All posts by Jonathan Chevreau

Latest crop of fixed-income ETFs keeps pressure up on fees

My latest MoneySense blog on ETFs looks in more depth at the four new fixed-income ETFs Vanguard Canada debuted in February, and how they sit versus existing funds in the category. Click on the highlighted text to retrieve the full article: Latest crop of Vanguard ETFs keeps up pressure on fees. 

The Hub noted the arrival of these new fixed-income ETFs when they were announced — here — but since then the 2017 edition of the MoneySense ETF All-stars has come out. For this article, we were interested in what some of the six panelists responsible for selecting the All-Star ETFs had to say about the new Vanguard funds.

The chart below, prepared by Forstrong Global Asset Management Inc. from industry sources, shows the four fixed-income categories the new products cover: Canadian Broad Government bonds; Canadian Broad Corporate; Canadian Short Government; and Canadian Long Aggregate.  As the chart shows, before these new arrivals, there was one iShares fixed-income ETF in three of those categories, except for the well-served Canadian Short Government bond segment, which had one iShares offering, two BMO products and one from First Asset. Actual product names and tickers are shown below, along with data on Duration, MERs, credit quality and the mix of government and corporate issues:

Canadian Broad Government
Ticker Name MER1 Duration1 AAA2 AA2 A2 BBB2 Federal/ Agencies2 Provincial/Municipal2 Corporate2
VGV Vanguard Canadian Government Bond Index ETF 0.25%3 8.0 54% 42% G4% 0% 51% 49% 0%
XGB iShares Canadian Government Bond Index ETF 0.39% 7.9 55% 28% 16% 0% 51% 49% 0%
Canadian Broad Corporate
Ticker Name MER1 Duration1 AAA2 AA2 A2 BBB2 Federal/ Agencies2 Provincial/Municipal2 Corporate2
VCB Vanguard Canadian Corporate Bond Index ETF 0.23%3 5.5 7% 30% 24% 40% 0% 0% 100%
XCB iShares Canadian Corporate Bond Index ETF 0.44% 6.1 4% 25% 34% 38% 0% 0% 100%
Canadian Short Government
Ticker Name MER1 Duration1 AAA2 AA2 A2 BBB2 Federal/ Agencies2 Provincial/Municipal2 Corporate2
VSG Vanguard Canadian Short-Term Government Bond Index ETF 0.18%3 2.7 77% 18% 4% 0% 74% 26% 0%
FGB First Asset Short Term Government Bond Index Class ETF 0.25%3 2.9 72% 17% 12% 0% 71% 29% 0%
ZFS/L4 BMO Short Federal Bond Index ETF 0.23% 2.6 100% 0% 0% 0% 100% 0% 0%
ZPS/L4 BMO Short Provincial Bond Index ETF 0.28% 3.0 9% 55% 36% 0% 0% 100% 0%
CLF iShares 1-5 Year Laddered Government Bond Index ETF 0.17% 2.5 61% 21% 18% 0% 49% 51% 0%
Canadian Long Aggregate
Ticker Name MER1 Duration1 AAA2 AA2 A2 BBB2 Federal/ Agencies2 Provincial/Municipal2 Corporate2
VLB Vanguard Canadian Long-Term Bond Index ETF 0.17% 14.8 32% 54% 8% 6% 26% 64% 10%
XLB iShares Core Canadian Long Term Bond Index ETF 0.18% 14.4 29% 30% 33% 9% 24% 54% 22%
1. MER and duration data as of February 28, 2017
2. Credit quality and issuer breakdowns are approximate and based on the most recent publicly available data from the ETF issuers
3. Represents management fee only, as an audited MER is not yet available.
4. ETF offered in both distributing units and accumulating units (L)
Sources: BMO Capital Markets, National Bank Financial, ETF Issuer Websites

The “Work Optional” stage: Work because you WANT to, not because you HAVE to

Nice to see the phrase “Work because you want to, not because you have to”  used by in its just-posted Retirement blog that looks at Victory Lap Retirement.

VLR, as co-author Mike Drak and I call it, has in some recent weeks cracked the Globe & Mail non-fiction bestseller list.

The line “Work because you want to, not because you have to,” was originally coined by me in the prequel to VLR: Findependence Day.

Aman Raina

Meanwhile you can view a “video book report” on Victory Lap Retirement in this clip by Sage Investor’s Aman Raina, who regular Hub readers may recognize as a guest blogger who provides considerable insights into the robo-adviser space. You can also find the video book report here via iTunes.  Aman’s most recent Hub blog was this one reviewing Year 2 of his personal Robo-adviser experience and test.

Continue Reading…

Review & Excerpt of Clay Gillespie’s Create the Retirement You Really Want

The Financial Post has just published my review of a new book by Vancouver-based financial advisor Clay Gillespie: Create the Retirement You Really Want: And Retire Smarter, Richer and Happier.

You can find the online review by clicking on this highlighted headline: From Dreams to Legacy: New Book Details the 5 Stages of Retirement.

And below is an excerpt from the chapter highlighted in the review. We may also run at least one other excerpt in the coming weeks. Over to you, Clay!

By Clay Gillespie

Special the Financial Independence Hub

Retirement isn’t an event; it’s a process, and it begins years before you actually retire. Working with hundreds of clients over many decades, I’ve come to realize that retirement success is best achieved in five distinct stages. Each stage reflects a different aspect of who you are and where you want to be in retirement, and it all begins with a dream.

       1.) Dreams stage

The Dreams stage of retirement typically begins about five or six years prior to actual retirement. This is the time when people have decided to retire but aren’t yet sure of the date. It’s the time where retirement goals and hopes for the future become defined and a preliminary retirement plan is developed. For couples, especially, retiring now becomes an ongoing topic of discussion, not just something brought up in passing.

2.) Reality stage

The Reality stage usually occurs between 6 and 24 months before retirement and its temporal proximity really starts to hit home. Lifestyle issues come into greater focus, along with fears that one’s retirement nest egg may be inadequate. This is a crucial time from a planning perspective. Old Age Security (OAS) and Canada Pension Plan/Quebec Pension Plan (CPP/QPP) applications need to be made, income streams need to be consolidated, taxes need to be minimized and portfolios need to be optimized for income and growth.

3. Transition stage Continue Reading…

The 2017 MoneySense ETF All-Stars

The fifth edition of the MoneySense ETF All-stars is available online here. This annual feature used to appear in the print edition of the magazine and was originally written by Dan Bortolotti, who is now a full time investment advisor with PWL Capital Inc., and well known for his Canadian Couch Potato blog.

In recent years, I’ve written it, with the assistance of an expert panel of ETF experts you can find in the link. They include Dan himself and his partner Justin Bender at PWL, Tyler Mordy at Forstrong Global Asset Management, Mark Yamada at PUR Data, Yves Rebetez, editor of ETF Insight), and Alan Fusty of Index Wealth Management. (The same members as last year).

As you’ll see, because the goal of the panel is to identify low-cost, well diversified ETFs that can be bought and held over the long run, we try not to make changes just for the sake of change. As a result, 12 of the 14 picks from 2016 are back in 2017, with two substitutions deemed necessary in the US equity and fixed income categories.

Changes in US equity and fixed-income categories

In the case of the US equity category, the panel stood pat with two Vanguard S&P 500 ETFs (hedged and unhedged) but replaced a third Vanguard ETF in this category, VUN, with a new offering, XUU, launched in 2015: the iShares Core S&P US Total Market Index ETF.

The other big change was in fixed-income. Four of our five fixed-income picks are back, with one major tweak: the removal of VAB, Vanguard Canadian Aggregate Bond Index ETF, and its replacement by ZAG, the BMO Aggregate Bond Index ETF.

For the most part, the panel was unanimous in making these two particular tweaks although of course there was a fair amount of debate throughout the process, which you can read about in the full article online.


Q&A: How Dividends can speed Financial Independence

I recently had a chance to discuss a new Canadian advisory on dividend stocks with the people responsible for that newsletter. The advisory comes from TSI Network, founded by Pat McKeough, whose investment approach I have always respected.

The advisory is TSI Dividend Advisor (shown above), and it grew out of a long respect for the power of dividends.

Pat and his investment team have always viewed dividends as a sign of investment quality. By extension, dividend stocks become the most reliable foundation of an investment portfolio built for growing wealth and financial independence.

This confidence in dividends is accompanied by a detailed examination of dividend-paying stocks to identify those with the greatest potential to sustain, and raise, their payouts.

The 8 key points they use to evaluate dividend stocks grew into their Dividend Sustainability Ratings. This proprietary ratings system became the backbone of the new TSI Dividend Advisor.  It was launched late in 2016 to impressive reviews in the media and a flood of subscriptions from Canadian investors.

Here are some of the keys to that success, from the editors’ point of view.

Jon Chevreau:  First of all, Pat, thanks for your time. What role do dividends play in a  successful portfolio? How can they lead to Findependence?

Pat McKeough

Pat McKeough: Top dividend stocks are a key part of a successful portfolio. Top dividend stocks can produce as much as a third of your total return over long periods. These payouts are drawn from earnings cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or monthly as well.

At TSI Network, we think investing in dividend stocks is one of the best investment decisions you can make to achieve Findependence. Dividends serve as a way for companies to share the wealth they accumulate through successfully operating their businesses.

JC: Many stocks have dividends. What makes a top dividend stock?

Jon Chevreau

PM: Top dividend stocks provide steady dividends: a sign of investment quality. Some good companies reinvest profits instead of paying dividends. But fraudulent and failing companies hardly ever pay dividends. So if you only buy stocks that pay dividends, you’ll automatically stay out of almost all the market’s worst stocks. For a true measure of stability, focus on companies that have maintained or raised their dividends during economic and stock market downturns. These firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, top dividend stocks provide an attractive mix of safety, income and growth. Continue Reading…