I continually receive emails from readers asking how they can construct their ETF portfolio for retirement. First off, I’d suggest that simple works. In retirement we are looking for portfolio growth and we need to manage the sequence of returns risk with bonds and other assets. That is to say, a simple core ETF portfolio can work very well in retirement.
While I was at Tangerine Investments I witnessed many retirees who were having incredible success with their simple index-based asset allocation portfolios. Even in the RRIF stage and with aggressive mandatory withdrawal rates . Many of the portfolios were holding steady in value or were declining just slightly.
Bend the core portfolio for retirement.
The core ETF building blocks can work for retirement. But when constructing that ETF portfolio for retirement, we can slightly bend the portfolio to better fit that stage of life. We can select ETFs with the potential of a lesser draw down in a major correction. A portfolio that delivers greater and growing income can help to better manage the sequence of returns risk.
7-ETF Portfolio for retirees.
In this post on the 7-ETF Portfolio I had suggested that readers take a look at Vanguard’s Dividend Appreciation index and funds.
The US Dollar version is offered with the ticker VIG.
Vanguard Canada offers a Canadian dollar version ticker VGG.
I have studied that index and the individual holdings for quite some time. There is the potential that the fund can deliver market-like returns with lesser volatility. VIG delivered on that promise through the major market correction of 2008 and into 2009. I’ll be back with a future post or two on the Dividend Appreciation Index and the funds available.
REITs and income.
Vanguard’s VDY was used for Canadian equities to deliver greater income and dividend growth. The BMO Income fund is present as a yield booster and it can also offer additional diversification. The portfolio offered Canadian and US REITs and also some international exposure by way of the core EAFE index fund XEF. Many would suggest that you boost that international exposure well beyond the percentage weight shown.
The total return for 2019.
This week I looked at the core ETF model portfolios on Cut The Crap Investing. The total return is right in line with a core couch potato approach. In fact there is some slight out performance. For the return example and chart above I used the Canadian dollar VGG. We would see a slight boost with the use of VIG.
Here are the returns for the core portfolios.
There was also lesser draw down and there is greater yield in the 7-ETF portfolio for retirees. But of course, it was a year of very little volatility in Canadian, US and International stock markets.
A modified total return approach.
This is not a yield hungry portfolio. The total yield for the start of the year was just north of 3%. If one is in retirement they would need to sell assets. What to sell can be an easy decision when the markets are roaring. We can sell a small percentage of the equity ETFs with the potential that the stock to bond ratio (risk level) will not drift out of whack.
Seek financial advice.
Keep in mind this is a simplified approach/example and does not take into account your personal situation. It does not take into account your tax situation and your spend rates for each bucket. You might consider an advice-only planner. They will then make a recommendation for the portfolio management. And you may certainly choose to self direct your ETF portfolio.
There are so many great links covered in Mark Seed’s weekend reads edition. Thanks Mark for that look at my core ETF portfolios post. And from that post we see Norman Rothery’s table of asset returns.
The Canadian personal finance blog looks at CPP and employment insurance adjustments for 2020.
Enoch at savvynewcanadians has been updating many of his posts to reflect any changes that take effect in 2020. Here’s his post on RRSP withdrawals.
Here is the EQ bank review 2020 – Canada’s best online savings account? from milliondollarjourney.
On findependencehub Danielle Klassen of WealthBar suggests how to keep your new year’s financial resolutions.
Related post: WealthBar – Get treated like you’re rich, even when you’re not.
Rob of passivecanadianincome provides an overview of his recent portfolio performance and portfolio moves.
Fresh off of leaving full time work Robb Engen of Boomer And Echo offers an update on his net worth.
On MoneySense financial planner Allan Norman answers is Carol better off withdrawing all of her RRIF money now?
ETF 2019 update.
On Bloomberg, they offer an update on the final ETF flows for the record year. They also suggest that Canadian ETF investors timed the markets just right with large flows to cash and bonds.
And Tom Connolly of the famed Connolly report makes an appearance in a Globe article penned by Rob Carrick. Mr Connolly looked at the dividend growth rates for his model portfolio in 2019.
And here’s the most recent rational reminder podcast.
The balance offers links to their favourite investment podcasts.
On Cut The Crap Investing you can have a read of my decade in review and other recent posts, I have been busy over the last two weeks.
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