It’s that time again. I’ve updated the total returns for Asset Allocation ETF page on Cut The Crap Investing. The Asset Allocation ETFs are game changers in Canada. For starters, these are the perfect investment vehicles that allow Canadians to park their high fee mutual funds. Well, they can send those high fee funds to the junkyard where they belong. The AA portfolios are simply a better way to invest, for most investors. In one ETF you own a well-diversified global portfolio at your risk level of choice. The fund is managed for you. There’s nothing for you to do but add money in the accumulation stage, and then sell desired amounts in retirement. The fees in the area of 0.20% are a 90% off sale compared to a typical mutual fund.
Here’s the link to the Canadian asset allocation ETF page.
You’ll find the returns by risk level for the major providers of Asset Allocation ETFs. You’ll also see the comparison rankings by risk level – that is the top performers by category. Also, on that page you’ll find a table that helps you determine the appropriate ETF for each investment task. I’ve recently added a few examples for the ‘how to’ in the post.
The risk return proposition
Here’s an example using the iShares suite of funds.
We see the risk / return proposition on display. Investors who took on more risk were rewarded with greater returns. What is also on display is the wonderful returns that have been available over the last 5 years. Of course, the wonderful returns history goes back many, many decades.
Here’s a previous post on when should you rebalance and lessons from the Tangerine Portfolios. We can learn so much from simple asset allocation portfolios. I was an advisor and trainer with Tangerine Investments for several years.
Asset Allocation and U.S concentration
And if there is a great rotation away from U.S. stocks as Professor Gallaway details, the asset allocation ETFs have you covered. That’s a very good post. It likely won’t be a U.S. wipe out for stocks as the stock market is not the economy. It might be the beginning of the end of the nonsensical overweight to expensive U.S. stocks. I have long reminded investors about – the lost decade for U.S. stocks.
And well, it might be the end, or weakening of U.S. exceptionalism. But who knows, a global portfolio has you covered.
For those who want advice, financial planning and low-fee ETF portfolios check out Canada’s top Robo Advisor – Justwealth.
Extrement concentration is a weakness in the cap-weighted global ETFs such as XAW-T (Ex-Canada) as they simply went with the flow. If the global markets wanted to greatly overweight the U.S. they simply went along for the ride, by design. The most valuable companies get the greatest weighting. XAW is 65% U.S., dominated by expensive tech.
XGRO’s global mix
Here’s a look at the geographic allocation for iShares XGRO-T. It’s a nice global mix. To do one minor tweak I like the idea of an equal split between U.S. / International / Canada. You might even underweight Canada slightly. Many studies show 30% Canadian is ‘optimal’.
This gives a more clear picture on the equity allocation. Essentially:
- 35% U.S.
- 25% International
- 20% Canadian
That’s a very sensible mix that manages the U.S. overweight “issue”.
Asset allocation ETF lessson for retirees
The good news is that history suggests the asset allocation ETFs would work quite well in retirement. Or if you’re in the retirement risk zone.
Check out the history of a Canadian 60/40 balanced portfolio in creating retirement income from your portfolio. Here’s the key chart from that post showing the balanced portfolio delivering income at various spend rates.
Every point on each line represents the current portfolio value. It is so data rich. For example, on the far right we see the portfolio value from the 2024 start date. Of course, it’s still near the original $1 million. On the far left we see the current portfolio value (inflation adjusted) with a 1994 retirement start date. 1994 was a very fortunate retirement start date, in 2025 the portfolio value for a 4% spend rate is near $2 million. Obviously, the retiree could have greatly boosted the spend rate.
While you can do better, as we detail in Retirement Club, a simple but effective global balanced portfolio can do the job in retirement.
Related post: Using defensive sectors for retirement.
Asset allocation ETFs for accumulators
As I have penned a thousand times, the accumulation stage is quite simple. First, read my personal finance book. OK it’s a blog post as it all ain’t that complicated. 😉
Oh look, I just found $888,000 in your coffee.
And then take on the risk that you can handle. You might even consider one of the all-equity asset allocation ETFs if you have higher risk tolerance.
But pay attention to this Tweet and thread …
Don’t forget to live. That’s a great message from DividendBoomer.
Warren Buffett ‘retires’
With a sensible transition plan, Mr. Buffett showed great respect for shareholders and Berkshire employees. Warren Buffett announced that he will step aside as CEO of Berkshire Hathaway, turning the company over to a Canadian – Greg Abel. Of course, Warren Buffett is known as the greatest invesors of all time. He will leave almost all of his wealth to charity.
BRK.B is the largest holding in our accounts – it’s in my wife’s spousal RRSP. From 2014 (our time of holding) it has returned about 350% and 14.4% average annual, outperforming the S&P 500 by about 2% annual. I have long suggested this is a must holding for retirees. Berkshire is a conglomerate behemoth with insurance, railway and energy divisions beyond the public stock portfolio. The company holds over $345 billion in cash – waiting for the next major recession. That’s a nice hedge.
The Sunday Reads
Dividend Hawk’s portfolio had lots of activity this past week. We shared dividends from Bank of Nova Scotia (BSN-T), TD Bank (TD-T), CVS Health (CVS) and TC Energy (TRP-T). Quarterly reports included Warren Buffett’s beverage and holding of choice …
The Coca-Cola Company (KO) Reports First Quarter 2025 Results; KO reported Q1 Non-GAAP EPS of $0.73, up 1% from the prior year and $0.01 above analyst expectations. Net revenues declined by 2% to $11.1 billion, mainly due to currency headwinds and the refranchising of bottling operations. For the full year 2025, management expects organic revenue growth of 5%–6% and comparable EPS growth of 2%–3%, compared to $2.88 in 2024.
I choose Pepsi (PEP) instead as a holding.
At Findendence Hub, one of my favourite subjects, Low Volatility ETFs for a volatile world.
At Banker on Wheels we cycle through so many reads and podcasts.
In the mix, bond duration, friend or foe for managing risk. From that post –
It is important to put this in historical context – this was the first time in almost 50 years that both equities and bonds declined in the same year. And going back to 1977, there have only been 5 years in which bonds delivered negative returns. 2022 was unusual!
Dan at Stocktrades offers Canada’s blue chip powerhouses. That’s a good list. You could certainly build around those 10 stocks.
Related post: The Canadian Wide Moat Portfolio.
Bob at Tawcan offers his 2025 goals and resolutions update.
Stocks have been recovering and gold has lost its shine. It’s not needed, when stocks do well, of course. But as always – gold makes the balanced portfolio better.
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For March we received $45.44 in cash. You can select 3 categories for 2% cash back. The rest pays at 0.50%. That’s one of our lowest spending levels of the last several years. Our fuel bill is way down and so is our grocery bill.
That cash went into my TFSA account to buy some CBIL-T, HUTS.T and VDY.T.
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