# How's this for a portfolio?



## Dmacneil (Jan 11, 2012)

I've developed a nest-egg portfolio predominantly around ETFs. Im looking for capital security first. Here's how I've allocated the capital:

90% ETF
10% Mutual

I originally wanted it around a 50/50 split.. but the MERs on ETFs are just so much lower. Im a believer in efficient market theory so I can't bring myself to pay a manager any more than I need to.

As far as sectors.. I'm currently invested in the following using Ishares and BMO Products (8 total ETFs):

Bonds 55% (Equal split between Long Federal,Long Corporate and real return)
Gold	10%
Index	25% (Equal split between TSX and Dow)
TSX Financials	10%

Wondering if you have any thoughts on 
1- Overall allocation strategy
1 - Any suggestions on how to invest my remaining unallocated capital - currently in cash. This new investment would make up 25% of the total portfolio once I invest it.

Thanks for any feedback.


----------



## Spidey (May 11, 2009)

It depends on your specifics. You have no allocation to foreign or emerging markets. 10% gold seems rather high if your main objective is capital security since gold can be rather volitile. (I would consider taking 5% from your gold allocation and putting it in an EM or global ETF, but that's just me.) Bond allocation looks okay for your objective. 

ETFs are generally a good way to go. I use mutual fund in areas where I figure they are competitive with ETFs and/or where contributions or switches would generate too many commissions. For me, I use mutual funds for TD "e" index funds, a couple of small cap funds (Beutel Goodman and Mawer) and PHN fixed income funds.


----------



## fatcat (Nov 11, 2009)

i think you are way over allocated in long bonds ... 
i would have 20% at most in long bonds and the rest short
i would only have 0-5% in gold at the moment
the large index is good 
i would move some of the gold and some of the bonds into emerging markets and american and international large caps


----------



## HaroldCrump (Jun 10, 2009)

In addition to what fatcat wrote above, what is the rationale for holding both long bonds and RRBs in equal weightage?
You are both betting that inflation won't rise significantly (via the 2 sets of long bonds) and yet protecting yourself against it (via RRBs)
If rates rise due to rising inflation, 2/3rd of your portfolio will suffer and the other 1/3rd might offset some of that.
If you don't want to bet on the direction of interest rates, I'd recommend a ladder of corporate and govt. bonds like the one provided by Claymore.
Or just do something like XBB.

On the equity side, there is quite a bit of duplication between your gold and financial holdings and the Canadian index.


----------



## Argonaut (Dec 7, 2010)

10% gold is good as long as it's the metal and not lame large-cap miners. 25% gold is better, but one would have to be enjoy it and be a believer in gold to take on that number. I was dreaming about gold and silver last night, for example.


----------



## Spidey (May 11, 2009)

fatcat said:


> i think you are way over allocated in long bonds ...
> i would have 20% at most in long bonds and the rest short


Very good point. I was only thinking about the percentage (for his objective) and not the internal allocation.


----------



## Financial Cents (Jul 22, 2010)

8 ETFs seems like a lot.

A millionaire I know (Millionaire Teacher, Andrew Hallam) only has 3 ETFs in his entire portfolio:

"My investment account has only three index funds in it. Here’s the composition:
40% Short Term Canadian bond market index 
30% U.S. Stock Market Index
30% International Stock Market Index"

http://andrewhallam.com/2011/07/my-money/

Could use XSB for the short-term bond, 
replace 30% U.S. index with a XIC here in Canada, and
use a blend of VWO, VTI and VEA (10-10-10) for your 30% international holdings and you're done.

5 ETFs.


----------



## warp (Sep 4, 2010)

Financial Cents said:


> 8 ETFs seems like a lot.
> 
> A millionaire I know (Millionaire Teacher, Andrew Hallam) only has 3 ETFs in his entire portfolio:
> 
> ...


One thing this "millionaire teacher" forget to mention is that unlike most regular working folk, he has a lovely Defined Pension to look forward to, at the expense of working taxpayers who can't hope for such a payout forever.

He was smart in that he was frugal, and began to invest, and add to his portfolio from the age of 19.

The pensions all these gov't workers and theif politicians get just makes me dam mad. ALL of them, including teachers, are underworked, overpaid, and over perked.

I have friends from high school who became teachers and laugh and laugh at me while telling me about the pensions they collect from age 55 to forever!!
And of course I and most others have to concern ourselves about saving for our own retirement, and of course keep paying these ludicrous taxes all along the way.

Sorry for ranting............but it is very unfair.


----------



## fatcat (Nov 11, 2009)

on defined benefit plans: they have got to go, they are unfair and unreal, they exist completely independently of the real market and the real world

on etf's i like the idea of less is more but when i saw XIU tank so badly in the recent downturn i decided to get more targeted and try to buy only the best stuff canada offers like banks, oil and utilities and so i needed to buy more etfs

whether or not it was worthwhile remains to be seen but i love the idea of like no more than 3-5 etf's

minimalist investing ...


----------



## Mall Guy (Sep 14, 2011)

warp said:


> One thing this "millionaire teacher" forget to mention is that unlike most regular working folk, he has a lovely Defined Pension to look forward to, at the expense of working taxpayers who can't hope for such a payout forever.
> 
> The pensions all these gov't workers and theif politicians get just makes me dam mad. ALL of them, including teachers, are underworked, overpaid, and over perked.
> 
> Sorry for ranting............but it is very unfair.


Won't disagree with you on the politicians, but for the teachers, maybe just think of it as danger pay for walking into a school with medal detectors, police "community" stations, the occasional stabbing, shooting, and the drunk/stoned "students" . . . and then there's the High Schools


----------



## Dmacneil (Jan 11, 2012)

*Great feedback*

Wow. This community doesn't disappoint. Great feedback - insightful and thought provoking.

I hear you all on the gold over-allocation. At $1600 it seems as speculative as any other investment and probably not the safe haven I envisioned when the US housing crisis broke. 

Thanks for the tip on the long bonds and the conflicting strategy vs real return. That's the type of discussion I hoped to elicit. I don't believe I have any ability to predict interest rates .. so part of me feels comfortable in playing both sides of the fence. I'll look into XBB and some ladder instruments as you recommend. Definitely under exposed to short term bonds.

I've thought about keeping a % (maybe 5-10%) for one hail-mary stock that I think has a real chance to explode. AMZN has a foolishly high P/E.. but they also are the only real player in broad online retailing and that market is about to get HUGE. I tend to think they have a chance to be the biggest market cap company in the world (especially if they buy a shipping carrier to reduce costs further). Curious if anyone else has a hail-mary section of their portfolio.

Thanks again everyone


----------



## Eder (Feb 16, 2011)

I think a lot of people underate the US & international exposure XIU has. . eg BNS RIM,POT almost all TSX60 stocks do business outside our borders.


----------



## HaroldCrump (Jun 10, 2009)

warp said:


> One thing this "millionaire teacher" forget to mention is that unlike most regular working folk, he has a lovely Defined Pension to look forward to, at the expense of working taxpayers who can't hope for such a payout forever.


^ +100.
For someone with perhaps one of the best pensions in the entire North American continent (and even Europe for that matter), I don't understand why the millionaire teacher needs to have 40% of his investments allocated to short term bonds.
It would make more sense to go 100% equities to counterbalance the bond-like nature of the pension.
But maybe I need to read the book to understand the logic.

For the OP, you need to look behind these covers and read between the lines.
Such pontificating books are dime-a-dozen these days.
Try and understand what a specific investment is, what factors influence it, and how it might perform under rising markets, falling markets, rising rates and falling rates, and other conditions.


----------



## Jungle (Feb 17, 2010)

Andrew Hallam now lives in Singapore and works for a private school.. before that he was a teacher on Vancouver Island. 

So not sure if he still gets the whole pension spoken about above. He's in his 40's.


----------



## fatcat (Nov 11, 2009)

HaroldCrump said:


> It would make more sense to go 100% equities to counterbalance the bond-like nature of the pension.


brilliant harold ...  ... one of my relatives is a teacher who has been retired about 15 years ... he teaches a few hours a week as a "master teacher" to other teachers ... he tells me he is making more money now than he did when he was actively teaching ... he's a great guy but defined benefits have got go ... pay teachers very well, pay them hazard pay, no problem but no more defined benefits plan for anyone


----------



## uptoolate (Oct 9, 2011)

Jungle said:


> Andrew Hallam now lives in Singapore and works for a private school.. before that he was a teacher on Vancouver Island.
> 
> So not sure if he still gets the whole pension spoken about above. He's in his 40's.


I will have to go check my copy of 'Millionaire Teacher' but my recollection of reading it is that Mr Hallam states that he does not have a pension. An excellent book by the way.


----------



## uptoolate (Oct 9, 2011)

I was just leafing through the book again and I couldn't find it stated that Andrew Hallam had no DB but I did find it in Jonathan Chevreau's article in the FP just before Christmas. Hallam amassed his first million by age 40 and it clearly didn't have anything to do with a DB pension. 

Again, a great book, highly recommended. I mean by the likes of Swedroe, Bernstein, and Malkiel. Hey don't take my word for it!


----------



## Jungle (Feb 17, 2010)

Yes I loved that book too. I borrowed it from the library. 

My memory is fuzzy but something is telling me he worked for private school in Vancouver too, so no gold plated pension? 

I could be wrong. Anyway this is off topic now, but does tie into the teacher's pension rant against Andrew Hallam. Like you said he built 7 figures with stocks getting average 15% return over 10 years. No pension included.


----------



## uptoolate (Oct 9, 2011)

Have to love the library! Mine didn't have it yet so I read it at the bookstore and then decided it was worth the price to have it around. I loved his stories of frugality.


----------



## ibex (May 17, 2011)

I can't believe the hostility towards the DB pension plan, do people really think that the people who receive these pensions are evil? i.e Military, police, fire fighters, EMS, teachers. These are all public servants who provide the citizens of Canada with both safety and security, and people have the audacity to say they shouldn't be compensated as such? Not to mention that the percentage of individuals who do retire at 60-65 do not retire with a full pension, as it is linked to years worked as well as the fact that I personally fund 35% of my pension superannuation, and I don't know that many people who spend 35 years with the same employer. So in short, instead of demonizing these people how about a pat on the back or a thank you for the years of tireless service these individuals give to the public at large.

And if your that angry, how about you put on the uniform, pick up a weapon, serve your country, run into a burning building, or get a heart beating again. Then we can talk.


----------



## Leading Edge Boomer (Apr 5, 2009)

ibex writes



> i.e Military, police, fire fighters, EMS, teachers. These are all public servants who provide the citizens of Canada with both safety and


Interesting that you only mention high profile or high risk occupations as examples of public servants. For every one of these there are hundreds of other public employees such as clerks and administrators. They too get the indexed DB public service pensions that every taxpayer pays for. 
Take the miitary for instance. DND is not made up of mostly front line troops.It employs thousand of civilians who seldom leave their office let alone serve on the front lines. They probably are better treated than our troops. They too get the gold-plated indexed DBs. 
. 



> "And if your that angry, how about you put on the uniform, pick up a weapon, serve your country, run into a burning building, or get a heart beating again. Then we can talk."


No need to do any of that to get the indexed taxpayer supported DBs we are talking about . All you have to do is get a job at city hall handing out marriage licences. Maybe a public servant uncle can get us such a job. Nepotism is not unheard of, especially at city halls across the nation. 




Our government departments are full of people who do jobs similar to what private sector workers do. The difference is that the public servants get the indexed DB at taxpayers expense while the private sector workers do not.

Also, many private sector workers contribute to the public good as much as some gov't employees, directly through their jobs, or through volunteer work.
They do not get an indexed taxpayer supported DB for their efforts.

We need to level the playing field.

Disclaimer.---- I worked three years in the federal public service in my youth. I left voluntarily for the private sector. I don't have the gold plated DB , but through my own efforts I am comfortably retired and have no financial worries. I still beleive that the playing field should be levelled.


----------



## Square Root (Jan 30, 2010)

fatcat said:


> brilliant harold ...  ... one of my relatives is a teacher who has been retired about 15 years ... he teaches a few hours a week as a "master teacher" to other teachers ... he tells me he is making more money now than he did when he was actively teaching ... he's a great guy but defined benefits have got go ... pay teachers very well, pay them hazard pay, no problem but no more defined benefits plan for anyone


No more defined benefit plans for anybody? Wow why would you say that. I can see your point for public servants but everyone?


----------



## PuckiTwo (Oct 26, 2011)

Originally posted by ibex:



> I can't believe the hostility towards the DB pension plan, do people really think that the people who receive these pensions are evil?


Not evil, but don't you think something has to give in this country? Canada's productivity is one of the lowest among the western nations, but with one of the highest level of bureaucracies with roads and a health care system of a 3rd-world country. The province I live in has an unsustainable 45% of public employees and people otherwise financed by government, all through taxes others generate. In order to have a good tax base you need to create value, i.e. by manufacturing, producing, exporting, etc. I originate from Merkel-country. In the late 70s Germany stopped guaranteeing newly hired teachers life-long pensions and other perks. They are now getting public pensions like everybody else. Now Germany is rich - most of the Merkelites live very well, have better roads, better health care system (for everybody not only for teachers and civil servants). A little bit of "austerity" would help Canada too, reducing the extreme percentage of civil servants and giving out less perks.


----------



## HaroldCrump (Jun 10, 2009)

Square Root said:


> No more defined benefit plans for anybody? Wow why would you say that. I can see your point for public servants but everyone?


I think fatcat is thinking of tax payer funded DBPs only, not those funded by private corporations out of their own revenue and profits.
They are, of course, free to offer whatever they want to their employees.
As long as they don't come begging to the tax payers cap in hand every 10 years for bailouts.

@ibex - no one is saying any individual person is evil.
What is evil is the way the system has been designed over the decades due to a combination of political and social influences (unions, etc).
An outrageous, unsustainable disparity between the pension haves and have-nots.


----------



## fatcat (Nov 11, 2009)

ibex, i have no problem with people who serve the public being fairly compensated but i have huge problrms with "defined benefits" that may well end up being funded by the taxpayers

members of parliament have a $1 billion dollar shortfall in their pension fund .... they simply "declared" that their pensions would have a rate of return of over 10% when in fact it has been returning half of that based on the real market

who will make up the shortfall ? ... you and i

it doesn't matter whether it is the mp's, teachers, the police, nortel or general motors ... when it comes to senior citizens being thrown into poverty, the taxpayer will usually end up on the hook whether it's a private plan or public

all of our pensions should be based on the same market that we all work in, invest in and base on retirement on

defined benefits is simply a bad idea ... it is a fantasy of what people "think" should be awarded for service not what actually can be awarded

if we all have a stake in the same pool, we will have much greater fairness and in the end, a more robust market

ps. look at what could happen in europe (and is happening in greece), a complete meltdown and nobody can have their pensions funded and you expect a taxpayer with reduced pensions to support public employees defined benefits plans ? ... i don't think that dog will hunt


----------



## Four Pillars (Apr 5, 2009)

warp said:


> One thing this "millionaire teacher" forget to mention is that unlike most regular working folk, *he has a lovely Defined Pension* to look forward to, at the expense of working taxpayers who can't hope for such a payout forever.


This is incorrect. Andrew has no pension at all - he doesn't teach in Canada.


----------



## Square Root (Jan 30, 2010)

HaroldCrump said:


> I think fatcat is thinking of tax payer funded DBPs only, not those funded by private corporations out of their own revenue and profits.
> They are, of course, free to offer whatever they want to their employees.
> As long as they don't come begging to the tax payers cap in hand every 10 years for bailouts.
> 
> ...


No sounds like he means for everyone not just civil servants. I don't agree. Private companies should be able to do what they want. Bailouts are a different question and I would respect a view that says bailouts should be few and far between. Sounds like a little bit of envy to me.


----------



## stephenheath (Apr 3, 2009)

Square Root said:


> No sounds like he means for everyone not just civil servants. I don't agree. Private companies should be able to do what they want.  Bailouts are a different question and I would respect a view that says bailouts should be few and far between. Sounds like a little bit of envy to me.


I'd agree with that except there has to be a mandated, extremely conservative, rate of return provided because there is, in Ontario at least, a facility set up specifically to cover private sector pensions where the pensioners lose out because the company is bankrupt and there isn't enough money in there to meet the obligations.

Without that mandated rate, a company can promise the moon but use an extremely high rate of return to guarantee they are underfunding it... or heck, even go with a rate of return that would be fine if there are no underperforming years and not top it up during those years... and as mentioned, the taxpayer winds up on the hook.


----------



## fatcat (Nov 11, 2009)

stephenheath said:


> I'd agree with that except there has to be a mandated, extremely conservative, rate of return provided because there is, in Ontario at least, a facility set up specifically to cover private sector pensions where the pensioners lose out because the company is bankrupt and there isn't enough money in there to meet the obligations.
> 
> Without that mandated rate, a company can promise the moon but use an extremely high rate of return to guarantee they are underfunding it... or heck, even go with a rate of return that would be fine if there are no underperforming years and not top it up during those years... and as mentioned, the taxpayer winds up on the hook.


 bingo ... there it is

defined benefits are just bad public policy because when it comes to things like pension benefits it doesn't matter what a private company says or the members of parliament pension plan promise, the taxpayers always have to jump in when things go bad because we don't want to see old people selling pencils on the street because their pension plan imploded 

we should all be in the same pool (i.e. the market) when it comes to our pensions


----------

