U.S. stocks as represented by the S&P 500 have gained over 23% in 2024. That’s the best performance in 24 years. It’s the 13th best start, ever. In 1997, Bill Clinton was President, OJ Simpson was in court, Harry Potter is published, Netflix is founded, Steve Jobs is named the interim CEO of Apple. Yes, it was a long, long time ago. When it comes to investing in stocks there is no such thing as average. Going for a walk might have an everage speed that is relevant. Riding the stock market roller coaster takes you on an exciting, thrilling and gut-wrenching journey. But you gotta stay in your seat. You have to stay the course. It’s the best year-to-date for stocks in a long time, on the Sunday Reads.
Here’s a wonderful chart courtesy of Charlie Bilello.
And from the Kobeissi Letter …
Here’s a look at the Q3 year-to-date returns by year …
Before seeing these charts and tables I had suggested that the U.S. stock market felt like 1998. Maybe I missed it by one year.
I have long suggested that we overweight to U.S. stocks, followed by Canada and then other International. I have stated the obvious that the U.S. is where they keep most of the best companies on earth. And it’s where they keep the growth.
When stock markets make sense
While the markets will gyrate all over the place …
… there is one trend that they mosty follow over time. Earnings.
The recent turbo charge is courtesy of the potential of AI to boost the prospects for economies and technology and innovation around the globe. From February – How will AI power your portfolio? The U.S. is simply dominant in this technological revolution.
A much-repeated messsage on this blog is to check the cost of your Canadian home bias.
That said, the Canadian markets have had a wonderful year as well, up about 19%.
Is it time to rebalance your portfolio?
The beauty of using one of the asset allocation ETFs is that the portfolio is managed for you. The allocations are rebalanced on schedule. If you have built your own ETF portfolio, you will have to rebalance. Of course the same goes if you have created a portfolio of individual stocks and ETFs.
Check out Canada’s top Robo Advisor
You can rebalance once a year, or by threshold. If your U.S. stock target weight is 40% and it has moved to 50%, you would simply sell enough to bring your allocation to target. You’d move the proceeds to an asset that is below its target weight. Of course, be sure to manage any capital gains in your taxable accounts.
Turn your capital gains into income
If you’re in retirement or in the retirement risk zone, you have a wonderful opportunity to turn those incredible capital gains into income. You sell assets and move the procceds to safety – bonds / cash / GICS / gold. They are ready for spending. I like the cash-like ultra short term bonds, CBIL.TO in Canada and UBIL.U for U.S. Dollar accounts.
This week, I updated the GIC rates at EQ Bank.
We also hold some longer dated bond ETFs that will go in price up when the markets tank (assuming we do get another recession one day, ha). A mix of cash and bonds seems prudent.
You can also consider defensive equities for retirement.
Retirement reads
Creating retirement income from your portfolio.
Boost your spend rate in retirement.
Risk tolerance drift
Check your risk tolerance level. The past 15 years or more have led many to think and feel that stocks only go up. In the table above in this post, check out the (red line) returns from 2000-2002. See the financial crisis of 2008-2009.
Major corrections happen, be ready.
More Sunday Reads
Here’s the week in review in the eyes of Dividend Hawk. Hawk reports on dividends received and his holdings that makes the news.
We’ll then turn our attention to Banker on Wheels who takes a look at sustainable withdrawal rates in retirement. You’ll find a podcast interview with Bill Bengen the creator/originator of the 4% rule. It’s a term that Mr. Bengen doesn’t like. Historically retirees have been able to use a spend rate in a range from 4% to 15%. It mostly comes down to the luck of the draw – your start date and what stock markets then offer up inthe early years.
Bengen now feels a 5% spend rate is more appropriate for a balanced portfolio that includes international, some greater growth holdings, gold and other real assets. The average (sustainable spend rate) of the last 5 decades is about 7%.
There’s nothing average about stock market returns and there’s nothing average for a safe withdrawal rate in retirement.
Bengen also looks at the reverse equity glide path in retirement. I covered that on Seeking Alpha, thinking I had come up with the concept 🙂 Yes, you can remove the sequence of returns risk and succeed.
At Stocktrades Dan wonders if there are too many headwinds for Magna International.
At Findependence Hub there’s 4 new posts for the week.
Bob at Tawan looks at fractional shares, is there a benefit for investors?
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Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and low-fee ETF portfolios all at one shop.
Consider Justwealth for RESP accounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.
OUR SAVINGS ACCOUNTS
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 2.5% and 3.0%. You’ll find some higher rates on GICs up to 4.50%. They also offer U.S. dollar accounts. We use EQ Bank, they have been awesome.
OUR CASHBACK CREDIT CARD
We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …
The Tangerine Cash Back Credit Card
For September we received $51.44 in cash. You can select 3 categories for 2% cash back.
That cash went into my TFSA account to buy some bitcoin, ha.
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