It’s much more fun to check in on the U.S. stock portfolio, compared to our Canadian stocks that’s for sure. That’s where the action is. That’s where the portfolio growth driver lives. I created a U.S. stock portfolio in 2014/2015 and while this was not the goal, the portfolio has bested the S&P 500 by 1.5% annual. The goal was to own a U.S. stock portfolio that was more retirement-friendly. There are signs that portfolio may contribute on that front. The outperformance arrived during (and through) the stress and disruption caused by the COVID pandemic and resulting market disruption. We’re checking in on our U.S. stocks on the Sunday Reads.
Here’s the 2023 update for our U.S. stocks. You ‘ll find the list of stocks and the investment rationale. I provide a current update later in this post.
In that 2023 post I also put together some ideas for building a portfolio in 2023. The idea was to stickhandle around (or away from) the very expensive growth stocks in the U.S. – the team leaders being the Magnificent 7. The conviction picks from that list have gone on to greatly beat the market – again with no exposure to the Magnificent 7.
Magnificent 7’s massive “GDP”
Here’s a post listing the Magnificent 7 stocks and how the combined profits now exceed almost every country in the world – should we be worried? If you are worried, or want to limit exposure you can certainly pick very good companies that exclude the Magnificent 7. You can find U.S. and Canadian listed ETFs that do not include (or greatly limit exposure) to the Mag 7, and present much more reasonable valuations – PE ratios.
When I sold half of my Bell stock, I did not buy a market ETF, I moved the proceeds to a U.S. ETF that does not include the Magnficient 7, and the valuations are much more reasonable. The trailing PE ratio for iShares Quality Dividend ETF XDU is currently 18. I will continue to chip away at that ETF. We already have significant growth exposure by way of Apple, Microsoft, Qualcomm, Texas Instruments, Nike, Lowe’s, Berkshire Hathaway and more. I also hold the CHPS ETF in my TFSA for some AI boosting.
Dividend Daddy adds …
Growth stocks and retirement
How to you manage insane market gains as you approach retirement? It’s easy, you sell shares and move the profits to safety. The money is protected, potentially growing in real terms until you need the funds for retirement spending. And we prepare well in advance of the retirement start date.
What is the retirement risk zone?
There’s nothing genius about it, you might even just call it portfolio rebalancing 🙂 In my wife’s U.S. growth-oriented account I have been trimming Microsoft and others. From one year ago …
We’re selling our winners on the Sunday Reads.
Some of the profits are booked and are earning over 5.0% in the UBIL.U ETF. We still have remaining growth exposure in those expensive growth stocks. For my wife’s growth account, the allocation sits about 65% stocks and 35% short and long term bonds.
Buy ETFs for free at Questrade
UBIL.U is an ultra short bond ETF – cash-like with no risk.
The U.S. stock portfolio total return chart
And without further delay, here’s the portfolio total returns vs the S&P 500.
And the table showing more periods.
We see that the portfolio showed its worth as we approached and moved through the first modern day pandemic. That said, almost 10 years in, I’d have to suggest that the portfolio has not truly been tested. There has been no ‘real’ recession or real stock market correction. Central bankers and finance ministers around the world unleashed the greatest government spending and support bonanza to put an end to the COVID recession and stock market correction.
In 2024 we continue marching to new highs. That’s all good by me. And we’ll hopefully be well prepared for the next recession and severe bear market.
More Sunday Reads
We’ll kick things off with the weekly sightings from Dividend Hawk. In the news section, TC Energy shareholders approve the spinoff of a new public company named South Bow Corporation.
Here’s the link to the announcement from management.
And a video from BNN Bloomberg, in which an equity analyst details the spinoff. The spinoff will not go into effect until later in the year. So you’ll have some time to decide if you want to continue to hold both ventures. I’m leaning towards keeping both.
- TC Energy = natural gas
- South Bow = oil
And for the weekly reads and podcasts we’ll cruise on over to Banker on Wheels. The feature story aligns nicely with the Sunday Reads – investing at the top of the markets.
You’l also find a video on ‘stocks for the long run’. And speaking of the Magnificent 7 and stock market concentration in a few stocks – how much is too much? From the charts you’ll see that the U.S. market often is driven by a few stocks, though we are certainly in a period of concentration exaggeration.
And speaking of new highs and heights …
Go hiking with Burnsco
While Bursco is a good follow for Canadian energy (and other) you can click to join the hiking adventures out west. The fruits of financial freedom. This is what it looks like …
More on the (adventurous) climbing theme from Bob at Tawcan – Is it really more tragic to die young?
At My Own Advisor Mark looks at how lower interest rates might help. Of course, in Canada, we were recently treated to the first rate cut. Thanks to Mark for linking to last week’s Sunday Reads – Canada braces for rate cuts. My guess was right that we would get a rate cut, and many more likely to come IMHO. Sadly, for that guess, I did not win a prize.
Or maybe I did ‘win’ … the bond market did start to move up when the Bank of Canada announced their first rate hold. From October of 2023 …
The Bank of Canada says “I’ll hold” on the Sunday Reads. From that post …
I my wife’s accounts I had added to XBB a few weeks ago, for the first time in a long time. She is overweight ultra-short term treasuries for the higher yield. But I’m happy to now also nibble away at longer term bonds for that stock market correction protection.
Yes, I was guilty of some bond market timing, perhaps. 🙂 I also suggested that the Canadian banks might be attractive given the valuation levels. That was the near-term bottom over the last 3 years or so. They’re up 20%. It may take some time and additional rate cuts to provide a meaningful tailwind for the Canadian banks.
Check out Canada’s best Robo Advisor
At stocktrades Dan takes a look at the Hamilton “enhanced” bank ETF – HCAL. That fund uses modest leverage as does the HUTS, the utilities option. I use some HUTS in very modest fashion in a couple of accounts, while keeping in mind that it is total return that matters.
And on the retirement front, Dan offers …
Put most of your money on the red dot?
Loonies and Sense is a good follow.
The problem with dividends
The problems and misconceptions about dividend investing (podcast) from Mike The Dividend Guy.
At Findependence Hub, we have index investing in the S&P 500.
And a new account type from EQ Bank. This looks very good for those who want to keep most of their savings at one institution. Add higher rate savings accounts to very good GIC rates.
In Kyle’s Making Sense of the Markets post for Money Sense, he suggested that the Notice Savings accounts are like …
If a high-interest savings account and a GIC had a child.
Smile of the week …
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Curious as to what percentage of U.S. currency denominated assets you hold as part of your total portfolio.
Cheers
Hi Steve, we are over 50% U.S. currency assets. I’ll keep ramping up a bit as my wife is about 3 years away from retirement.
Thanks Dale, that is a large percentage. Do you hold the U.S. dollar investments because you plan on spending more time in America, or are you concerned about the fate of our Loonie?
Hi Steve, that would be below the U.S. percentage in a global portfolio. Canada in itself is useful, but weak on its own. We only have a few sectors and we present currency risk, that we are experiencing now. Most would suggest about 30% Canada as a max, some say less.
Here’s a post on asset allocation. We want a mix of Canada / U.S. / International.
https://cutthecrapinvesting.com/2024/04/07/checking-in-on-your-asset-allocation-on-the-sunday-reads/