Happy Easter to those who observe and ‘celebrate’. We’re counting our dividends and counting our blessings on the Sunday Reads. In this post you’ll find some dividend portfolio updates. Other Canadian investors ‘have portfolio will travel’. Should you avoid bonds in retirement? Got international stocks? And you’ll find the performance update for the core ETF portfolios on Cut The Crap Investing. We’ll kick things off with the economic update. We’re still moving in slow motion.
The economy keeps surprising, but the recession forecast has not gone away. But perhaps that forecast has gone awry. We have strong jobs growth on both sides of the border. But there are signs of a weakened consumer and a weakening economy. As I have suggested for several weeks, the economic forces are present but moving in slow motion.
Here’s a solid description of the central banker strategy.
When the central bank tightens credit, it typically leads to higher rates on mortgages, auto loans, credit card borrowing and many business loans.
And the ongoing challenge for the Fed and those who trade instead of invest –
Many traders are betting the Fed will cut rates later this year in order to prop up the economy. The Fed, meanwhile, has been adamant so far in saying it does not plan any rate cuts this year. Rate cuts can relax conditions for the economy and financial markets, but they could also give inflation more oxygen.
Inflation is still higher than the Fed wants, and it has said it does not want to risk letting up too early.
Consumers are fighting inflation with debt
Here’s a sobering tweet thread.
The Kobeissi newsletter sums it up with:
- 1. Lower saving rate than 2008
- 2. Highest credit card debt of all time
- 3. 22 straight months of 5%+ inflation
- 4. Fastest rising interest rates of all time
- 5. Consumers “fighting” inflation with debt
Meanwhile, in Canada …
Once again, no one knows how this all plays out. A soft landing is possible, and so is a real recession. I don’t write this kind of “stuff” to scare you, but to prepare you. Awareness is preparedness. Be ready to stick to your investment plan. Be ready to buy as assets as they go on sale in any correction. There’s very good value available today. Bond yields and cash yields are solid.
There’s no reason to not be fully invested within your risk tolerance level.
The Sunday Reads
On My Own Advisor, Mark asks if we should own international stocks. Of course we should in the name of geographic, sector and currency diversification. That said, we can obtain reasonable international diversification by way of U.S. multi-national companies. Many of the U.S. stocks that I hold gain 50% or more of their revenues from international markets.
I applied (and admitted to) a U.S. and Canadian bias in the core ETF portfolio models on Cut The Crap Investing. In that post you’ll find the updated returns for the 4 models. That bias has paid off, but sure, things could change. As I’ve suggested for a couple of years, the U.S. markets are very expensive and have been expensive (over-valued) for quite some time. That said, portfolio rebalancing can take care of some of the stock market inefficiency as we trim gains from (at times) over-valued markets and move the profits to the laggards – often where there is more value.
Core ETF portfolio returns
Here’s a taste of the returns over the last several years. The returns have been very good, especially for the all equity and balanced growth models.
And more on the First Home Savings Account. Aaron Hector offers a very good table on the FHSA vs RRSP that includes the Home Buyer’s Plan. Remember, you can combine FHSA amounts with the HBP amounts when you purchase your first home.
And check out this loophole that Aaron identifies. You can use RRSP monies to get two tax breaks on the same amount. Ya, totally legit. Let’s call it a loophole. From one of Aaron’s tweets …
“But because we made a withdrawal from the HBP and then made a NEW contribution into your FHSA you then get a SECOND tax deduction… on the same money.”
The Dividend Hawk offers his weekly wrap, including dividends received, plus the stock and blog reads of the week.
On MoneySense, Kyle Prevost makes sense of the week.
Shaw and Rogers finally tie the knot, OPEC+ sends oil prices skyrocketing, and the Canadian and American economies appear to be slowing down.
Yes, oil prices are moving back up. I continue to chip away, adding to our Canadian oil and gas stocks.
Fritz is taking stock ( a book review) on The Retirement Manifesto. That looks like a very good read.
On the portfolio front, GenYMoney delivered a March 2023 dividend update.
This is kind of an exciting update as I reached another ‘threshold’ of $30,000 in annual dividend income last month.
Also, Dividend Daddy counts his March 2023 dividend total as $5,611.95. Very impressive.
Assets to avoid in retirement
On Findependence Hub, Pat McKeough offers retirement assets to avoid. From that post …
- Invest mainly in well-established, dividend-paying companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
Pat suggests retirees avoid bonds and annuities. On that count I would disagree. We should hold some bonds, cash and perhaps consider annuities, those super bonds. That will help manage the sequence of returns risk for stocks. We might pensionize our nest egg further with the Purpose Longevity Pension Fund that includes mortality credits.
To overweight stocks in retirement, I would not disagree with a strong dividend portfolio at the core. And we might pay attention to sectors. Recently I posted on how defensive sectors for retirement were twice as effective as a traditional balanced portfolio. But in the mix, I want to hold some cash and bonds, and I’ll consider annuities and that Purpose Longevity Fund, one day.
For U.S. readers, FiPhysician shows you how to optimize tax diversification.
Canadian self-directed investors can head over to Cashflows & Portfolios to develop and execute a tax-efficient strategy in the accumulation and retirement stages.
Have portfolio, will travel …
And safe and happy travels to Deane who has two wonderful trips (cruises) booked over the next several weeks. I will be following.
And here’s another carrot for feeling and seeking that early retirement, and scratching that travel itch.
Thanks for reading. Have a great Sunday and a wonderful week. Don’t forget to follow me on Twitter, and follow this blog – it’s free.
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