All posts by Jonathan Chevreau

BMO ETFs experts and finfluencers’ reveal best personal picks at DIY Investor Day

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Courtesy BMO ETFs/TSX

On Wednesday, BMO ETFs conducted its second annual ETF Investor day. Conducted at the Toronto Stock Exchange, Do-it-yourself investors and finfluencers [Financial Influencers] were on hand for the ceremonial opening of the exchange, shown in the photo on the left (including myself).

Hard to believe, but this marks BMO’s 16th year as a Canadian ETF provider.

Before we get to the individual expert picks from BMO’s large ETF stable, the morning began with the obligatory analysis of the current Trump-inspired global trade war, and its implications for the Canadian economy and stock market.

Economic Update

In an Economic update Amber Kanwar, Host of the In the Money Podcast interviewed Bipan Rai, Head of ETF & Structured Solutions Strategy at BMO ETFs. Rai said the protectionist measures being imposed by the Trump administration have “not been seen since the Great Depression.” In the U.S. tariffs are now north of 20%, or ten times the 2% average tariffs that were previously in place.

Asked what will happen next, Rai said probably one of three things: Trump might rescind the Tariffs, or there will be a massive expansion of U.S. fiscal policy to fund its Tax Cuts, or the Federal Reserve will cut rates. But he doesn’t think a U.S. recession will show up this year, as its economy is “too dynamic.”

BMO ETFs Bipan Rai

However, Rai was less confident that Canada won’t face a Recession: “I’m very concerned about the Canadian economy in coming quarters.” The two most recent scenarios from the Bank of Canada are mixed: one is “far more benign,” the second “more malignant.” He thinks the former is more likely, with a few negative quarters of GDP growth but not likely exhibiting Stagflation risk. 70% of Canada’s GDP is generated from trade, “most of it with the U.S. As much as [Prime Minister Mark] Carney talks about diversifying away from the U.S., that’s not going to happen. The U.S. is way too big and is right next door. We may do more with the United Kingdom but it and the European Union won’t replace the U.S. Jobs may be lost, especially in the auto sector.”

Asked if he expects more rate cuts from central banks around the world, Rai said he thinks the BOC is likely closer to the end, with one or two more rate cuts, after which fiscal stimulus will kick in. England or the ECB may cut a few more times, then Japan and a few “others divorced from the rest.”

How retail investors can play Defence

Kanwar also probed the views of two experts in a session titled Playing Defense: Positioning Your Portfolio in today’s environment. Now that the U.S. market has rebounded 18% from the lows around early April’s Liberation Day, Kanwar asked how Do-it-yourself [DIY] investors can deal with volatility. Jimmy Xu, Head of Liquid Alternatives & Non-linear solutions, BMO ETFs, said it depends on investor goals. Those with a long-term 20- or 30-year time horizon before Retirement would be “best to sit tight,” Xu said, “Overtrading is the enemy of growing assets and market timing is hard.”

Freelance writer Tony Dong, founder of ETF Portfolio Blueprint, said volatility is the price of admission to create investment returns that are superior to risk-free treasury bills. Betting on certain sectors may expose DIY investors to uncompensated risk, Dong said. Even equal-weight products provide imperfect exposure to the size premium commanded by small- and mid-cap stocks. But investors can overweight less volatile stocks concentrated in structurally defensive sectors like health care, utilities and consumer staples. Jimmy Xu said sector-agnostic low-volatility strategies can help investors get around this problem. BMO’s low-volatility ETFs own low-volatility stocks that have a low beta relative to the broad market, which amounts to “a better tool than picking top sectors.” Continue Reading…

How much should Retirees with RRIFs “de-risk” their portfolios?

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In mid-April, my monthly Retired Money column for MoneySense looked at the experience of new retirees who have just shifted from RRSPs to Registered Retirement Income Funds (RRIFs), including my own.

Now my followup May column has been published, and it looks in more detail at how such new retirees should handle their Asset Allocation, particularly in light of this volatile Trump Trade War era we are now in. You can find the full column by clicking on the highlighted headline: How to allocate a RRIF for Secure Income in Retirement. 

The column begins with an old rule of thumb that advisor John De Goey says is now obsolete: that your age should roughly equal your Fixed-Income exposure. So, for example, that rule would suggest a new RRIF owner aged 71 might have 71% fixed-income and just 29% stock exposure.

I bounced that off De Goey, who recently aired his views on Trump’s second reign of Error in this recent Findependence Hub blog: The Gangster in the White House.

A new Rule of Thumb for Retirement Asset Allocation

He introduced me to a novel formula that was new to me and perhaps to most readers. “I believe longevity has made that [previous] rule of thumb out of date for at least a generation now. My view, after taking longevity into account, is that you should use age times the decimal of your age until you get to RRIF age (71). This assumes that the client is not particularly risk averse. The portfolio still has to be suitable.”

 So under this new rule and assuming the other qualifications apply to your personal -circumstances,  a 50-year-old should be 50 x .50 = 25% in fixed income; a 60-year-old should be 60 x .60 = 36% in income; and a 71-year old-should be 71 x .71 = ~ 50% in income. However, beyond that age,  De Goey thinks 50% fixed income is the maximum. “People over the age of 71 should be able to withstand having half their money in equities even if they’re in their 90s, because the risk associated with the 50/50 portfolio is quite low.

I was recently interviewed by Allan Small on his Allan Small Financial Show, along with financial commentator and broadcaster Patricia Lovett-Reid, formerly a TD Waterhouse senior vice president and later CTV commentator. Allan, who is Senior Investment Advisor for Scarborough-based IA Private Wealth Inc., probed us about current investor psyche and how to position for the global trade war.

Coping with the Triple T

Patricia coined the term Triple T: for Trump, Trade and Tension. Reviewing past investor panics, she said it is “different this time in that we have an individual wreaking havoc on a global platform.” Even so, she suggested staying the course with quality holdings, albeit being a more defensive with utilities, telecom, financials and Gold. Since we may all spend a third of our lives in Retirement, retirees should not abandon the “stocks for the long run” stance, she said. If you can’t sleep at night, ask your advisor what you can do about it but personally, Lovett-Reid says she has not made any drastic changes to her family’s Asset Allocation.

One focus of the interview, some of which also aired on CFRB 1010 Radio, was our “crystal ball” for markets by the end of the year. All three of us thought they would likely be a bit higher from where they were in late April. Patricia said the TSX should outperform for the rest of 2025, based on its resource and materials stocks (Gold, Oil). My view assumed Trump would partly back down from his harder-nosed Tariff positions but if he doesn’t, I said, “Look out below.”

One observation was that those with Defined Benefit pension plans can consider those to be a form of fixed income. That leaves more room to take risk with equities in other parts of one’s retirement portfolio. In a followup email, Patricia told me that “As someone with a DB [pension], I tend to skew toward more equities. And yet I do like the 60/40 split (equities to bonds). I’m very much about asset protection versus accumulation, so we are erring on the cautious side.”

What role can Annuities play?

The full MoneySense column closes with a look at annuities, which resemble Fixed Income.

In the past, I have referenced retired actuary Fred Vettese’s suggestion in various Globe & Mail columns that – at least for those who don’t have employer-sponsored Defined Benefit pension plans – they should partly annuitize when their RRSP must be converted to a RRIF. Continue Reading…

New to a RRIF? Make sure you have enough cash and consider dialing down risk

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My latest MoneySense Retired Money column has just been published and covers something that was a new experience for me: starting and managing a RRIF or Registered Retirement Income Fund.

You can find the full column by clicking on the highlighted headline: How to make sure you have enough money to fund your RRIF withdrawals. 

At the end of the year you turn 71, those with RRSPs are required either to cash them out  (not recommended from the standpoint of taxes), to to annuitize orto convert it into a RRIF, or Registered Retirement Income Fund. The latter is the most popular action and recommended by experts like The Successful Investor’s Patrick McKeough.

            However,  as I’ve discovered since my own RRIF started up this past January, the sweetness of the RRSP tax deduction over the decades is offset by the sourness of having to pay taxable withdrawals on your new RRIF.

            In my case, I am a DIY investor who uses one of the big-bank discount brokers to self-manage the taxable distributions and to manage the remaining investments, most of them carryovers from the RRSP.  While accumulating funds in an RRSP is a matter of making annual contributions and reinvesting dividends and interest, a RRIF represents a departure from the psychology needed to build an RRSP for the future. Suddenly, regular selling is necessary. The RRIF rules mean that in the first year you’ll have to withdraw something like 5.28% of what your balance was at the start of the year (rising to 5.4% at age 72 and every upwards each passing year).

Payments can quarterly, monthly or any frequency you choose

          If you choose monthly payments, as I did, that means every month you have to have 1/12th of the required annual distribution in the form of ready cash to be whooshed out monthly on whatever date you specify. As most retirees will be getting other pensions near the end of the month, I chose mid-month for the RRIF distribution. You also need to choose the percentage of tax you wish to pay to Canada Revenue Agency: I picked 30%, which automatically leaves your account each month. The remaining 70% transfers out into your main chequing account, ideally at the same financial institution where the RRIF is held: It’s easier that way.

Setting regular tax payments

          You also need to choose the percentage of tax you wish to pay to Canada Revenue Agency: I picked 30%, which automatically leaves your account each month. The remaining 70% transfers out into your main chequing account, ideally at the same financial institution where the RRIF is held: It’s easier that way. Sure, you could set the tax at 10% or 20% but if you have other sources of taxable income, like taxable dividends and other pensions, I’d rather not have the unpleasant surprise of a larger-than-expected tax bill a year from April. Once you have a year of RRIFing under your belt, you may see fit to adjust the 30% upwards or downwards. Continue Reading…

“Unretirement” — more than one in four near-retirees plan to work in Retirement to make ends meet

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My latest MoneySense Retired Money column has just been published. You can find it by clicking on the highlighted text here: Why “unretirement” may be the fate of so many Canadians.

Even before the Tariffs threats emerged under Trump 2.0, Canadian seniors were starting to find the economic uncertainty and rising living costs to be unmanageable. No surprise then that many seniors approaching Retirement Age are delaying their exit from the workforce.

According to a report by HealthCare of Ontario Pension Plan, 28% of unretired Canadians aged 55-64 say they expect to continue working in retirement to support themselves financially.  Here’s a screenshot from the HOOPP survey:

 

The Healthcare of Ontario Pension Plan (HOOPP) commissioned Abacus Data to conduct its sixth annual Canadian Retirement Survey in the spring of 2024.  The latest survey finds “persistent high interest rates and a rising cost of living continue to have a significant negative impact on Canadians’ ability to save and manage the cost of daily life, threatening their retirement preparedness.” While all Canadians are struggling, “women and those closest to retirement are especially hard hit with lower savings and higher levels of financial stress.”

While most Canadians are struggling to save amidst a high cost of living, HOOPP finds women are particularly affected. Half (49%) of all Canadian women have less than $5,000 in savings and almost a third (28%) have no savings (compared to 33% and 17% of men, respectively), similar to the 2023 results

 

The MoneySense column also looks at more recent Retirement surveys that also reveal anxiety about rising costs of living. One is from Bloom Finance Co. Ltd., conducted by founder Ben McCabe after Trump’s Tariffs started to kick in this year.

A Bloom study conducted with Angus Reid found 46% of Canadians thinking of working part-time in Retirement. That’s in line with a Fidelity survey in 2024 that found half of Canadians plan to delay Retirement. According to the Bloom Report [in March 2024], 67% of Canadian homeowners over 55 were concerned their savings would not sustain their quality of life through retirement. Only 29% considered downsizing or alternative living situations to access their home equity earlier than expected. 59% of the same cohort agreed accessing micro-amounts of their home’s equity would help maintain their desired living standard. Continue Reading…