# Guaranteed Income?



## CJB (Apr 4, 2009)

As somebody in their mid 20s, I have never felt a need to secure any portion of my portfolio in guaranteed/fixed income vehicles. I have always (and still am) weighted 100% in stocks. I feel holding bank stocks and collecting the dividend a better strategy than giving them my money at a discounted rate. I was just curious as to what strategies others have implemented to deal with this portion of their portfolio.

So a few questions: 

1. Do you use laddered GICs, if so how do you create the ladder? Term deposits? High interest savings? 

2. What percentage does everyone have in these investments? How has this impacted your portfolio and what is the performance record like?

3. And on another note should this be something to consider only when I am closer (eg. within 20 years) of retirement?


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## leslie (May 25, 2009)

Never asset-allocated in my life. Only bought debt when it promised higher returns than equity (1980's and last Dec). My results equaled equity returns but with lower volatility (as if held debt). Early-retired now. Still don't asset-allocate. Arguments


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## brad (May 22, 2009)

In your mid-20s, being 100% in stocks isn't particularly risky. If we have a crash next year and the value of your portfolio drops to zero, you'll have decades to rebuild its value before you retire.

I'm in my early 50s and my portfolio is still heavily weighted toward stocks (all in index funds), my split is about 80-20 or so, but I'm philosophical about the risks. If I lose it all then I just won't retire, it's not the end of the world. But I am gradually ramping up my proportion of guaranteed investments...I've got a couple of GICs (no ladder yet) and am putting more money into my bond index fund.

I think the main point is to avoid putting all your eggs in one basket, which applies to your overall asset allocation as well as your behavior within asset categories. Index funds spread my risk in equities, for example.


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## ssimps (Dec 8, 2009)

I've read that one strategy for principle protected fixed income is the % of your portfolio should match your age. So at 20, 20% of your portfolio should be in principle protected fixed income, at 50, 50% should be. I may have the equation wrong though.

I don't follow this strategy myself because I have a low tolerance to risk, I'm in my 30's and have about 50% in principle protected fixed income. 

One reason for this is that our family has been fortunate enough to be able to increase our net worth quite a bit because of what we get paid from our jobs. To me this is the best way to grow your net worth: work really hard, be 'smart', be honest, and try to make money the good old fashioned way. So I do not feel the need to take higher risks to try to get really high returns in the markets.

What stocks I do own are mostly either high quality stocks that pay a good div. yield and index based ETFs, also drawn to those that pay higher yields (not double digit yields though, as how are they sustainable in most cases?). This is so that when we do ever 'retire', we can draw from the yield and not have to sell shares to live (which suggests to me that you will need to stay an active trader even in 'retirement').

Others on the site have suggested that it makes no / little difference, or that it is even worse, using yield vs. selling growth stocks to fund retirement. This may be true, but for me I do not feel comfortable about it; been burned by too many bubbles.


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## cannon_fodder (Apr 3, 2009)

CJB said:


> As somebody in their mid 20s, I have never felt a need to secure any portion of my portfolio in guaranteed/fixed income vehicles. I have always (and still am) weighted 100% in stocks. I feel holding bank stocks and collecting the dividend a better strategy than giving them my money at a discounted rate. I was just curious as to what strategies others have implemented to deal with this portion of their portfolio.
> 
> So a few questions:
> 
> ...


Hopefully my wife and I are retiring early in 10 years. I've never had a lot of $ invested in fixed income. I look at the retirement timeframe being 40 years and realize that if I can set up a retiremt portfolio that produces enough dividend income (regardless of how it is treated for tax purposes) to cover our needs then I would be set. 

I also look at aggressively paying down the mortgage as being a great substitute to buying GICs and the like. 

I will say I'm starting to sit on more cash. I think a correction will happen on 2010.


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## Square Root (Jan 30, 2010)

*Pension as fixed income*

I consider a pension received as a substitue for holding a portion of one's retirement portfolio in fixed income. I am newly retired and will generate half my required retirement income from dividends and the rest from my pension. Dividends will grow and hopefully cover inflation. Also dividends are taxed lower. Pension is secure.


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