision (% equities, % bonds) is the right fit for you. I'll post again some stats below based on historical performance of US stocks & bonds. Decide which is the right fit for your taste -- something you can be comfortable with and that won't stress you out even in the worst times. And then make the change! The time is now.

100% stocks 0% bonds : 10.4% CAGR, -37.0% worst year, -51% max drawdown
80% stocks 20% bonds : 10.1% CAGR, -25.5% worst year, -39% max drawdown
70% stocks 30% bonds : 9.9% CAGR, -19.8% worst year, -33% max drawdown
60% stocks 40% bonds : 9.6% CAGR, -15.1% worst year, -29% max drawdown
50% stocks 50% bonds : 9.3% CAGR, -11.9% worst year, -24% max drawdown
40% stocks 60% bonds : 9.0% CAGR, -8.7% worst year, -19% max drawdown
30% stocks 70% bonds : 8.6% CAGR, -5.5% worst year, -14% max drawdown
20% stocks 80% bonds : 8.2% CAGR, -5.8% worst year, -12% max drawdown

There is your RISK vs REWARD. As reward (CAGR) goes up, so does risk (worst year and maximum drawdown/loss ever seen). Now it's just a matter of choosing something with the risk level you are comfortable with. We got barely a 5% decline and you sounded concerned about where the market is going. I still don't think 80/20 is right for you.


----------



## Bruins63

james4beach said:


> So here you go Bruins, now the market is really flying high. Now you don't have to have any fear of "selling low". Nothing should hold you back from adjusting your allocation.
> 
> As I said before, make sure your asset allocation decision (% equities, % bonds) is the right fit for you. I'll post again some stats below based on historical performance of US stocks & bonds. Decide which is the right fit for your taste -- something you can be comfortable with and that won't stress you out even in the worst times. And then make the change! The time is now.
> 
> 100% stocks 0% bonds : 10.4% CAGR, -37.0% worst year, -51% max drawdown
> 80% stocks 20% bonds : 10.1% CAGR, -25.5% worst year, -39% max drawdown
> 70% stocks 30% bonds : 9.9% CAGR, -19.8% worst year, -33% max drawdown
> 60% stocks 40% bonds : 9.6% CAGR, -15.1% worst year, -29% max drawdown
> 50% stocks 50% bonds : 9.3% CAGR, -11.9% worst year, -24% max drawdown
> 40% stocks 60% bonds : 9.0% CAGR, -8.7% worst year, -19% max drawdown
> 30% stocks 70% bonds : 8.6% CAGR, -5.5% worst year, -14% max drawdown
> 20% stocks 80% bonds : 8.2% CAGR, -5.8% worst year, -12% max drawdown
> 
> There is your RISK vs REWARD. As reward (CAGR) goes up, so does risk (worst year and maximum drawdown/loss ever seen). Now it's just a matter of choosing something with the risk level you are comfortable with. We got barely a 5% decline and you sounded concerned about where the market is going. I still don't think 80/20 is right for you.


Agreed,I can’t stomach illogical volatility....I may as well go to the Casino...I’m thinking some of the couch Potato conservative etf portfolios...do they need to be in $100k chunks to be properly insured?


----------



## like_to_retire

Bruins63 said:


> Agreed,I can’t stomach illogical volatility....I may as well go to the Casino...I’m thinking some of the couch Potato conservative etf portfolios...do they need to be in $100k chunks to be properly insured?


No, non-deposit investment products (mutual funds, stocks and bonds) are not insured by the CDIC. Only savings accounts, chequing accounts, GIC's, term deposits.

ltr


----------



## GoldStone

james4beach said:


> So here you go Bruins, now the market is really flying high. Now you don't have to have any fear of "selling low". Nothing should hold you back from adjusting your allocation.
> 
> As I said before, make sure your asset allocation decision (% equities, % bonds) is the right fit for you. I'll post again some stats below based on historical performance of US stocks & bonds. Decide which is the right fit for your taste -- something you can be comfortable with and that won't stress you out even in the worst times. And then make the change! The time is now.
> 
> 100% stocks 0% bonds : 10.4% CAGR, -37.0% worst year, -51% max drawdown
> 80% stocks 20% bonds : 10.1% CAGR, -25.5% worst year, -39% max drawdown
> 70% stocks 30% bonds : 9.9% CAGR, -19.8% worst year, -33% max drawdown
> 60% stocks 40% bonds : 9.6% CAGR, -15.1% worst year, -29% max drawdown
> 50% stocks 50% bonds : 9.3% CAGR, -11.9% worst year, -24% max drawdown
> 40% stocks 60% bonds : 9.0% CAGR, -8.7% worst year, -19% max drawdown
> 30% stocks 70% bonds : 8.6% CAGR, -5.5% worst year, -14% max drawdown
> 20% stocks 80% bonds : 8.2% CAGR, -5.8% worst year, -12% max drawdown
> 
> There is your RISK vs REWARD. As reward (CAGR) goes up, so does risk (worst year and maximum drawdown/loss ever seen). Now it's just a matter of choosing something with the risk level you are comfortable with. We got barely a 5% decline and you sounded concerned about where the market is going. I still don't think 80/20 is right for you.


What's the time frame for the stats above? That's kinda important.


----------



## james4beach

GoldStone said:


> What's the time frame for the stats above? That's kinda important.


1972 to 2017. Beware that these are for US stocks only. I'm not sure how the statistics would change for more global investment mixes.


----------



## james_57

james4beach said:


> james_57: Quick answer on what to do is: just stick to your asset allocation targets.
> 
> 
> 
> Sorry for being repetitive and I've posted this many times, even though I realize everyone hates bonds and is afraid of rising interest rates.
> 
> The market _already knows_ that interest rates might go up. It's priced into bonds. The market isn't stupid, there are trillions of $ traded every day in the bond market and you're not the first person who's heard that interest rates may rise. The probability of rising rates is baked into the value of bond funds.
> 
> Additionally, bond funds still have good returns in rising rates, as long as rates rise gradually. Of course the opposite can happen and rates could fall, which nobody ever seems to think about (even though this is what has been happening for the last 35 years).
> 
> My point is that there's no good reason to avoid bond funds. It's a mistake to look at headlines about central bank wording when deciding whether to invest in bonds. Just stick to your asset allocation targets and buy what you have to in order to keep yourself at your % targets. If you're under weight bonds according to your target, then go buy some XBB or VAB.


 Hi James, and thanks for the reply. Actually I don't have a target per se, nor do I have a planned asset allocation. I started investing in stocks about 1975 and have been off and on ever since. I've had some winners and losers like all people. I recall losing about 80K on Nortel when they bit the dust, that hurt,but I enjoyed redemption when I liquidated everything in fall 2008, buying back in spring of 2009. These days I'm focused on wealth preservation. This market to me is much like a house of cards. For now I think I'll sit on the sidelines, probably 1/2 in USD, and watch. The market will eventually crash, its written on the wall. I can wait. Meanwhile i'll give bonds a good second look. Thanks for your advice! 
Cheers!


----------



## GoldStone

james4beach said:


> 1972 to 2017. Beware that these are for US stocks only. I'm not sure how the statistics would change for more global investment mixes.


The list you posted should come with a fat asterisk. The last 30 years coincided with a secular bull market in bonds. 10 year yields dropped from 15% to 2%. That was a major boost for bond returns. It is not going to repeat any time soon, because we are not starting at 15%.

The portfolios at the bottom of your list look mightily attractive. High returns, modest drawdowns, with just 20-30% in stocks. What's not to like? Here's the asterisk: JUICED bond returns are responsible for those stats. The drop from 15% to 2% is a magic juice. That deal is no longer on offer.

====

BTW, James. The OP sold all of his stocks today. We know his portfolio was heavy on defensive dividend payers: utilities, telcos, pipelines. Many of those stocks are at 52 week lows, or close to 52 week lows, because they trade like bond proxies. How do you feel about that?

The reason I brought this up: it's one thing to share your knowledge, explain available options, highlight pros and cons. It's quite another thing to forcefully push advice. Your advice may or may not be appropriate. It's a bad idea to cross that line. Please think about that.


----------



## carson

Bruins63 said:


> Sold the portfolio to cash today folks...essentially monetized some returns during the last 32 months...now the hard part...what to do now...


Good choice. No rush to pile it all back in the market, your cash is far safer than a 80/20 stake for the short term. Take your time and figure out what asset allocation works for you.

cheers


----------



## james4beach

GoldStone said:


> The list you posted should come with a fat asterisk. The last 30 years coincided with a secular bull market in bonds. 10 year yields dropped from 15% to 2%. That was a major boost for bond returns. It is not going to repeat any time soon, because we are not starting at 15%.


It was also a secular bull market for stocks, one of the greatest in all of history. So yes one must consider that this was a dual bull market in stocks and bonds.

This kind of return for stocks will likely not be repeated either, since stocks began in the 70s/80s at low valuations. Today they are at historically high valuations.

Both stocks and bonds are overvalued, and both will likely have lower returns going forward.



> BTW, James. The OP sold all of his stocks today. We know his portfolio was heavy on defensive dividend payers: utilities, telcos, pipelines. Many of those stocks are at 52 week lows, or close to 52 week lows, because they trade like bond proxies. How do you feel about that?
> 
> The reason I brought this up: it's one thing to share your knowledge, explain available options, highlight pros and cons. It's quite another thing to forcefully push advice. Your advice may or may not be appropriate. It's a bad idea to cross that line. Please think about that.


I don't care about the specific holdings and dividends are a moot point, completely irrelevant. They are stocks. I was very clear on my advice. He should figure out the asset allocation that's right for him and then stick to that plan. I didn't say to make one plan and then reverse it next month or constantly change... I said that he should figure out the right allocation for himself, and then stick with that through thick and thin.

Then I offered my opinion that his 80% stock exposure seems too high based on what he's posting. I'm not pushing anything.

Presumably his advisor will help him find the correct asset allcation %s. This should involve a thorough discussion of both upside and downside, but the advisor clearly did not do that before, because he had Bruins in an aggressive allocation and seems to not have prepared him at all for what kind of risk 80% stock exposure means.

My experience has been that most "advisors" are way too pushy towards high stock allocations. High returns are more fun, let you brag when they perform well, and it's not the advisor's own money in any case so he really has nothing to lose.

And if Bruins is comfortable with the tradeoff offered by 80/20, then by all means, invest that way. It is a totally fine allocation for someone who is comfortable with the possibility of that level of loss, who is positive they can stick with it even when the portfolio declines 30% to 40% and stays down there for a few years.


----------



## james4beach

cainvest said:


> Ok, so 95% is a hand picked basket of large cap CDN dividend paying stocks. So maybe something like the CDZ etf would be kind close, without knowing your exact holdings, for comparison.


Somewhat in reference to GoldStone's earlier comment that Bruins was in safe/defensive stocks, here is how those kinds of stocks performed in the last downturn: http://schrts.co/8nu4wa

As you can see, those stocks decline just as much as the broad stock index. They are still stocks... makes no difference if they pay dividends or not. There is no such thing as a "defensive" stock that withstands stock market downturns.

So no, I don't think it's a mistake that Bruins ditched his utility stocks while he figures out which asset allocation mix is right for him.


----------



## james4beach

like_to_retire said:


> So you bought high and sold low?


No, he had a significant positive return since he started. Bruins is in a great spot and he's lucky:

1. He's sitting on gains since starting investing
2. He experienced a sharp decline _and got to feel_ what risk/drawdown is... though this was a tiny one
3. Now he's in cash and can breathe and think carefully about how to position himself


----------



## james_57

james4beach said:


> Bruins is in a great spot and he's lucky:


So you do acknowledge we are playing in a casino.


----------



## cainvest

james4beach said:


> Somewhat in reference to GoldStone's earlier comment that Bruins was in safe/defensive stocks, here is how those kinds of stocks performed in the last downturn: http://schrts.co/8nu4wa
> 
> As you can see, those stocks decline just as much as the broad stock index. They are still stocks... makes no difference if they pay dividends or not. There is no such thing as a "defensive" stock that withstands stock market downturns.


Yes, you can focus on the downturn bottom (bad idea IMO) or look at what is likely down the road from that. 
The returns for 6 years following your chart's end ...
38.43
15.69	
6.07	
8.84	
13.59	
12.96	

Of course if you can't sleep at night for a year or two because of a downturn then by all means, do what you need to do! 
One does have to keep in mind that over the long haul stocks historically provide a great return, much better than totally defensive asset allocations.


----------



## james4beach

cainvest said:


> Of course if you can't sleep at night for a year or two because of a downturn then by all means, do what you need to do!
> One does have to keep in mind that over the long haul stocks historically provide a great return, much better than totally defensive asset allocations.


I agree, historically stocks provide the strongest returns, but you also need to be able to stomach the losses and negative periods.

And I have no problem with CDZ by the way, it's a great fund. My point is that it dropped just as much as the broad index during the negative period.


----------



## Bruins63

Thanks folks for all the great insights...for me, the reason I sold out is I couldn’t stomach the volatility over the next 30 years of being invested...some can, some can’t and I can’t afford to lose any of the nest egg...if there were logical reasons why the market reacts the way it does sometimes, perhaps I may have been more patient...

I think the down turn was a good wake up call for me and I’m still ahead of the game but believe me it was a tough decision for me given trusted advisor relationship etc...at the EOD, my advisor was very professional.

I’m going to re read this thread for the links on potential investment opportunities for etf’s etc...I’m also thinking as rates rise a simple GIC ladder may even suffice if I can sustain a 3 percent return...I’m not looking to shoot the lights out but rather in preservation mode...again, thanks for all the input...keep it coming eaceful:eaceful:


----------



## hboy54

Bruins63 said:


> I’m going to re read this thread for the links on potential investment opportunities for etf’s etc...I’m also thinking as rates rise a simple GIC ladder may even suffice if I can sustain a 3 percent return...I’m not looking to shoot the lights out but rather in preservation mode...again, thanks for all the input...keep it coming eaceful:eaceful:


Preservation? Yes, maybe. For me at 41% marginal tax rate 3% before tax is after tax 1.77%. Inflation is ...

Fixed income is not risk free. It is however a whole lot easier to lie to yourself and pretend that it is.

Hboy54


----------



## OptsyEagle

hboy54 said:


> Preservation? Yes, maybe. For me at 41% marginal tax rate 3% before tax is after tax 1.77%. Inflation is ...
> 
> Fixed income is not risk free. It is however a whole lot easier to lie to yourself and pretend that it is.
> 
> Hboy54



Taxes and inflation are losses that most of us have to bear, but making bad decisions because one is in a portfolio that is too aggressive for their risk tolerance, for Bruin, would end up being the costliest of all, in my opinion.

He made the right decision for him let's not confuse him anymore then he probably is already.


----------



## pwm

You are correct hboy54. Pure interest income after tax and inflation is ~ zero real return. Dividends have a tax advantage and also increase over time. Example: See my previous post re GWO and BCE.


----------



## Bruins63

OptsyEagle said:


> Taxes and inflation are losses that most of us have to bear, but making bad decisions because one is in a portfolio that is too aggressive for their risk tolerance, for Bruin, would end up being the costliest of all, in my opinion.
> 
> He made the right decision for him let's not confuse him anymore then he probably is already.


Thank you Sir...that’s the best advice yet :friendly_wink: Question, if I simply wanted to copy cat the Couch Potatoe Conservative etf portfolio, is there any big mystery or risk in doing so? I understand there is always risk but are there any BIg RISKY silver bullets, like etf’s Tomorrow could go belly up etc? I just got off the phone with TDDI and am starting to set up accounts up...


----------



## cainvest

Bruins63 said:


> Thanks folks for all the great insights...for me, the reason I sold out is I couldn’t stomach the volatility over the next 30 years of being invested...some can, some can’t and I can’t afford to lose any of the nest egg...if there were logical reasons why the market reacts the way it does sometimes, perhaps I may have been more patient...
> 
> I think the down turn was a good wake up call for me and I’m still ahead of the game but believe me it was a tough decision for me given trusted advisor relationship etc...at the EOD, my advisor was very professional.


It's all good Bruins63, sounds like you made an informed decision and did changes you can live with. 
You'll also save on fees with you at the wheel instead of the advisor.


----------



## Spudd

You might like Vanguard's new all-in-one funds (probably the conservative one, based on the above discussion):

http://canadiancouchpotato.com/2018/02/05/vanguards-one-fund-solution/


----------



## Bruins63

Spudd said:


> You might like Vanguard's new all-in-one funds (probably the conservative one, based on the above discussion):
> 
> http://canadiancouchpotato.com/2018/02/05/vanguards-one-fund-solution/


Thanks, a question for everyone, let’s say this is the one I chose, and I open a TDDI account, wholly smokes how do I just hand “$1M” (for sake of discussion) to some entity/company/fund I know VERY little about? Even if I read and read and read, how comfortable am I going to be?


----------



## GreatLaker

Bruins63 said:


> Thank you Sir...that’s the best advice yet :friendly_wink: Question, if I simply wanted to copy cat the Couch Potatoe Conservative etf portfolio, is there any big mystery or risk in doing so? I understand there is always risk but are there any BIg RISKY silver bullets, like etf’s Tomorrow could go belly up etc? I just got off the phone with TDDI and am starting to set up accounts up...


Never say never. Many unpredictable things have happened in the market. But having said that, most ETFs are based on indexes, and hold the underlying stocks or bonds in those indexes. So it's highly improbable that ETFs would go "belly up". ETF providers can discontinue ETFs, especially ones that are esoteric, have low assets, or are not traded much. But if that happens the fund provider would buy back the units and issue cash to the holders. As long as you use broadly traded ETFs like those listed in model portfolios from Canadian Couch Potato, Canadian Portfolio Manager Blog or Finiki, it's very unlikely that a fund would be discontinued. Remember they hold shares of underlying stocks or bonds.

Justin Bender of PWL Capital has a video on how to build an ETF portfolio at TD Direct. He gives specific instructions and screen shots on how to purchase ETFs.
https://www.youtube.com/watch?v=S5LmyozD4d4&list=PLovWMWBk4UZnaH0Z2hBvtDidGsur2xDf7


----------



## Bruins63

GreatLaker said:


> Never say never. Many unpredictable things have happened in the market. But having said that, most ETFs are based on indexes, and hold the underlying stocks or bonds in those indexes. So it's highly improbable that ETFs would go "belly up". ETF providers can discontinue ETFs, especially ones that are esoteric, have low assets, or are not traded much. But if that happens the fund provider would buy back the units and issue cash to the holders. As long as you use broadly traded ETFs like those listed in model portfolios from Canadian Couch Potato, Canadian Portfolio Manager Blog or Finiki, it's very unlikely that a fund would be discontinued. Remember they hold shares of underlying stocks or bonds.
> 
> Justin Bender of PWL Capital has a video on how to build an ETF portfolio at TD Direct. He gives specific instructions and screen shots on how to purchase ETFs.
> https://www.youtube.com/watch?v=S5LmyozD4d4&list=PLovWMWBk4UZnaH0Z2hBvtDidGsur2xDf7


Thank you! Is there something like a “Like” button on this board so I could hit “Like” when someone posts something I really like?


----------



## cainvest

Bruins63 said:


> Thanks, a question for everyone, let’s say this is the one I chose, and I open a TDDI account, wholly smokes how do I just hand “$1M” (for sake of discussion) to some entity/company/fund I know VERY little about? Even if I read and read and read, how comfortable am I going to be?


Only you can answer how comfortable you'll be going into just one fund.
You can always spread it over multiple funds, saw some in the Vanguard ETF, some in a Mawer fund and another portion in a GIC ladder. Just keep an eye on your trading costs if you plan on using many different products.


----------



## GreatLaker

Bruins63 said:


> Thanks, a question for everyone, let’s say this is the one I chose, and I open a TDDI account, wholly smokes how do I just hand “$1M” (for sake of discussion) to some entity/company/fund I know VERY little about? Even if I read and read and read, how comfortable am I going to be?


TDDI is a big Canadian bank. Unlikely they are going under or making off with your money. (Make Off Like Madoff so to speak)

Your accounts will have $1M of coverage from CIPF in case your broker does become insolvent. Read the CIPF site carefully so you know your coverage. Note that CIPF only covers insolvency of the broker, not declines in the value of your investments.
https://www.cipf.ca/Public/CIPFCoverage/CoveragePolicy.aspx


> Limits for Individuals
> For an individual holding an account or accounts with a member firm, the limits on CIPF protection are generally as follows:
> 
> $1 million for all general accounts combined (such as cash accounts, margin accounts and TFSAs), plus
> $1 million for all registered retirement accounts combined (such as RRSPs, RRIFs and LIFs), plus
> $1 million for all registered education savings plans (RESPs) combined where the client is the subscriber of the plan.


ETF providers like Blackrock (iShares), Vanguard and BMO are also large.

In addition to that, TDDI offers GICs from about a dozen issuers, each having CDIC coverage up to $100k.

If you are really concerned, or go over the coverage limits, consider having two brokers and buying ETF from multiple providers.

For context, I have about the amount of money you are talking about all at one big bank's discount broker, and my ETFs are from 3 ETF providers (BMO, Vanguard, iShares), not for safety sake, but because at the time I purchased them thought they were the best ETFs available for me.


----------



## Bruins63

GreatLaker said:


> TDDI is a big Canadian bank. Unlikely they are going under or making off with your money. (Make Off Like Madoff so to speak)
> 
> Your accounts will have $1M of coverage from CIPF in case your broker does become insolvent. Read the CIPF site carefully so you know your coverage. Note that CIPF only covers insolvency of the broker, not declines in the value of your investments.
> https://www.cipf.ca/Public/CIPFCoverage/CoveragePolicy.aspx
> 
> 
> ETF providers like Blackrock (iShares), Vanguard and BMO are also large.
> 
> In addition to that, TDDI offers GICs from about a dozen issuers, each having CDIC coverage up to $100k.
> 
> If you are really concerned, or go over the coverage limits, consider having two brokers and buying ETF from multiple providers.
> 
> For context, I have about the amount of money you are talking about all at one big bank's discount broker, and my ETFs are from 3 ETF providers (BMO, Vanguard, iShares), not for safety sake, but because at the time I purchased them thought they were the best ETFs available for me.


Thanks to all, again...sooooo an ETF is the index and I’m thinking a conservative portfolio weighed towards bonds, perhaps 30/70...given bond yields are potentially rising, is now a good time to buy or do u wait for the yield to rise first, and then buy?


----------



## like_to_retire

Bruins63 said:


> Thanks to all, again...sooooo an ETF is the index.....


Be careful, not all ETFs are designed to mimic indexes. There are ETF's that represent all sorts of niche sectors. Stick to the large well known ETF's and be sure you understand the index it represents.

ltr


----------



## Bruins63

Well I chatted with itrade, TDDI, and Bmo today...so 1/2 my savings are in a LIRA and 1/2 registered...BMO’s smartfolio service doesn’t accept LIRA’s yet but their direct investing side does...for smartfolio, it’s ETF’s only and their fees are scaled but in my situation around .75 percent annually...for that fee they will structure and advise you on a complete ETF portfolio, along with 1/4ly rebalancing etc...I would need to put the LIRA in the direct investing side of the house (no mgmt fee) and could simply replicate the ETF’s that were setup for me on the Smartfolio side...that way I would “feel” like I was getting advisor advice from the smartfolio side of the house and then apply it to my LIRA...this accomplishes a few things for me 1) fees become about 25 percent of what I was paying 2) I get to realign my asset allocation to something waaaay more conservative than 80/20 3) I get advice and direction on specifically what ETF’s to purchase instead of relying on my newbie knowledge...I know I still end up paying fees but they are significantly reduced and allows me to still get good advice on an ETF portfolio...how does that sound for a plan?


----------



## james4beach

Bruins: is this TDDI account you're setting up non-registered? Or some kind of tax shelter? Both?

This can influence which ETFs are ideal.


----------



## like_to_retire

Bruins63 said:


> I know I still end up paying fees but they are significantly reduced and allows me to still get good advice on an ETF portfolio...how does that sound for a plan?


It appears like a decent plan. You obviously have a lot to learn, so this will offer you the opportunity and time to do so. 

The ultimate goal would be to separate yourself from the smartfolio advisor account and completely switch to DIY with no advisor fees. Any new monies could go to the BMO direct DIY side such that eventually you would feel comfortable in closing down the smartfolio service.

Pay attention to what James just posted, in that there are tax considerations with respect to registered and non-registered accounts in the DIY accounts. You will likely setup a non-registered, TFSA, RRSP and LIRA account in the DIY side. Pay attention what goes into each account with respect to taxes.

ltr


----------



## Bruins63

like_to_retire said:


> It appears like a decent plan. You obviously have a lot to learn, so this will offer you the opportunity and time to do so.
> 
> The ultimate goal would be to separate yourself from the smartfolio advisor account and completely switch to DIY with no advisor fees. Any new monies could go to the BMO direct DIY side such that eventually you would feel comfortable in closing down the smartfolio service.
> 
> Pay attention to what James just posted, in that there are tax considerations with respect to registered and non-registered accounts in the DIY accounts. You will likely setup a non-registered, TFSA, RRSP and LIRA account in the DIY side. Pay attention what goes into each account with respect to taxes.
> 
> ltr


Thanks guys, it’s all in rrsp’s except for 2 tfsa’s..the Lira (1/2 the portfolio value) is a big RRSP I believe...


----------



## james4beach

Bruins63 said:


> Thanks guys, it’s all in rrsp’s except for 2 tfsa’s..the Lira (1/2 the portfolio value) is a big RRSP I believe...


That's great, it's all tax shelters. This will make the ETF situation much more smooth.

Paying someone to assist with you establishing an ETF portfolio is not a bad idea, for the interim. However beware that these people tend to overcomplicate things and might want to load you up with more ETFs than you need. The Canadian Couch Potato model you looked at is really excellent... it's hard to do better than this.

Where the advisor/assistor can help is in the mechanics of buying and managing the ETFs and basics of navigating the brokerage. Definitely worth getting some help there!


----------



## Bruins63

james4beach said:


> That's great, it's all tax shelters. This will make the ETF situation much more smooth.
> 
> Paying someone to assist with you establishing an ETF portfolio is not a bad idea, for the interim. However beware that these people tend to overcomplicate things and might want to load you up with more ETFs than you need. The Canadian Couch Potato model you looked at is really excellent... it's hard to do better than this.
> 
> Where the advisor/assistor can help is in the mechanics of buying and managing the ETFs and basics of navigating the brokerage. Definitely worth getting some help there!


Thanks, if interest rates are set to rise, is it better to sit in cash for a minute, wait for the hike, and then move to a strong bond weighting?


----------



## GreatLaker

Bruins63 said:


> Thanks, if interest rates are set to rise, is it better to sit in cash for a minute, wait for the hike, and then move to a strong bond weighting?


Interest rates have been poised to rise "real soon now" since about 2010. Some people have been sitting in cash since then. Those same people sold out of equities in late 2008 or early 2009 to wait for the market to stablize. Some of them are still sitting in cash, thinking "maybe I should get back in now before I miss this bull market all together".

Don't be one of those people. 

Bond Basics 3: Should You Wait for Higher Yields?


----------



## Eder

Sell blue chips after 10% correction...heres how... Canadianlackofmoneyforum.com


----------



## GoldStone

Bruins63 said:


> Thanks to all, again...sooooo an ETF is the index and I’m thinking a conservative portfolio weighed towards bonds, perhaps 30/70...


Have you checked if 30/70 allocation will meet your retirement budget?

Use your expected retirement age to look up VPW withdrawal rate in the 30/70 column:

http://www.finiki.org/wiki/Variable_percentage_withdrawal#Without_the_spreadsheet

Multiply your expect portfolio balance at the time of retirement by the VPW rate. This is your expected withdrawal amount. Does it meet your spending requirements?

If not, you have three options:

1. Delay your retirement and save more.
2. Tighten your belt in retirement.
3. Increase your allocation to stocks. For example, at age 65, VPW rate increases from 4.4% to 4.8% if you change the allocation from 30/70 to 50/50.


----------



## Bruins63

GreatLaker said:


> Interest rates have been poised to rise "real soon now" since about 2010. Some people have been sitting in cash since then. Those same people sold out of equities in late 2008 or early 2009 to wait for the market to stablize. Some of them are still sitting in cash, thinking "maybe I should get back in now before I miss this bull market all together".
> 
> Don't be one of those people.
> 
> Bond Basics 3: Should You Wait for Higher Yields?


Thanks, I’ll give that a read...


----------



## Bruins63

GoldStone said:


> Have you checked if 30/70 allocation will meet your retirement budget?
> 
> Use your expected retirement age to look up VPW withdrawal rate in the 30/70 column:
> 
> http://www.finiki.org/wiki/Variable_percentage_withdrawal#Without_the_spreadsheet
> 
> Multiply your expect portfolio balance at the time of retirement by the VPW rate. This is your expected withdrawal amount. Does it meet your spending requirements?
> 
> If not, you have three options:
> 
> 1. Delay your retirement and save more.
> 2. Tighten your belt in retirement.
> 3. Increase your allocation to stocks. For example, at age 65, VPW rate increases from 4.4% to 4.8% if you change the allocation from 30/70 to 50/50.


Damn, forgot about THAT table that low balls me at every age and stage!!!


----------



## OnlyMyOpinion

Last withdrawl age 99.


----------



## GoldStone

OnlyMyOpinion said:


> Last withdrawl age 99.


Well, that's a ready-made table. The OP can fire up the actual spreadsheet and change 99 to whatever he thinks is appropriate.


----------



## GoldStone

Bruins63 said:


> Damn, forgot about THAT table that low balls me at every age and stage!!!


Well, you can look at it from a different angle.

You previously said that you need to earn 3-4% real rate of return to meet your retirement budget. That's the number that your adviser gave you. Is that right?

Let's assume the following long term rates of return:

stocks: 4.5% real
bonds: 1.5% real

With 30/70 allocation you get: 4.5% * 30% + 1.5% *70% = 2.4% real.

That's short of the target that your advisor calculated. You are facing the same 3 options:

1. Work longer.
2. Spend less in retirement.
3. Allocate more to stocks and learn to live with the volatility.

With 50/50 allocation, you get: 4.5% * 50% + 1.5% * 50% = 3%.

This is not an exact science. Future rates of returns and the sequence of returns are unknown.

VPW might be low-balling you but it does a great job dealing with unknowns. It will give you a raise if future unfolds better than expected.


----------



## Bruins63

GoldStone said:


> Well, you can look at it from a different angle.
> 
> You previously said that you need to earn 3-4% real rate of return to meet your retirement budget. That's the number that your adviser gave you. Is that right?
> 
> Let's assume the following long term rates of return:
> 
> stocks: 4.5% real
> bonds: 1.5% real
> 
> With 30/70 allocation you get: 4.5% * 30% + 1.5% *70% = 2.4% real.
> 
> That's short of the target that your advisor calculated. You are facing the same 3 options:
> 
> 1. Work longer.
> 2. Spend less in retirement.
> 3. Allocate more to stocks and learn to live with the volatility.
> 
> With 50/50 allocation, you get: 4.5% * 50% + 1.5% * 50% = 3%.
> 
> This is not an exact science. Future rates of returns and the sequence of returns are unknown.
> 
> VPW might be low-balling you but it does a great job dealing with unknowns. It will give you a raise if future unfolds better than expected.


That’s very helpful...I’m comfortable with a 3 percent return...and maybe that does mean 50/50 but I’d calculate to age 90 not 99...given my health I’ll be fortunate to make it to 80...the boss, however, will make it to 90...also as u say there are things that can mitigate...inheritance etc...


----------



## james4beach

Bruins63 said:


> Thanks, if interest rates are set to rise, is it better to sit in cash for a minute, wait for the hike, and then move to a strong bond weighting?


No, but that's a common question (amazingly, daily someone in CMF makes an argument for waiting in cash or short term bonds until interest rates go higher). People have been saying this since 2010... this line of thinking is wrong.

As soon as you decide on your asset allocation, the fixed income portion should either be invested in a standard bond fund (XBB or VAB are two great ones) or in a 5 year GIC ladder. I think most people use a mix of both of these.

Waiting in cash until a rate hike is not a proper couch potato approach. Rather, it's an attempt to time the market (the bond market). Just as it's impossible to time the stock market, it's impossible to time the bond market. So the idea with passive investing or couch potato is that you just use a steady investment in stocks & bonds without attempting to time various things.

Bruins, take a look at this analysis I did of an ETF portfolio I had put together 10 years ago. I looked into why it did worse than some other mutual funds out there, and the answer is that I did worse because I stayed in cash 'while waiting for interest rates to rise'
http://canadianmoneyforum.com/showthread.php/124690-10-year-critique-of-ETF-portfolio


----------



## Bruins63

james4beach said:


> No, but that's a common question (amazingly, daily someone in CMF makes an argument for waiting in cash or short term bonds until interest rates go higher). People have been saying this since 2010... this line of thinking is wrong.
> 
> As soon as you decide on your asset allocation, the fixed income portion should either be invested in a standard bond fund (XBB or VAB are two great ones) or in a 5 year GIC ladder. I think most people use a mix of both of these.
> 
> Waiting in cash until a rate hike is not a proper couch potato approach. Rather, it's an attempt to time the market (the bond market). Just as it's impossible to time the stock market, it's impossible to time the bond market. So the idea with passive investing or couch potato is that you just use a steady investment in stocks & bonds without attempting to time various things.
> 
> Bruins, take a look at this analysis I did of an ETF portfolio I had put together 10 years ago. I looked into why it did worse than some other mutual funds out there, and the answer is that I did worse because I stayed in cash 'while waiting for interest rates to rise'
> http://canadianmoneyforum.com/showthread.php/124690-10-year-critique-of-ETF-portfolio


My gawd you know your stuff!! Question: 5 yr GIC ladder...if I go to a bank branch, it seems they are a bit negotiable or at least they have better rates than a direct investing option...as an example itrade rates were less than walking into a SB branch...it looks like a 5 yr ladder would deliver pretty close to an average of 2.75 percent...if someone took a million bucks to a bank branch as new biz, do u think they could land some fine unposted GIC rates, if they committed to a 5 year ladder?


----------



## Eder

28k return on a million invested in GIC's is about 280$/month after inflation. After tax it is about -$400/month and shrinking...pathetic.


----------



## GreatLaker

Bruins63 said:


> Question: 5 yr GIC ladder...if I go to a bank branch, it seems they are a bit negotiable or at least they have better rates than a direct investing option...as an example itrade rates were less than walking into a SB branch...it looks like a 5 yr ladder would deliver pretty close to an average of 2.75 percent...if someone took a million bucks to a bank branch as new biz, do u think they could land some fine unposted GIC rates, if they committed to a 5 year ladder?


Not if you want to stay within the CDIC $100k coverage limit. $1 million in GIC deposits would take 10 issuers.

I don't have access to Scotia iTrade GIC rates but you can see TDDI GIC rates here. You have to call them to purchase... can't be done online. TDDI's GIC rates are significantly better than bank branch rates, and they have about a dozen issuers. 
https://fibondoneselfserve.tdwaterhouse.ca/FIP_GICLinkWeb/GICLink?language=en

You can get better rates by opening accounts directly with online banks like Oaken or B2B or CWB. But all my GICs are in registered accounts, so I don't consider it worth it to chase rates by constantly having to do registered transfers between banks.

For GIC ladders, Finiki has a good explanation.
http://www.finiki.org/wiki/Fixed_income_ladder


----------



## Jimmy

Bruins63 said:


> Thanks, if interest rates are set to rise, is it better to sit in cash for a minute, wait for the hike, and then move to a strong bond weighting?


It wouldn't hurt to wait one or two years w the $ in a ST bond fund IMO. Yields are similar ~ only .4% less. XBB was hammered compared to the ST XSB, losing 1.77% vs .5% w the rise in interest rates in the last 3 months alone. Longer maturities - more risk. After that you can go couch potato .


----------



## james4beach

Jimmy said:


> It wouldn't hurt to wait one or two years w the $ in a ST bond fund IMO. Yields are similar ~ only .4% less. XBB was hammered compared to the ST XSB, losing 1.77% vs .5% w the rise in interest rates in the last 3 months alone. Longer maturities - more risk. After that you can go couch potato .





james4beach said:


> No, but that's a common question (amazingly, daily someone in CMF makes an argument for waiting in cash or short term bonds until interest rates go higher). People have been saying this since 2010... this line of thinking is wrong.


Correction to the above. I should have said: _several_ times daily.

And just for fun, here's the same argument being made back in 2013. This is bad advice, but I just want to show how people have been arguing this for many years:
https://www.theglobeandmail.com/glo...he-interest-rate-steamroller/article13940873/


----------



## GoldStone

Bruins63 said:


> My gawd you know your stuff!! Question: 5 yr GIC ladder...if I go to a bank branch, it seems they are a bit negotiable or at least they have better rates than a direct investing option...as an example itrade rates were less than walking into a SB branch...it looks like a 5 yr ladder would deliver pretty close to an average of 2.75 percent...if someone took a million bucks to a bank branch as new biz, do u think they could land some fine unposted GIC rates, if they committed to a 5 year ladder?


2.75% is nominal return. Assuming 2% inflation, real return after inflation is *0.75%*. Your adviser told you need *3%* real return to meet your retirement budget. GIC ladder isn't going to cut it.


----------



## GreatLaker

Jimmy said:


> It wouldn't hurt to wait one or two years w the $ in a ST bond fund IMO. Yields are similar ~ only .4% less. XBB was hammered compared to the ST XSB, losing 1.77% vs .5% w the rise in interest rates in the last 3 months alone. Longer maturities - more risk. After that you can go couch potato .


Yes, it could hurt. Nobody knows for sure, you may do better or worse in cash or a s/t bond fund.

A fundamental tenet of fixed income investing (that's investing as opposed to speculating on rate changes) is to match your fixed income duration with your timeline for using the funds. If your expected time to use the funds is ~8 years or longer then a universe bond fund like XBB, VAB, ZAG etc should be your choice. Shorter timeline for needing the money should be invested in short-term bonds. And a mix of both would be suitable for someone that will begin drawing funds now or soon, but expects to still be using them in a decade or more.

See this Canadian Couch Potato article: Holding Your Bond Fund for the Duration


----------



## Jimmy

james4beach said:


> Correction to the above. I should have said: _several_ times daily.
> 
> And just for fun, here's the same argument being made back in 2013. This is bad advice, but I just want to show how people have been arguing this for many years:
> https://www.theglobeandmail.com/glo...he-interest-rate-steamroller/article13940873/


You are free to view the % returns again. Advisers on BNN think otherwise too so there is no right and wrong here just opinion. Keep an eye on the charts, doubt XBB will beat XSB this year. if you don't care about the ST just dump $ into XBB but a little active mgmt would not hurt here. Anyway, not going to belabor this


----------



## Jimmy

GreatLaker said:


> Yes, it could hurt. Nobody knows for sure, you may do better or worse in cash or a s/t bond fund.
> 
> A fundamental tenet of fixed income investing (that's investing as opposed to speculating on rate changes) is to match your fixed income duration with your timeline for using the funds. If your expected time to use the funds is ~8 years or longer then a universe bond fund like XBB, VAB, ZAG etc should be your choice. Shorter timeline for needing the money should be invested in short-term bonds. And a mix of both would be suitable for someone that will begin drawing funds now or soon, but expects to still be using them in a decade or more.
> 
> See this Canadian Couch Potato article: Holding Your Bond Fund for the Duration


XBB lost 1% more than XSH already in the last 3 months. It is going to be a lousy yr for XBB. Rates are likely going to continue rising so it isn't a bad move to go ST. There is a reason advisers on BNN are recommending ST bond funds for the ST and Bruins asked about it.


----------



## Bruins63

GoldStone said:


> 2.75% is nominal return. Assuming 2% inflation, real return after inflation is *0.75%*. Your adviser told you need *3%* real return to meet your retirement budget. GIC ladder isn't going to cut it.


Thanks, so I’ve been thinking about this 3 percent real return from my advisor...what I know is my advisor forecasted that with 3 percent return, and allowing for 2 percent inflation annually, in the calculations, there would be enuf $$ there until age 90...does that not mean if I could get a 3 percent GIC, for sake of discussion for the next 30 years, that would meet my advisors forecast?


----------



## GoldStone

Bruins63 said:


> Thanks, so I’ve been thinking about this 3 percent real return from my advisor...what I know is my advisor forecasted that with 3 percent return, and allowing for 2 percent inflation annually, in the calculations, there would be enuf $$ there until age 90...does that not mean if I could get a 3 percent GIC, for sake of discussion for the next 30 years, that would meet my advisors forecast?


Quoted GIC rates are nominal rates. In other words, they are rates of return before inflation. Assuming 2% inflation annually, 3% GIC has a real rate of return of 1% after inflation. To earn 3% real rate of return in a world of 2% inflation, you need to own 5% GIC.

You wrote:

_"what I know is my advisor forecasted that with 3 percent return, *and allowing for 2 percent inflation annually*, in the calculations, there would be enuf $$ there until age 90."_

What does "allowing for 2 percent" really mean? Does it mean that you need to earn 3% real rate after 2% inflation? Or, does it mean that you need to earn 3% nominal rate before 2% inflation? I am guessing it's the former, but I can't say for sure because I haven't seen your advisor calculations.


----------



## GreatLaker

GoldStone said:


> What does "allowing for 2 percent" really mean? Does it mean that you need to earn 3% real rate after 2% inflation? Or, does it mean that you need to earn 3% nominal rate before 2% inflation? I am guessing it's the former, but I can't say for sure because I haven't seen your advisor calculations.


Agree with you GoldStone. OP stated that the adviser managed portfolio was 78% equities. For that asset allocation planning for 5% nominal / 3% real return is more plausible than 3% nominal.

Bruins did the adviser provide a written plan with stated assumptions for things like investment return, inflation, spending & lifespan along with tables for annual net worth and cashflow? These are million dollar decisions (literally) that are critical to a well funded retirement.


----------



## Bruins63

GreatLaker said:


> Agree with you GoldStone. OP stated that the adviser managed portfolio was 78% equities. For that asset allocation planning for 5% nominal / 3% real return is more plausible than 3% nominal.
> 
> Bruins did the adviser provide a written plan with stated assumptions for things like investment return, inflation, spending & lifespan along with tables for annual net worth and cashflow? These are million dollar decisions (literally) that are critical to a well funded retirement.


I think u r both right...3 percent real return...that is to say I have to earn 3 percent, after accounting for inflation...so I guess that’s really saying I need to earn 5 percent, as both of u have mentioned...my advisor provided a year by year cash flow sheet, with in’s and out’s...


----------



## cainvest

Bruins63 said:


> I think u r both right...3 percent real return...that is to say I have to earn 3 percent, after accounting for inflation...so I guess that’s really saying I need to earn 5 percent, as both of u have mentioned...my advisor provided a year by year cash flow sheet, with in’s and out’s...


So now you need a portfolio (assuming other options mentioned previously are not on the table) that will generate 5% or 3% above inflation. No longer having the advisor fees dipping into that should help some.


----------



## latebuyer

Just a cautionary tale on holding 100% equities. My grandma held 100% equities throughout her retirement and did quite well. But then right before she died there was a 100,000 drop and no time for the money to recover because everything had to be sold. I'm just glad her money lasted for her to live on but I would say if you want to leave money to your heirs dial the equities back a bit.

Sorry I think I should have posted this in sequence of returns risk.


----------



## Bruins63

cainvest said:


> So now you need a portfolio (assuming other options mentioned previously are not on the table) that will generate 5% or 3% above inflation. No longer having the advisor fees dipping into that should help some.


Folks, I did send my advisor a note to see if the 3 percent was real or nominal...I’m waiting to hear...I wonder if this is any more clear...? in the projections, if they are based on a drawdown of $50k/yr, starting this year, in year 35, the equivalent of the $50k, is then $80k (for sake of discussion), as 2 percent inflation was taken into account over the 35 years so the $80k has the same buying power as the original $50k...all along the annual return was 3 percent...with that info, is it anymore clear if the 3 percent is real or nominal?


----------



## OnlyMyOpinion

No, I don't think $50k to $80k in 35 years tells us anything about the assumed portfolio return.
As an aside, if I inflate $50k at 2% for 35 years I get $99,994, not $80k.
$80k is reached around year 25.
An inflation rate of 1.35% will get you $80k in 35 years.


----------



## Bruins63

OnlyMyOpinion said:


> No, I don't think $50k to $80k in 35 years tells us anything about the assumed portfolio return.
> As an aside, if I inflate $50k at 2% for 35 years I get $99,994, not $80k.
> $80k is reached around year 25.
> An inflation rate of 1.35% will get you $80k in 35 years.


Thanks, that’s why I said “for sake of discussion”...The $80k is directional only as I don’t have the exact number beside me...the assumed return is 3 percent per year...


----------



## GoldStone

At this point, I would ignore the required rate of return quoted by the (former?) advisor. We don't know how he arrived at the number, what assumptions he made, what withdrawal model he used, etc etc.

I can run VPW backtests for you but I need to know a few numbers:

- age at retirement
- life expectancy for you and the boss. Or just a general assessment: poor health, average health, great health.
- portfolio size at retirement ($1M?)
- expected CPP/OAS for you and the boss
- any pensions?
- spending budget in retirement ($55K?)

With these inputs and a few runs in VPW, it should be possible to figure out the safest allocation that can meet your spending requirements.


----------



## Bruins63

GoldStone said:


> At this point, I would ignore the required rate of return quoted by the (former?) advisor. We don't know how he arrived at the number, what assumptions he made, what withdrawal model he used, etc etc.
> 
> I can run VPW backtests for you but I need to know a few numbers:
> 
> - age at retirement
> - life expectancy for you and the boss. Or just a general assessment: poor health, average health, great health.
> - portfolio size at retirement ($1M?)
> - expected CPP/OAS for you and the boss
> - any pensions?
> - spending budget in retirement ($55K?)
> 
> With these inputs and a few runs in VPW, it should be possible to figure out the safest allocation that can meet your spending requirements.


Very much appreciate the help! Juuuust not ready to go there yet...all I’m really trying to figure out in my simple (stupid) mind is if my 3 percent annual growth included inflation or not...I’m now kinda thinking the best route for me is perhaps 50 percent GIC ladder/50 percent blu chip solid divvy paying equities...yes I know I just sold a bunch off, but I think for equities I would wait for a real buying opportunity which I believe is coming sooner than later...


----------



## Bruins63

GoldStone said:


> At this point, I would ignore the required rate of return quoted by the (former?) advisor. We don't know how he arrived at the number, what assumptions he made, what withdrawal model he used, etc etc.
> 
> I can run VPW backtests for you but I need to know a few numbers:
> 
> - age at retirement
> - life expectancy for you and the boss. Or just a general assessment: poor health, average health, great health.
> - portfolio size at retirement ($1M?)
> - expected CPP/OAS for you and the boss
> - any pensions?
> - spending budget in retirement ($55K?)
> 
> With these inputs and a few runs in VPW, it should be possible to figure out the safest allocation that can meet your spending requirements.


Actually, u know what, let’s go there...use age 55 for retirement, run it until age 85, use $1M all RRSP, cpp $800 for me, none for her, no pensions, use net $3500/mth for spending budget...sorry to change my mind as you are being very helpful!!


----------



## GoldStone

Okay, but this might take some time. The last thing I want to do is give you inaccurate information.

Max OAS for both?


----------



## cainvest

Bruins63 said:


> Actually, u know what, let’s go there...use age 55 for retirement, run it until age 85, use $1M all RRSP, cpp $800 for me, none for her, no pensions, use net $3500/mth for spending budget...sorry to change my mind as you are being very helpful!!


My quick estimate, a 4% return is required, broke at 85. Of course I made a number of assumptions as well.


----------



## Bruins63

GoldStone said:


> Okay, but this might take some time. The last thing I want to do is give you inaccurate information.
> 
> Max OAS for both?


Sorry, don’t have the max OAS, can u make an assumption?


----------



## Bruins63

cainvest said:


> My quick estimate, a 4% return is required, broke at 85. Of course I made a number of assumptions as well.


Thanks, Yup, sounds about right...no kids etc, so no one to leave any inheritance too...when u say 4 percent, is that real or nominal?


----------



## GoldStone

Bruins63 said:


> Sorry, don’t have the max OAS, can u make an assumption?


Will you have less than 40 years of Canadian residency when you reach 65? Let me know how many for each of you.

I can't make an assumption otherwise. It can be 10 years or 39 years or anything in between.


----------



## Bruins63

GoldStone said:


> Will you have less than 40 years of Canadian residency when you reach 65? Let me know how many for each of you.
> 
> I can't make an assumption otherwise. It can be 10 years or 39 years or anything in between.


Both of us are 55, born in Canada


----------



## GoldStone

Then you should get full OAS at 65. Why do you think you won't?


----------



## OnlyMyOpinion

Bruins63 said:


> ...when u say 4 percent, is that real or nominal?


Ah see. Now you are catching the best of them with your own salient questions! :applouse:


----------



## Bruins63

GoldStone said:


> Then you should get full OAS at 65. Why do you think you won't?


Sorry, was generally confused, all good


----------



## cainvest

Bruins63 said:


> Thanks, Yup, sounds about right...no kids etc, so no one to leave any inheritance too...when u say 4 percent, is that real or nominal?


My 4% estimate is a nominal value. 
This could be a bit off, didn't include second OAS, had CPP/OAS taken at 65, inflation fixed at 2% and doesn't account for your exact tax figures. I'm also not a financial planner, just someone with a spreadsheet, so keep that in mind.


----------



## Bruins63

cainvest said:


> My 4% estimate is a nominal value.
> This could be a bit off, didn't include second OAS, had CPP/OAS taken at 65, inflation fixed at 2% and doesn't account for your exact tax figures. I'm also not a financial planner, just someone with a spreadsheet, so keep that in mind.


Fully understand and very much appreciate the help!


----------



## GoldStone

Here you go.

Assumptions:

1. Retire at 55.
2. Take CPP and OAS at 65.
3. CPP: $800/month = $9,600/year.
4. OAS: $586.66/month for both = $14,128/year total.
5. Portfolio: $1M

First, let's deal with OAS and CPP. Total amount at 65:

$9,600 + $14,128 = $23,728/year

You have a funding gap between 55 and 65 where you don't get OAS/CPP. That's 10 years. To fill this gap, I am going to put aside a lump sum:

$23,728 * 10 = $237,728

The idea is to completely consume this lump between 55 and 65 at a clip of $23,728 per year. This income supplements the portfolio income until OAS and CPP kick in at age 65. You can invest the lump sum in GICs and get a bit of extra interest income. I'm going to ignore this extra interest income to keep things simple. 

Taking the lump sum out, you are left with:

$1,000,000 - $237,728 = $762,272

I used this amount to run VPW calculations for different combinations of:

- expected returns
- asset allocations
- last withdrawal age

This is what I got. The dollar amounts shown is suggested withdrawal at age 55:










Notes:

1. The dollar amounts shown are not your total income. 

From 55 to 65, you would supplement the shown amounts with $23,728/year from the lump sum set aside.
After 65, you would supplement them with OAS/CPP (also $23,728/year).

For example, look at the cell F8:

- expected returns: 4.5% stocks / 1.4% fixed income
- asset allocation: 50/50
- suggested withdrawal at 55: $36,589
- actual total income: $36,589 + $23,728 = $60,317

2. The amounts shown in the table are before tax. I don't know how your RRSPs are split between the two of you. Use taxtips.ca to estimate your after-tax income.

3. VPW method adjusts your income up or down depending on actual returns. The suggested withdrawal at age 55 is an estimate of what you can expect on average.

4. This plan has a neat feature. Your actual asset allocation between 55 and 65 is more conservative than shown in the table above. That's because we have a lump sum set aside and it's not taken into account in the shown allocations. This plan reduces the sequence of returns risk in the first decade of retirement. Which happens to be the most impactful decade in terms of SoR.


*DISCLAIMER*: I am not a licensed advisor. Nothing that I've written here should be taken as advice. While I tried to be careful with the numbers, I can't guarantee that I haven't made any mistakes. I strongly recommend that you learn to use the spreadsheet and verify the numbers yourself.


----------



## Bruins63

GoldStone said:


> Here you go.
> 
> Assumptions:
> 
> 1. Retire at 55.
> 2. Take CPP and OAS at 65.
> 3. CPP: $800/month = $9,600/year.
> 4. OAS: $586.66/month for both = $14,128/year total.
> 5. Portfolio: $1M
> 
> First, let's deal with OAS and CPP. Total amount at 65:
> 
> $9,600 + $14,128 = $23,728/year
> 
> You have a funding gap between 55 and 65 where you don't get OAS/CPP. That's 10 years. To fill this gap, I am going to put aside a lump sum:
> 
> $23,728 * 10 = $237,728
> 
> The idea is to completely consume this lump between 55 and 65 at a clip of $23,728 per year. This income supplements the portfolio income until OAS and CPP kick in at age 65. You can invest the lump sum in GICs and get a bit of extra interest income. I'm going to ignore this extra interest income to keep things simple.
> 
> Taking the lump sum out, you are left with:
> 
> $1,000,000 - $237,728 = $762,272
> 
> I used this amount to run VPW calculations for different combinations of:
> 
> - expected returns
> - asset allocations
> - last withdrawal age
> 
> This is what I got. The dollar amounts shown is suggested withdrawal at age 55:
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> Notes:
> 
> 1. The dollar amounts shown are not your total income.
> 
> From 55 to 65, you would supplement the shown amounts with $23,728/year from the lump sum set aside.
> After 65, you would supplement them with OAS/CPP (also $23,728/year).
> 
> For example, look at the cell F8:
> 
> - expected returns: 4.5% stocks / 1.4% fixed income
> - asset allocation: 50/50
> - suggested withdrawal at 55: $36,589
> - actual total income: $36,589 + $23,728 = $60,317
> 
> 2. The amounts shown in the table are before tax. I don't know how your RRSPs are split between the two of you. Use taxtips.ca to estimate your after-tax income.
> 
> 3. VPW method adjusts your income up or down depending on actual returns. The suggested withdrawal at age 55 is an estimate of what you can expect on average.
> 
> 4. This plan has a neat feature. Your actual asset allocation between 55 and 65 is more conservative than shown in the table above. That's because we have a lump sum set aside and it's not taken into account in the shown allocations. This plan reduces the sequence of returns risk in the first decade of retirement. Which happens to be the most impactful decade in terms of SoR.
> 
> 
> *DISCLAIMER*: I am not a licensed advisor. Nothing that I've written here should be taken as advice. While I tried to be careful with the numbers, I can't guarantee that I haven't made any mistakes. I strongly recommend that you learn to use the spreadsheet and verify the numbers yourself.


WOW, thank you VERY much! At a minimum until age 85 at a 30/70, the return required is 5 percent...Im getting confused on real vs nominal...im assuming the calcs u ran take inflation into account...is the 5 percent after inflation meaning a total of 5 percent return or before inflation, meaning a total of 7 percent return required...again, hugely appreciated!


----------



## GoldStone

Bruins63 said:


> At a minimum until age 85 at a 30/70, the return required is 5 percent...


Just to make sure we are on the same page.... can you explain why?

I am looking at cell D9. 5%/1.8% & 30/70. The suggested withdrawal is $35,827. Add $23,728 in OAS/CPP. Total pretax income: $59,555.

Are you saying that this is your minimum required income?




Bruins63 said:


> Im getting confused on real vs nominal...im assuming the calcs u ran take inflation into account...is the 5 percent after inflation meaning a total of 5 percent return or before inflation, meaning a total of 7 percent return required...again, hugely appreciated!


The returns are real. 5% after inflation for stocks, 7% before inflation. The suggested initial withdrawal will be adjusted for inflation going forward, *if* actual real returns match the expected real returns set in the spreadsheet.

BTW, let me repeat this:

If you pick 30/70, your actual allocation will be even more conservative. Because of the lump sum set aside.

lump sum: $237,728
fixed income in the main portfolio: $762,272 * 70% = $533,590
total fixed income at 55: $771,318 or *77%* of the total $1M.


----------



## GoldStone

One more thing, just to make sure there is no confusion.

Cell D9

Stocks: 5% real
Fixed income: 1.8% real
Asset allocation: 30/70

Expected rate of return for the main portfolio: 5% * 0.3 + 1.8% * 0.7 = 2.76% real

That's not far from what your advisor quoted.


----------



## Bruins63

GoldStone said:


> One more thing, just to make sure there is no confusion.
> 
> Cell D9
> 
> Stocks: 5% real
> Fixed income: 1.8% real
> Asset allocation: 30/70
> 
> Expected rate of return for the main portfolio: 5% * 0.3 + 1.8% * 0.7 = 2.76% real
> 
> That's not far from what your advisor quoted.


Perfect, we are on the same page! Thanks for simplifying for me with the math above...! Cell d7, only 1.9 percent real return required!  Is it possible to run 1 final book end for me? Sorry to ask and can even be anytime next week...the book end would be $850k, same parameters as above...sorry to ask...if it’s toooo much work, just tell me to pound sand...you have already gone above and beyond...with both bookends I can make a very informed decision...thanks again...


----------



## GoldStone

You mean, $850K total portfolio instead of $1M?


----------



## Bruins63

GoldStone said:


> You mean, $850K total portfolio instead of $1M?


Correct, sorry not to be clear...hopefully I’m understanding properly...cell d7, only 1.9 percent real return required


----------



## GoldStone

Bruins63 said:


> Correct, sorry not to be clear...hopefully I’m understanding properly...cell d7, only 1.9 percent real return required


Correct.

BTW, using GICs for fixed income is unlikely to give you 1.8% real. Not at today's rates. I would use 1% real for GICs. 3% nominal minus 2% inflation. 5% real for equities is also kinda aggressive. It assumes that future returns will be as good as past returns. That seems doubtful for many different reasons that I'm not going to get into.

Here's what might happen if you set your return expectations too high:

1. You pick 30/70 allocation that gives you your minimum required income at 5% / 1.8%.
2. Actual returns come in lower. Say, 4% / 1%.
3. VPW dials down your suggested withdrawal.
4. You are forced to tighten the belt.

Suppose you set a more conservative return expectation: 4% stocks / 1% GICs.

1. You would need to pick 60/40 to have the same income ($35,827 + $23,728). Note that your actual allocation is more conservative because of the lump sum between 55 and 65.
2. Actual returns come in exactly as expected: 4% / 1%.
3. You get your expected income.
4. There is no need to adjust the budget.

That's the trade-off. Sleep well or eat well.


----------



## GoldStone

For $850K, you would need to set aside the same lump sum to fill the gap between 55 and 65.

lump sum 55-65: $237,728

You are left with: $850,000 - $237,728 = $612,272
At $1M, you were left with: $762,272

612,272 / 762,272 = 0.8032

Take the suggested withdrawals at $1M. Multiply them by 0.8032. You will get your suggested withdrawals for $850K.

For example, cell D7:

$32,015 at $1M * 0.8032 = $25,715 at $850K

Plus the same $23,728 from OAS/CPP.


----------



## Bruins63

GoldStone said:


> Correct.
> 
> BTW, using GICs for fixed income is unlikely to give you 1.8% real. Not at today's rates. I would use 1% real for GICs. 3% nominal minus 2% inflation. 5% real for equities is also kinda aggressive. It assumes that future returns will be as good as past returns. That seems doubtful for many different reasons that I'm not going to get into.
> 
> Here's what might happen if you set your return expectations too high:
> 
> 1. You pick 30/70 allocation that gives you your minimum required income at 5% / 1.8%.
> 2. Actual returns come in lower. Say, 4% / 1%.
> 3. VPW dials down your suggested withdrawal.
> 4. You are forced to tighten the belt.
> 
> Suppose you set a more conservative return expectation: 4% stocks / 1% GICs.
> 
> 1. You would need to pick 60/40 to have the same income ($35,827 + $23,728). Note that your actual allocation is more conservative because of the lump sum between 55 and 65.
> 2. Actual returns come in exactly as expected: 4% / 1%.
> 3. You get your expected income.
> 4. There is no need to adjust the budget.
> 
> That's the trade-off. Sleep well or eat well.


Got ya, I’m now understanding how this works...thank-you


----------



## Bruins63

GoldStone said:


> For $850K, you would need to set aside the same lump sum to fill the gap between 55 and 65.
> 
> lump sum 55-65: $237,728
> 
> You are left with: $850,000 - $237,728 = $612,272
> At $1M, you were left with: $762,272
> 
> 612,272 / 762,272 = 0.8032
> 
> Take the suggested withdrawals at $1M. Multiply them by 0.8032. You will get your suggested withdrawals for $850K.
> 
> For example, cell D7:
> 
> $32,015 at $1M * 0.8032 = $25,715 at $850K
> 
> Plus the same $23,728 from OAS/CPP.


Got ya, essentially 80 percent...wow, thanks big time!!!! Now I have something to work with...at the end of the day, for the risk adverse, it comes down to either 1) increasing the capital 2) reducing the expense 3) 1+2 

So, anywhere between $850k->$1M gives me ~$50-$60k annually to work with with some fairly low expectations for returns...I need to review the numbers but perhaps a 50/50 allocation makes sense...like I said, now I have something to work from, thanks again

Now this gets interesting, if at a minimum I need a 2 percent real return, I could just buy CDN blue chip divvys with an average 4 percent divvy and be done...ie. BCE, Enbridge, TransCanada, CIBC, Scotiabank etc...Maybe my advisor was right after all :surprise: hard to believe these blu chips will be less in 30years and with a 4 percent divvy, who cares what the stock does over in the interim, within reason...


----------



## Dilbert

Bruins63 said:


> Got ya, essentially 80 percent...wow, thanks big time!!!! Now I have something to work with...at the end of the day, for the risk adverse, it comes down to either 1) increasing the capital 2) reducing the expense 3) 1+2
> 
> So, anywhere between $850k->$1M gives me ~$50-$60k annually to work with with some fairly low expectations for returns...I need to review the numbers but perhaps a 50/50 allocation makes sense...like I said, now I have something to work from, thanks again
> 
> Now this gets interesting, if at a minimum I need a 2 percent real return, I could just buy CDN blue chip divvys with an average 4 percent divvy and be done...ie. BCE, Enbridge, TransCanada, CIBC, Scotiabank etc...Maybe my advisor was right after all :surprise: hard to believe these blu chips will be less in 30years and with a 4 percent divvy, who cares what the stock does over in the interim, within reason...


My sentiments exactly.:soap:


----------



## Eder

Bruins63 said:


> Now this gets interesting, if at a minimum I need a 2 percent real return, I could just buy CDN blue chip divvys with an average 4 percent divvy and be done...ie. BCE, Enbridge, TransCanada, CIBC, Scotiabank etc...Maybe my advisor was right after all :surprise: hard to believe these blu chips will be less in 30years and with a 4 percent divvy, who cares what the stock does over in the interim, within reason...


Yes, I think you got some poor advice here earlier and you sold your portfolio at a discount.

http://www.greaterfool.ca/2018/02/17/why-60-40/


----------



## Bruins63

Eder said:


> Yes, I think you got some poor advice here earlier and you sold your portfolio at a discount.
> 
> http://www.greaterfool.ca/2018/02/17/why-60-40/


Well, I’m not looking back, I was able to monetize some nice returns, I didn’t sell at the high but I didn’t sell at the low...in 32 months of being invested, at the high I made 22 percent. I sold at 17 percent gains, so as I said, not looking back...going to concentrate on how to properly structure go forward, with the tremendous insights this forum is providing...I still have 30 years of being invested in front of me, so it’s important I stand back, understand, and take a look...I will make back the 5 percent loss I just went through, easy, peasy...thanks to all


----------



## OnlyMyOpinion

Yes, and as I recall you were paying your advisor $1000/month = $12,000/yr.
On a go-forward-basis, make sure you keep an eye on your costs - MER's, account fees, advisor fees.
It wasn't too many years ago that having a DIY, simple low-cost etf / GIC ladder portfolio in a no-fee account, with abundant, informative on-line resources was not even an option. Today it is.


----------



## Bruins63

OnlyMyOpinion said:


> Yes, and as I recall you were paying your advisor $1000/month = $12,000/yr.
> On a go-forward-basis, make sure you keep an eye on your costs - MER's, account fees, advisor fees.
> It wasn't too many years ago that having a DIY, simple low-cost etf / GIC ladder portfolio in a no-fee account, with abundant, informative on-line resources was not even an option. Today it is.


You hit the nail on the head! Thank-you!


----------



## GoldStone

I agree with Eder, you got some poor advice here earlier. Peter Lynch (legendary US fund manager) said once that the real key to making money in stocks is not to get scared out of them. Unfortunately, you allowed yourself to get scared by certain posters.

CMF is a good place to bounce ideas but to state the obvious, it's an anonymous internet forum. There is a wide range of opinions here. We all have our biases. Some people are extremely biased. Be skeptical about anything you read here, no matter how knowledgeable a person sounds. That includes myself of course. You should be especially skeptical if someone pushes specific advice. Personally, I like sharing knowledge but do my best to steer clear from telling others what specifically they have to do.

Going forward, there is no such thing as a perfect plan. There are pros and cons to every option. Pick a reasonable plan that you will be able to execute. It's better than a "perfect" plan that you will eventually abandon at a bad moment. It's a platitude but it's true.


----------



## OptsyEagle

Eder said:


> Yes, I think you got some poor advice here earlier and you sold your portfolio at a discount.
> 
> http://www.greaterfool.ca/2018/02/17/why-60-40/


Perhaps for you it would have been poor advice, but for Bruin it was not the case. In your case, I don't remember you coming here, after the correction started, with all kinds of fear and concern about your portfolio. Staying invested may be the correct decision for you. Bruin, however, was posting post after post, which undoubtedly indicated that if he didn't sell now, he would definitely sell if it went a lot lower. The fact that the market didn't go lower, yet, is irrelevant and all hindsight based. 

His portfolio was not inline with his risk tolerance and to continue on that path would have been fool hardy.

My only concern now is he seems to want to beat to death fairly irrelevant points. What portfolio may or may not provide some level of return that may or may not be above inflation, is not really the point. What he should be looking at, is what portfolio is in line with his risk tolerance and from there take his estimates of return and work backwards.

Just because he thinks he needs a certain level of income, does not mean that he can have it. In my opinion, he should find out what he can have (the return on a portfolio that meets his risk tolerance) and then figure out how much income he can possibly get from that, and then decide when he should retire or how he should budget his retirement expenses, with that income level in mind.


----------



## Bruins63

GoldStone said:


> I agree with Eder, you got some poor advice here earlier. Peter Lynch (legendary US fund manager) said once that the real key to making money in stocks is not to get scared out of them. Unfortunately, you allowed yourself to get scared by certain posters.
> 
> CMF is a good place to bounce ideas but to state the obvious, it's an anonymous internet forum. There is a wide range of opinions here. We all have our biases. Some people are extremely biased. Be skeptical about anything you read here, no matter how knowledgeable a person sounds. That includes myself of course. You should be especially skeptical if someone pushes specific advice. Personally, I like sharing knowledge but do my best to steer clear from telling others what specifically they have to do.
> 
> Going forward, there is no such thing as a perfect plan. There are pros and cons to every option. Pick a reasonable plan that you will be able to execute. It's better than a "perfect" plan that you will eventually abandon at a bad moment. It's a platitude but it's true.


Thank you...the $$ I didn’t make because I sold below my high, I will re coup in 36 months, based on no more fees alone...not a bad lesson to learn for so few $$, in the grand scheme of things...at the end of the day, I’m still not comfortable with an 80/20 portfolio, so a change was required, regardless...absolutely appreciate the financial models you ran...i need somewhere between a 4-6 percent real return, which will require a combination of stocks and bonds...I’m not sure what the market will do go forward here for this year, but I’m just going to set up some direct investing accounts and stay ready, no rush, the money is in a cash account...thanks again...


----------



## Bruins63

OptsyEagle said:


> Perhaps for you it would have been poor advice, but for Bruin it was not the case. In your case, I don't remember you coming here, after the correction started, with all kinds of fear and concern about your portfolio. Staying invested may be the correct decision for you. Bruin, however, was posting post after post, which undoubtedly indicated that if he didn't sell now, he would definitely sell if it went a lot lower. The fact that the market didn't go lower, yet, is irrelevant and all hindsight based.
> 
> His portfolio was not inline with his risk tolerance and to continue on that path would have been fool hardy.
> 
> My only concern now is he seems to want to beat to death fairly irrelevant points. What portfolio may or may not provide some level of return that may or may not be above inflation, is not really the point. What he should be looking at, is what portfolio is in line with his risk tolerance and from there take his estimates of return and work backwards.
> 
> Just because he thinks he needs a certain level of income, does not mean that he can have it. In my opinion, he should find out what he can have (the return on a portfolio that meets his risk tolerance) and then figure out how much income he can possibly get from that, and then decide when he should retire or how he should budget his retirement expenses, with that income level in mind.


You are correct, if it would have tanked another 5 percent, I definitely would have bailed with even more losses! Yes u r correct, I NEED to better understand my risk tolerance and then build a plan around it...


----------



## OptsyEagle

GoldStone said:


> I agree with Eder, you got some poor advice here earlier. Peter Lynch (legendary US fund manager) said once that the real key to making money in stocks is not to get scared out of them. Unfortunately, you allowed yourself to get scared by certain posters.


You guys really don't get it. If you look back at my posts, I don't believe I ever mentioned much about losses or past drawdowns, etc. It was all based on helping the guy find the portfolio that is within his risk tolerance. To suggest anything else is poor advice. Who cares what Peter Lynch would have done?

Let's not confuse what you do with what he should do. Maybe after a few stock market cycles he will build up a knowledge to allow him to utilize a more aggressive portfolio, but until then, a more aggressive portfolio will cause higher losses, whenever that portfolio eventually nosedives. The fact that he should sit through the volatility has no value if he doesn't...and it was quite obvious to me, that if he had the kind of concerns about his portfolio during this small correction, when most people were still pretty optimistic, what kind of concerns is he going to have when real negative pessimism becomes the lead story of the day...day after day, because someday in the future it will.


----------



## GoldStone

OptsyEagle, just for the record, I don't have any problems with the advice you gave to OP. You are one of the most level-headed, rational posters around here. I highly respect your opinion. 

My #214 was about perma-gloom-and-doom types. Anyway, enough about that.


----------



## GoldStone

Bruins63 said:


> Thank you...the $$ I didn’t make because I sold below my high, I will re coup in 36 months, based on no more fees alone...not a bad lesson to learn for so few $$, in the grand scheme of things...at the end of the day, I’m still not comfortable with an 80/20 portfolio, so a change was required, regardless...absolutely appreciate the financial models you ran...i need somewhere *between a 4-6 percent real return*, which will require a combination of stocks and bonds...I’m not sure what the market will do go forward here for this year, but I’m just going to set up some direct investing accounts and stay ready, no rush, the money is in a cash account...thanks again...


I think you mean 4-6 nominal (2-4 real). 

The table in my #198 ranges from 1.9% real in the upper left corner to 3.7% real in the bottom right corner. The entire range of incomes seems to be close to what you need.


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## Bruins63

GoldStone said:


> I think you mean 4-6 nominal (2-4 real).
> 
> The table in my #198 ranges from 1.9% real in the upper left corner to 3.7% real in the bottom right corner. The entire range of incomes seems to be close to what you need.


Yes, sorry, I did mean nominal...Im always going to think nominal because that is what has to be achieved...thanks for the correction...


----------



## Bruins63

OptsyEagle said:


> You guys really don't get it. If you look back at my posts, I don't believe I ever mentioned much about losses or past drawdowns, etc. It was all based on helping the guy find the portfolio that is within his risk tolerance. To suggest anything else is poor advice. Who cares what Peter Lynch would have done?
> 
> Let's not confuse what you do with what he should do. Maybe after a few stock market cycles he will build up a knowledge to allow him to utilize a more aggressive portfolio, but until then, a more aggressive portfolio will cause higher losses, whenever that portfolio eventually nosedives. The fact that he should sit through the volatility has no value if he doesn't...and it was quite obvious to me, that if he had the kind of concerns about his portfolio during this small correction, when most people were still pretty optimistic, what kind of concerns is he going to have when real negative pessimism becomes the lead story of the day...day after day, because someday in the future it will.


500 percent correct Sir...thanks


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## Bruins63

GoldStone said:


> I think you mean 4-6 nominal (2-4 real).
> 
> The table in my #198 ranges from 1.9% real in the upper left corner to 3.7% real in the bottom right corner. The entire range of incomes seems to be close to what you need.


I’m going take my time and think about this but “thinking” 50/50...if I need at a minimum 4 percent nominal return, 3 percent from GIC’s, 5 percent from CDN blu chip divvys...that way I’ll be able to stomach a down turn in equities...again, I may take a couple months hoping for a bit of a down turn and perhaps divvy yields rise in the meantime...thanks to yours and everyone’s help I much better understand this...it may have the same outcome as my advisor had me in, but I now understand it much better and much more unlikely to shy away now that I understand the logistics and my tolerance level...good lessons learned


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## GreatLaker

Bruins63 said:


> Well, I’m not looking back, I was able to monetize some nice returns, I didn’t sell at the high but I didn’t sell at the low...in 32 months of being invested, at the high I made 22 percent. I sold at 17 percent gains, so as I said, not looking back...going to concentrate on how to properly structure go forward, with the tremendous insights this forum is providing...I still have 30 years of being invested in front of me, so it’s important I stand back, understand, and take a look...I will make back the 5 percent loss I just went through, easy, peasy...thanks to all


Looking back can be useful if you use it as a lesson for what works and what doesn't and how to avoid making the same mistakes again.

This is a good time to look again at the fundamentals, pick an asset allocation you think you can live with, decide on an investing strategy and develop a plan that is documented in an investment policy statement.
http://www.finiki.org/wiki/Getting_started
http://www.finiki.org/wiki/Creating_a_financial_plan
http://www.finiki.org/wiki/Investment_policy_statement
http://www.finiki.org/wiki/Portfolio_design_and_construction
http://www.finiki.org/wiki/Recommended_reading




> I may take a couple months hoping for a bit of a down turn and perhaps divvy yields rise in the meantime


After 23 pages of discussion, you still think you can time the market. If the market goes up in those couple of months will you hold out another couple of months hoping for an even bigger bit of a downturn? If we get a bear market and it drops 20% (not at all unusual) will you wait some more with your cash being eroded by inflation for the market to get back to normal?:stupid:


----------



## Eder

My remark about poor advice is only my opinion and apologize if any take it disparagingly. 

I'm pretty sure we all know the truth of the adage "Its time in the market not timing the market" and I would encourage Bruins to get back in ASAP, 20% corrections et all.


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## Bruins63

GreatLaker said:


> Looking back can be useful if you use it as a lesson for what works and what doesn't and how to avoid making the same mistakes again.
> 
> This is a good time to look again at the fundamentals, pick an asset allocation you think you can live with, decide on an investing strategy and develop a plan that is documented in an investment policy statement.
> http://www.finiki.org/wiki/Getting_started
> http://www.finiki.org/wiki/Creating_a_financial_plan
> http://www.finiki.org/wiki/Investment_policy_statement
> http://www.finiki.org/wiki/Portfolio_design_and_construction
> http://www.finiki.org/wiki/Recommended_reading
> 
> 
> 
> After 23 pages of discussion, you still think you can time the market. If the market goes up in those couple of months will you hold out another couple of months hoping for an even bigger bit of a downturn? If we get a bear market and it drops 20% (not at all unusual) will you wait some more with your cash being eroded by inflation for the market to get back to normal?:stupid:


Thank you...I think half my point was, that I didn’t articulate properly was, I may just study a bit more before jumping in as I am in no rush...appreciate the links...


----------



## Bruins63

Eder said:


> My remark about poor advice is only my opinion and apologize if any take it disparagingly.
> 
> I'm pretty sure we all know the truth of the adage "Its time in the market not timing the market" and I would encourage Bruins to get back in ASAP, 20% corrections et all.


Thanks, no offence taken here...I’m still feelin pretty good :smile-new:


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## Bruins63

Bruins63 said:


> Folks, I did send my advisor a note to see if the 3 percent was real or nominal...I’m waiting to hear...I wonder if this is any more clear...? in the projections, if they are based on a drawdown of $50k/yr, starting this year, in year 35, the equivalent of the $50k, is then $80k (for sake of discussion), as 2 percent inflation was taken into account over the 35 years so the $80k has the same buying power as the original $50k...all along the annual return was 3 percent...with that info, is it anymore clear if the 3 percent is real or nominal?


Folks...I did hear back from my advisor...as I’ve stated they have been extremely professional thru this transition...here is their response:

“When we make projections we use a rate of return that will grow assets at that rate. We also input the inflation rate which will inflate the income needed over time so, no you don't add the two numbers. What you see is cash flow created with a 3% rate of return.”

Ok, so is the 3 percent referenced above, real or nominal? My gut says nominal but I need the experts to weigh in...even if I have confused real and nominal it sounds like 3 percent is the TOTAL return required, no additions or subtractions required, meaning in a perfect world if I could get a 3 percent GIC for the next 30 years, I would meet the cash flow projections my advisor created for me...Directionally correct? Thanks folks...


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## Eder

You need a 5% GIC.


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## Bruins63

Eder said:


> You need a 5% GIC.


Thanks, Could you help me understand why, based on the info I just provided from my advisor?


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## OnlyMyOpinion

Wow, talk about an opaque answer. I'd still guess they mean 3% real, no advisor would suggest they can only deliver you 3% nominal.
In either case, it doesn't realy matter now does it? You've moved up the curve enough to pick some scenarios & assumptions that make sense for you, and GoldStone has given you some very good information. You're flying now.


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## Bruins63

OnlyMyOpinion said:


> Wow, talk about an opaque answer. I'd still guess they mean 3% real, no advisor would suggest they can only deliver you 3% nominal.
> In either case, it doesn't realy matter now does it? You've moved up the curve enough to pick some scenarios & assumptions that make sense for you, and GoldStone has given you some very good information. You're flying now.


Thanks, that’s been my point all along, I “thought” the advisors projections were a total 3 percent return required...hard to pay those kind of fees if I can just buy a 3 percent GIC (for sake of discussion)...

In fairness, the advisor is not saying they can only deliver 3 percent...I asked my advisor how long my money would last...their answer was “at a 3 percent return, your monthly income will be x and will last until y”

I understand the VPW tables probably take SoR’s etc into consideration whereas my advisors projections don’t...that may be perhaps why the VPW results require greater returns...would like to hear others chime in as to whether the 3 percent is total return or not? Thanks


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## OptsyEagle

It's nominal. Not that it really matters because it is just a projection. Every time you input something into a computer you will get something out. I would not waste too much time on looking at it. It is interesting to get a feel for how one set of inputs effects the output but unless you have the program yourself and can do many, many variations, it is just a set of pretty pictures and graphs.

As I indicated before. You need to find a portfolio that you are as sure as you can be, that you will be able to leave alone through the various types of markets you will experience in the future. Obviously you will have no problem sitting through the good markets. No one ever seems to complain about making a higher return then what they should, so some of the info given on the bad markets in the past is what you should give at least a little thought to. 

It is important that the portfolio provide the necessary income but that importance should always be secondary to you being able to get any return out of it. You won't be able to get any return or at least the average return, if you react negatively when it reacts negatively. So find your portfolio. Get a feel for the possible rates of return it can provide and go from there.

A portfolio of 100% GICs in a 1 to 5 year ladder is not necessarily a bad idea. I suspect you could handle a little more spice in a portfolio but that one probably could provide you with around 3% nominal growth, once it moves through 5 years and you start getting the 5 year rate on all of the money. Obviously, no guarantee can ever be given on the future return but at least the capital is guaranteed. Nothing wrong with that.


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## OptsyEagle

OnlyMyOpinion said:


> Wow, talk about an opaque answer. I'd still guess they mean 3% real, no advisor would suggest they can only deliver you 3% nominal.
> In either case, it doesn't realy matter now does it? You've moved up the curve enough to pick some scenarios & assumptions that make sense for you, and GoldStone has given you some very good information. You're flying now.


I don't think the advisor was saying that he could only give him 3% nominal. He was just trying to show Bruin what a conservative number like 3% nominal would do. 

Of course that is my guess on the matter. Your's is probably as good as mine.


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## Bruins63

OptsyEagle said:


> It's nominal. Not that it really matters because it is just a projection. Every time you input something into a computer you will get something out. I would not waste too much time on looking at it. It is interesting to get a feel for how one set of inputs effects the output but unless you have the program yourself and can do many, many variations, it is just a set of pretty pictures and graphs.
> 
> As I indicated before. You need to find a portfolio that you are as sure as you can be, that you will be able to leave alone through the various types of markets you will experience in the future. Obviously you will have no problem sitting through the good markets. No one ever seems to complain about making a higher return then what they should, so some of the info given on the bad markets in the past is what you should give at least a little thought to.
> 
> It is important that the portfolio provide the necessary income but that importance should always be secondary to you being able to get any return out of it. You won't be able to get any return or at least the average return, if you react negatively when it reacts negatively. So find your portfolio. Get a feel for the possible rates of return it can provide and go from there.
> 
> A portfolio of 100% GICs in a 1 to 5 year ladder is not necessarily a bad idea. I suspect you could handle a little more spice in a portfolio but that one probably could provide you with around 3% nominal growth, once it moves through 5 years and you start getting the 5 year rate on all of the money. Obviously, no guarantee can ever be given on the future return but at least the capital is guaranteed. Nothing wrong with that.


Thank you Sir...always very balanced advice from you...appreciated


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## Bruins63

OptsyEagle said:


> I don't think the advisor was saying that he could only give him 3% nominal. He was just trying to show Bruin what a conservative number like 3% nominal would do.
> 
> Of course that is my guess on the matter. Your's is probably as good as mine.


U r correct...I edited my post 232...


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## james4beach

I think OptsyEagle's advice is good. All of these projections and estimates are just guesses... we really have no idea how the world will play out. For example a stock-heavy portfolio _does not guarantee_ high returns going forward. There are no guarantees in any of this, though we think there's a high probability of strong returns with heavier stock allocations.

Remember that when your advisor said that this portfolio can generate X or last Y years, those are also guesses and projections. No guarantees.



OptsyEagle said:


> It is important that the portfolio provide the necessary income but that importance should always be secondary to you being able to get any return out of it. You won't be able to get any return or at least the average return, if you react negatively when it reacts negatively. So find your portfolio. Get a feel for the possible rates of return it can provide and go from there.


I agree, the highest priority is to find a portfolio composition that you're comfortable with and can consistently follow. It's far more important to have a well defined plan you can stick with, rather than (for example) taking more risk than you're comfortable with and having to abandon everything.

Again this is a great opportunity for you to take a fresh look at all this. You're already ahead of the game; you had investment gains up to now. It could have been much worse, you might have had heavy losses and then questioned everything. You're in a good spot here


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## Bruins63

james4beach said:


> I think OptsyEagle's advice is good. All of these projections and estimates are just guesses... we really have no idea how the world will play out. For example a stock-heavy portfolio _does not guarantee_ high returns going forward. There are no guarantees in any of this, though we think there's a high probability of strong returns with heavier stock allocations.
> 
> Remember that when your advisor said that this portfolio can generate X or last Y years, those are also guesses and projections. No guarantees.
> 
> 
> 
> I agree, the highest priority is to find a portfolio composition that you're comfortable with and can consistently follow. It's far more important to have a well defined plan you can stick with, rather than (for example) taking more risk than you're comfortable with and having to abandon everything.
> 
> Again this is a great opportunity for you to take a fresh look at all this. You're already ahead of the game; you had investment gains up to now. It could have been much worse, you might have had heavy losses and then questioned everything. You're in a good spot here


Agreed, thanks kindly


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## Bruins63

Wild ride out there...it’s cementing for me that mentally I couldn’t stomach the roller coaster ride of an 80/20 asset allocation...still working on proper asset allocation. In the interim, sitting in cash.


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## hboy54

Bruins63 said:


> Wild ride out there...it’s cementing for me that mentally I couldn’t stomach the roller coaster ride of an 80/20 asset allocation...still working on proper asset allocation. In the interim, sitting in cash.


Just make sure you are not still in cash in 10 years like the thousands of 2008 stock market refugees. 

Hboy54


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## tygrus

After the bot crash from nothing, I sold all my positions and will never enter the equities market again. I can take swings due to news or cycles or whatever, but I cannot accept a computer crashing the market just because. 

And investors are stupid to stay in there. What if I crashed your paycheck or OAS check for one month and told you it should come back next month. You would be pulling your hair out. People accept BS from the market and excuse away its stupidity.


----------



## hboy54

tygrus said:


> After the bot crash from nothing, I sold all my positions and will never enter the equities market again. I can take swings due to news or cycles or whatever, but I cannot accept a computer crashing the market just because.
> 
> And investors are stupid to stay in there. What if I crashed your paycheck or OAS check for one month and told you it should come back next month. You would be pulling your hair out. People accept BS from the market and excuse away its stupidity.


I accept the BS from the market and extract great rewards from the stupidity. Quite happy to have a paycheck crash one month when I get two the next month, plus the missing one.

What was the "bot crash from nothing" that so impacted your investing life? I must have been outside working on my boat or something.

Hboy54


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## tygrus

hboy54 said:


> What was the "bot crash from nothing" that so impacted your investing life? I must have been outside working on my boat or something.
> 
> Hboy54


Just cant accept another outside force on my investments, especially an unnecessary one like HFT.


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## OnlyMyOpinion

tygrus said:


> After the bot crash from nothing, I sold all my positions and will never enter the equities market again. I can take swings due to news or cycles or whatever, but I cannot accept a computer crashing the market just because.
> And investors are stupid to stay in there. What if I crashed your paycheck or OAS check for one month and told you it should come back next month. You would be pulling your hair out. People accept BS from the market and excuse away its stupidity.


Your comment reflects irrational fear, perhaps because of poor investment decisions and/or market exposure beyond your level of comfort. To call investors and the market stupid only turns the mirror in the other direction. 
Too bad because there is enough discussion on CMF to point a person towards developing a FP that suits them and to be successful as a long term investor.


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## james4beach

This is why the first and most important question is: what asset allocation mix is right for you? Some combination of % stocks, bonds, GICs, gold, cash, (real estate). The key is to find a mix that you're comfortable with, including its historical *worst periods*, so that you can consistently stay invested and stick to a steady plan over the years.

Everyone has different comfort levels. For me, 75% stocks would be way too volatile. Instead I've gone with a more conservative asset allocation. The most I've been down this year is -2.3% at daily closes. This is exactly why I chose this allocation. But in really strong periods, I do much worse than the market.

Nothing comes for free. The market is a dangerous place to play, but you have the total freedom to decide how much risk (and potential reward) you want.



tygrus said:


> Just cant accept another outside force on my investments, especially an unnecessary one like HFT.


These forces (including irrational actors and crooks) have been there since day one. It's always been like this.


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## Bruins63

For me, I learned my asset allocation lesson, juuuuust at the right time...


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## Italicum

james4beach said:


> This is why the first and most important question is: what asset allocation mix is right for you? Some combination of % stocks, bonds, GICs, gold, cash, (real estate). The key is to find a mix that you're comfortable with, including its historical *worst periods*, so that you can consistently stay invested and stick to a steady plan over the years.
> 
> Everyone has different comfort levels. For me, 75% stocks would be way too volatile. Instead I've gone with a more conservative asset allocation. The most I've been down this year is -2.3% at daily closes. This is exactly why I chose this allocation. But in really strong periods, I do much worse than the market.
> 
> Nothing comes for free. The market is a dangerous place to play, but you have the total freedom to decide how much risk (and potential reward) you want.
> 
> 
> 
> These forces (including irrational actors and crooks) have been there since day one. It's always been like this.


Glad to see reference to real estate in the mix of investments. Great contributions on this site but if there is something that i would like more clarity in terms of viewpoints is where People here see RE fit in a FP. My mix for example is 90/10 equity/fixed income + cash, if i exclude RE. When i include it, however, it 53/47 equity/fixed income + cash + RE.


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## OnlyMyOpinion

Italicum said:


> Glad to see reference to real estate in the mix of investments. Great contributions on this site but if there is something that i would like more clarity in terms of viewpoints is where People here see RE fit in a FP. My mix for example is 90/10 equity/fixed income + cash, if i exclude RE. When i include it, however, it 53/47 equity/fixed income + cash + RE.


You are presumably talking about RE that is an investment - not your prinicpal residence? 
ISTM that a principal residence is part of your total assets/net worth, but not generally considered part of your investments.

Good question though. Until recently, I owned several non-principal RE and considered it an investment and part of my assets, but never included it as a slice of my portfolio (which was equities and FI held in various registered and non-registered accounts). Part of the reason I suppose is that they were illiquid and not part of other portfolio decisions (AA, rebalancing, etc.). Now that they are sold, the proceeds do form part of our portfolio. Certainly when selling RE, existing portfolio capital gains/losses need to be part of your planning. So maybe that bodes for including as you suggest?

But we digress from the subject of this thread...


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## Italicum

OnlyMyOpinion said:


> You are presumably talking about RE that is an investment - not your prinicpal residence?
> ISTM that a principal residence is part of your total assets/net worth, but not generally considered part of your investments.
> 
> Good question though. Until recently, I owned several non-principal RE and considered it an investment and part of my assets, but never included it as a slice of my portfolio (which was equities and FI held in various registered and non-registered accounts). Part of the reason I suppose is that they were illiquid and not part of other portfolio decisions (AA, rebalancing, etc.). Now that they are sold, the proceeds do form part of our portfolio. Certainly when selling RE, existing portfolio capital gains/losses need to be part of your planning. So maybe that bodes for including as you suggest?
> 
> But we digress from the subject of this thread...


Yes, i am talking about RE investments and thank you for responding to my implicit question. You are also correct that i am digressing. I am guilty of having known that when i took the opportunity afforded by JFB's post . Maybe i should open another thread.


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## olivaw

They say that people find out their real risk tolerance during a market crash. That rings true to me but I would add that it also depends upon your situation at the time. 

The crash of 2008 and early 2009 didn't bother me much. My job paid my living expenses so the stock pullback was an opportunity to add to my portfolio. 

Now that I am retired. I'd like to think that I will take a similarly constructive view of a pullback. Unfortunately, I won't know until I have lived through it at least once. 

I do know that I am not entirely emotionless when it comes to investing. I'm gun-shy about RE because I lived through a bit of an RE crash in Edmonton in the early 80s. It soured me on investment RE for life. My wife an I own our home but that is it.


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## Italicum

olivaw said:


> They say that people find out their real risk tolerance during a market crash. That rings true to me but I would add that it also depends upon your situation at the time.
> 
> The crash of 2008 and early 2009 didn't bother me much. My job paid my living expenses so the stock pullback was an opportunity to add to my portfolio.
> 
> Now that I am retired. I'd like to think that I will take a similarly constructive view of a pullback. Unfortunately, I won't know until I have lived through it at least once.
> 
> I do know that I am not entirely emotionless when it comes to investing. I'm gun-shy about RE because I lived through a bit of an RE crash in Edmonton in the early 80s. It soured me on investment RE for life. My wife an I own our home but that is it.


I hear you. I have lived in Ottawa ever since i moved from Europe and i have experienced a very stable local economy and RE sector, due largely to the feds. They are such a stabilizing factor that they pulled us through even the Nortel and JDS debacle and the .com bust. As a consequence i tend to place RE on the safer side of my portfolio ledger (equities are on the other). When it comes to passive income, i feel rent income is as safe if not safer than dividends on equities.


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## james_57

Seat belts fastened? Tomorrow is going to be a good day to make a batch of popcorn and put the feet up!


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## james4beach

olivaw said:


> They say that people find out their real risk tolerance during a market crash. That rings true to me but I would add that it also depends upon your situation at the time.
> 
> The crash of 2008 and early 2009 didn't bother me much. My job paid my living expenses so the stock pullback was an opportunity to add to my portfolio.


2008 destroyed my small business (income went virtually to zero), so I basically lost my job during that contraction. Luckily however my investments were very conservative, and this saved the day. I would have been destroyed if I had invested heavily in stocks leading up to 2008.

Fast forward to now, I again work in a kind of business that is vulnerable to booms and busts. Learning this lesson from the past, I continue to be very conservative positioned in my investments, because I know that I may be jobless and on my own at any moment, and I may have to live off my savings.

All of you out there with stable jobs are very lucky people.


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## gibor365

> Fast forward to now, I again work in a kind of business that is vulnerable to booms and busts. Learning this lesson from the past, I continue to be very conservative positioned in my investments, because I know that I may be jobless and on my own at any moment, and I may have to live off my savings.
> 
> All of you out there with stable jobs are very lucky people.


and think about retired people! you are very lucky that you are young and will be able to find another job


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## james4beach

gibor365 said:


> and think about retired people! you are very lucky that you are young and will be able to find another job


That's true gibor, I am lucky to be able to work and earn income.


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## james_57

Bruins63 said:


> Opinions please...I’m 78% equities, 22% bonds, banks, utilities, telecom, reits, oil...down 6 percent...do u think the tsx will recover much this year or is there more downside coming? Do u think it depends on if the DOW recovers Or do you think with rates going up, equities are going to sell off for bonds? Thanks


So you opened this thread 10th Feb, and the question is still begging the answer. Today, the first trading day of the 2nd quarter, the market continues to bench down in triple digit air pockets, today's battle breaking through the 200 DMA's of both DOW and S&P. It's been dead-cat bouncing its way down. Today probably poses a sea-change moment question for professional traders. I'm pretty sure it will go green tomorrow, but its early in the week. These are exciting times in the market. It doesn't get much better!


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## OhGreatGuru

_Is the market going to come back?_ Yes.

_When?_ Who knows? If I could answer that, I would be sipping margaritas on my private island in the Caymans.


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## james4beach

Even with a 30 or 40 year time horizon, you can be nearly certain that the market is going to come back... but it's never guaranteed. That's the risk with markets.

Mr. Market doesn't owe you a positive return, and Mr. Market doesn't have to treat you nice. Mr. Market does whatever the heck he wants, and you go along for the ride.


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