Sorry, it looks like I jinxed the bull market run in U.S. stocks. After posting on the new bull market, U.S. stocks have had a rough go. That said, it’s a drop that only spans several trading days. Canadian stocks had a rough week and seem stuck in the mud, though they are modestly positive over the last year. International developed markets are on a nice run. Bonds appear to have found their footing, for now. It all adds up to wonderful performance for balanced ETF portfolios that track the markets. The balanced portfolio rules on the Sunday Reads.
Here’s the jinx post – A new bull market on the Sunday Reads.
The U.S. bull market might not make sense, but the balanced portfolio that buys the market goes along for the ride. And a traditional cap weighted portfolio will have a heavy allocation to the U.S. market.
Here’s the U.S. market returns year-to-date and month-to-date.
In that MoneySense article link (above) you’ll find more stats and charts on several (very expensive) stocks driving the market returns. It’s an AI frenzy. But of course, the balanced portfolio does not judge. It accepts the market ‘wisdom’.
And while my investment bias tilts toward paying attention to valuations, I will never argue with one who holds an asset allocation ETF or builds their own ETF portfolio, sticking close to the cap weighted script.
Here’s a total return chart for XGRO – iShares balanced growth asset allocation ETF. The total return over the last year to June 22, is almost 13%.
And the holdings and weights …
Simple and cheap in winning in 2023.
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Stick to your investment plan
On Twitter I’ve noticed many Canadian investors fussing slightly about their poor recent returns. Most Canadian investors have an exaggerated home bias. From October of 2021 …
We Canadians also love our dividends. The Canadian high dividend approach is underperforming these days thanks to weakness in the big banks, telcos, pipelines and energy. You mean the Dale Canadian portfolio? Ha, well ya.
But no worries. We have to stick with the plan. That said, you might consider patching portfolio holes over time if you lack diversification. We can’t change course every time (or any time) we hit some choppy seas. And in Canada, value usually wins out in the long run. In fact there’s wonderful value in the Canadian market and even more so in the high dividend space. We should embrace these lower prices and bigger dividends if that’s your thing.
That was the theme in late May with buying the big Canadian banks. We hold the bank-heavy Vanguard VDY in my wife’s retirement accounts. She also holds iShares TSX 60 – XIU. I’m happy to add to both ETFs.
For my Canadian RRSP (retirement) account, most of the dividends will be reinvested. I may deregister a small amount each year to supplement my semi-retirement income. But of course, over time I want to see more capital appreciation. Eventually, I will also sell shares to create additional income.
Selling our winners
In last weeks’ Sunday Reads we were selling our winners. My wife holds Microsoft, one of the recent runaway winners in the early stages of the AI race. The valuation does not make sense IMHO, so I set a limit sell target. That price was reached last week and the sale was automatically exectuted. I then set another limit sell. If someone wants to pay even more for very little current earnings, step right up.
That said, the portfolio move is really nothing more than rebalancing. Stock profits going to short term bonds.
My wife will retire within 3-4 years, so we’re happy to get paid in advance. If there’s a market correction, it’s possible that we might not see today’s Microsoft share price for several years or more. From the lofty heights of the dot com mania (late 1990’s and early 2000s) it took Microsoft 15 years to reach its dot com peak price.
I hold Apple. I’m gonna let that one continue to run for now. Though I’m keeping an eye on it. There may be some homemade Apple dividends created.
More Sunday Reads
On My Own Advisor, Mark asks if there is a banking crisis looming? Regulators are watching and managing the risks …
The punchline from the most recent global regulatory rules for bank capital and liquidity forces our Canadian banks to hold “enough capital to equal at least 10.5% of their total risk-weighted assets.” Meeting that particular requirement is considered a breeze by some.
I would also agree with Mark, on the following quote from his post. We might have to be patient.
With high capital thresholds intact, I’m of the theory that our Canadian banks are likely to suffer a bit, near-term, over the next few years when it comes to stock price appreciation and in the form lower dividend payments to shareholders or potential dividend freezes.
And as always, that’s why sector and geographic diversification is key.
And on Million Dollar Journey, the best utility stocks in Canada. That’s a nice six pack of bond proxies. This post demonstrates the green shift tailwind for utility stocks as we will need considerably more electricity in the near future.
Electricity demand grows more slowly in the current measures scenario but still increases by 62 per cent by 2050.
That’s a nice little growth kicker for a boring sector. And from this MoneySense post …
Furthermore, the global pivot to green energy and the resultant demand for reliable and clean electricity have created a strong tailwind for the power and utilities sector. A report from the International Energy Agency (IEA) forecasts nearly USD$2.8 trillion will be invested in energy in 2023, including USD$1.7 trillion in clean energy. Another IEA report finds that renewables are set to account for over 90% of global electricity expansion over the next five years.
For utilities you can buy the stocks, or go the ETF route.
The GIC riches just keep coming
It seems that every week I have to increase the GIC rates in the EQ Bank post. There are now 6 terms at 5.0% or higher. That is good news for retirees and near retirees who want a certain level of guaranteed income over the next few years.
The dividends keep coming!
At Tawcan, Bob offers up his latest portfolio report.
As of this writing, we are still on track to hit the $60k target by 2025. But it’s always important to remind myself that we’re not in a rush to get there. Enjoying the journey and gaining valuable memories is more important than rushing to get to the finish line.
Well said. What’s the rush? Enjoy life.
And let’s check in on the weekly report from Dividend Hawk. I’m with Hawk on receiving that Qualcomm dividend.
On the retirement front, Jonathan Chevreau asks, now that interest rates are higher, is it time for near retirees to consider partial annuitization?
Keep in my that annuities are super bonds. And they should be on the table for consideration. It’s all part of pensionizing part of your nest egg. You might also look to the Purpose Longevity Pension Fund.
At The Retirement Manifesto Fritz looks at why 28% of retirees are depressed. We need a life plan for retirement. We need purpose and we need to stay busy enough. Thanks Fritz, a must read and consideration.
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