# Alternatives to VBAL everywhere or stay the course?



## kalie (Jun 19, 2021)

Hi forum people,
My investment porfolio is exclusively in VBAL. I retired this year at 65 and like everyone in VBAL have not enjoyed the downturn. I have a decent cash wedge for the next few years in GICs and HISA until gov pensions kick in at 70. I now have an additional 100,000 to invest and instead of plonking it into my VBAL everywhere strategy I was wondering if I should diversify and into what (e.g. income producing dividend stock? annuity?) 
Thanks in advance for your feedback.


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## bigmoneytalks (Oct 3, 2014)

kalie said:


> Hi forum people,
> My investment porfolio is exclusively in VBAL. I retired this year at 65 and like everyone in VBAL have not enjoyed the downturn. I have a decent cash wedge for the next few years in GICs and HISA until gov pensions kick in at 70. I now have an additional 100,000 to invest and instead of plonking it into my VBAL everywhere strategy I was wondering if I should diversify and into what (e.g. income producing dividend stock? annuity?)
> Thanks in advance for your feedback.


If income is your goal, and not growth, dividend producing ETF, would be ideal. A banks/financials ETF for example


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## Thal81 (Sep 5, 2017)

I'd argue that right now is a great time to buy more VBAL, as long as you're safe for the next few years which you seem to be. You can reduce the risk of further market drops by buying in small chunks over a period of 6 to 12 months. A great plan would be 10K a month or 5K every two weeks. Future you will thank you.


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## GreatLaker (Mar 23, 2014)

If you start buying dividend stocks you would not be diversifying your investments, you would be concentrating them. VBAL is broadly diversified so it would likely already hold most or all of the large dividend paying stocks you would consider. You would also be increasing your equity allocation, so your portfolio could become more volatile, and volatility seems to be a concern for you based on some previous posts. Compare the top holdings of VBAL and VDY to see how much overlap there is. Look at how many dividend ETFs are really concentrated in financial stocks.

Then there is income. VBAL has a yield of 2.1%. Vanguard Canadian High Dividend Yield Index ETF (VDY) has a yield of 3.5%. $100k in VDY would produce an additional $1400 of income per year compared to VBAL. Would that make a big difference to your ability to spend and pay your bills?

This is an unusual time because both bonds and equities are falling at the same time. But bond prices are negatively correlated to interest rates, and there is a limit to how much rates will go up, especially if the economy continues to falter. But stocks could continue to fall, like they fell ~40% in 2008 and from 2000 to 2003. There are people that say the traditional 60/40 asset allocation used by VBAL is not appropriate in today's economy or market or for the future. Markets fall 20% regularly. I would think carefully and do more reading before making changes to your portfolio.

Maybe a review of Canadian Couch Potato's Getting Started section would help reinforce why you bought VBAL in the first place: Getting Started | Canadian Couch Potato 

Or grab a copy of CCP author Dan Bortolotti's latest book: It’s Time to Reboot Your Portfolio | Canadian Couch Potato Not sure where you are but it may be available in the library.


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## MrBlackhill (Jun 10, 2020)

kalie said:


> instead of plonking it into my VBAL everywhere strategy I was wondering if I should diversify


Diversify? VBAL holds 13,000+ stocks and 18,000 bonds, world diversified and tax-advantaged for Canadians, I'm not sure how you could diversify more than that. Stay the course. Buy more VBAL.


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## TomB16 (Jun 8, 2014)

I urge you to consider why you like to balance.

VBAL


First quote on Yahoo Finance is January 14, 2018 at 24.584 (day low)
Peaked on October 31, 2021 at 31.010 (day high)
Last closed at 26.23 (close)



https://ca.finance.yahoo.com/quote/VBAL.TO



S&P 300


On January 14, 2018 the day low was 16270.6
Peaked on October 31, 2021 at 21473.8 (day high)
Last end of day at 18861.36



https://ca.finance.yahoo.com/quote/%5EGSPTSE





So, a bit of quick analysis on the back of a spreadsheet shows...

VBAL - Maximum gain to peak is 26.14%
S&P300 - Maximum gain to peak is 31.98%

VBAL - Peak to current is down 15.41%
S&P300 - Peak to current is down 12.17%

VBAL - Gain since Jan 14, 2018 (inception) is 6.70%
S&P300 - Gain since Jan 14, 2018 is 15.92%


VBAL compared to S&P300:


VBAL gained less during the boom market
VBAL lost more during the correction
VBAL has less total gain from inception to today than S&P300



I would contend that balancing is a false religion. As proof this practice is frequently part of an emotional response, read the responses to this very post that are sure to follow.

There are times when balancing is a gainful endeavour, so corner cases to support balancing can be cited, but the data I have sifted through shows that balancing loses a lot more money than it gains. My position is that everyone should sift through their own data and not trust the most vocal people in the crowd to define reality as they wish.


Tom's perspective:

The most difficult task in investing is to do nothing but that is usually the most gainful course of action. There is a steering wheel and gas pedal that everyone desperately wants to operate. Responding to market conditions (balancing) is instinctual but at what cost?


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## AltaRed (Jun 8, 2009)

MrBlackhill said:


> Diversify? VBAL holds 13,000+ stocks and 18,000 bonds, world diversified and tax-advantaged for Canadians, I'm not sure how you could diversify more than that. Stay the course. Buy more VBAL.


I agree plus the OP is second guessing the premise of the 'all in one' approach to passive investing, diversified across asset classes and geography. It mitigates the risks of putting too many cards in just a few baskets. If and when the OP starts to make other decisions, what will the OP do when that new investment under performs VBAL?

I think the bigger issue is an unwillingness to buy more 'on sale', i.e. buy low.

A broader question not addressed is the query about an annuity. Annuities have been discussed a fair bit in other threads but the primary reason to buy an annuity is to protect one from themselves, AND/OR make up for a lean retirement portfolio AND for longevity insurance, i.e. alleviate the risk of outliving their portfolio. The OP appears to have already made the decision to delay CPP and OAS to 70 to do exactly this, i.e. increase longevity insurance, so the question is whether the OP feels she needs more such longevity insurance. I think it is too early in life (65) for this consideration BUT may be something only a 'fee for service' planner can help her sort out. 

I don't know what it is like to have a 'lean' retirement plan so don't know how I would respond to the desire for an annuity to decrease some of that longevity stress. I don't think most of us here can do so either. The more important thing is 'to know thyself' and Kalie may need some help to sort out that issue. The fact she is second guessing automatically buying more VBAL on sale may already be saying something about her risk tolerance.


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## zinfit (Mar 21, 2021)

bigmoneytalks said:


> If income is your goal, and not growth, dividend producing ETF, would be ideal. A banks/financials ETF for example


Why not just buy a number of dividend paying high quality stocks . Enbridge, BCE, CM, Sunlife, CNQ and Bam and by so doing you will save yourself some management expenses. The MER on some of the dividend ETFs are no bargain.


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## james4beach (Nov 15, 2012)

kalie said:


> My investment porfolio is exclusively in VBAL. I retired this year at 65 and like everyone in VBAL have not enjoyed the downturn.


It's very important to stick with your existing plan. Market downturns always make people question their plans, and sometimes they abandon them or change their investments. Making such pivots or switching investments is almost guaranteed to harm your long-term returns.

VBAL is a very good investment. It's highly diversified and there is nothing wrong with VBAL. The roughly 16% decline is quite normal (well within historical patterns). It's not pleasant, and I don't like it either, but declines will happen every few years and are an inevitable part of the investing game.



kalie said:


> I now have an additional 100,000 to invest and instead of plonking it into my VBAL everywhere strategy I was wondering if I should diversify and into what (e.g. income producing dividend stock? annuity?)


With your spare 100K, start by making sure the cash wedge (including GICs) is big enough. Have enough cash to pay 2-3 years of living expenses, also allowing for some potential surprise expenses.

If the 100K really is an excess after the cash wedge is full, then as @AltaRed mentioned it may be worth getting some advice on whether an annuity could be helpful. I don't know much about annuities so I really have no idea. If you decide not to pursue the annuity, then yes I *would* continue to invest into VBAL. Perhaps in chunks of 10K, at 2 or 3 month intervals.


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## KaeJS (Sep 28, 2010)

Stay the course.
The bonds will recover when inflation subsides (and it will)

I'm not even a fan of bonds but I have been buying a ton of them lately. You can get bonds over 4% and we all know the Bank of Canada and government strive to keep inflation at 2%.

It's kind of a no-brainer. If you're not buying bonds right now, you're not ahead of the curve. At today's prices, bonds will give 4% yield on cost plus you'll get capital gains when people (fund managers) inevitably start buying them back when inflation starts slowing down.

Keep buying VBAL. Don't change a thing.


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## kalie (Jun 19, 2021)

Many thanks for all your contributions. Seems popular thinking is to stay the course with VBAL. And instead of investing all at once, do so in chunks over the next few months. I am more comfortable with that rather than investing 100K all at once and watching it dive. I can keep the remaining in a HISA earning at least a little rather than losing more in the short term. Maybe a short term GIC if we get another good interest raise this month. Sure hate all this juggling of money these days (hey, there could be bigger problems, right?!)


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