Decumulate & Downsize

Most of your investing life you and your adviser (if you have one) are focused on wealth accumulation. But, we tend to forget, eventually the whole idea of this long process of delayed gratification is to actually spend this money! That’s decumulation as opposed to wealth accumulation. This stage may also involve downsizing from larger homes to smaller ones or condos, moving to the country or otherwise simplifying your life and jettisoning possessions that may tie you down.

All-in-one ETF showdown TD vs. BMO vs. iShares vs. Vanguard: Which is best?

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Image courtesy Tawcan/Unsplash

By Bob Lai, Tawcan

Special to Financial Independence Hub

Over the years, I have come to really like the all-in-one ETFs from Vanguard and iShares. I like these ETFs because they are a simple way to diversify your portfolio across different sectors and countries. These ETFs also automatically rebalance regularly, making an investor’s life much easier.

Due to the popularity of the all-in-one ETFs, both TD and BMO also created similar ETFs. Which company offers the best all-in-one ETFs? Are TD ETFs better? Are iShares ETFs better? Are Vanguard ETFs better? Or are BMO ETFs better?

Let’s find out!

TD ETFs

TD has many different ETFs, including active ETFs, special focused ETFs, and broad market index ETFs that are well-suited for different investment strategies. When it comes to all-in-one ETFs, TD offers three different ETFs that were created in 2020:

All three of these TD all-in-one ETFs have a MER of 0.17%. This means if you have $1k invested in one of these ETFs, you effectively would pay $1.7 in fees every year, which is extremely cheap if you think about it.

Here are the historical performances of these three ETFs:

1 Yr 2 Yr 3 Yr
TCON 12.48% 9.63% 4.41%
TBAL 19.27% 14.96% 8.04%
TGRO 26.27% 20.16% 11.70%

You can buy and sell all three ETFs via online brokers. Since many brokers offer commission-free trades nowadays, you can buy one of these all-in-ones regularly and build up your portfolio.

BMO ETFs

Like TD, BMO offers five different all-in-one ETFs (BMO calls them Asset Allocated ETFs).

All five BMO all-in-ones have an MER of 0.20%.

ZBAL and ZESG are very similar, except ZESG is for investors looking to align their investments with their social values.

Here are the historical performances of the five BMO ETFs:

1 Yr 2 Yr 3 Yr
ZCON 13.94% 9.74% 4.79%
ZBAL 18.67% 13.10% 7.25%
ZESG 18.63% 14.61% 7.68%
ZGRO 23.52% 16.49% 9.71%
ZEQT 28.35% 19.83% 12.09%

ZCON, ZBAL, and ZESG have more than 40% exposure to Canada, while ZGRO and ZEQT are more heavily exposed to the US.

iShares ETFs

Like BMO, iShares offers five all-in-one ETFs. 

All five ETFs have an MER of 0.20%.

Here are the historical performances of the five iShares ETFs:

1 Yr 3 Yr
XINC 9.97% 2.81%
XCNS 14.38% 5.07%
XBAL 18.81% 7.70%
XGRO 23.47% 9.65%
XEQT 28.06% 11.92%

Vanguard ETFs

Finally, Vanguard all-in-one ETFs:

VRIF has an MER of 0.29%, while the other five all-in-ones have an MER of 0.22%. VRIF probably has a slightly higher MER because of the fund structure. Interestingly enough, Vanguard all-in-ones have the highest MER out of the four fund companies (I said this because historically Vanguard has lead the way when it comes to lowest MER).

Here are the historical performances of the Vanguard all-in-one ETFs:

1 Yr 3 Yr
VCIP 8.90% 1.99%
VRIF 10.44% 3.08%
VCNS 13.61% 4.45%
VBAL 18.40% 6.90%
VGRO 23.39% 9.39%
VEQT 28.40% 11.83%

The best all-in-one ETFs for your investment portfolio

As you can see, all four fund companies offer all-in-one ETFs with different asset exposures. Which are the best all-in-one ETFs for your investment portfolio?

Well, that is totally dependent on your risk tolerance and your investment timeline.

If you are an investor who is approaching retirement or is already retired, you might want to invest in something more conservative. In other words, you don’t want to lose sleep whenever there’s a market correction. For you, a steady investment income and stable portfolio value growth is more important. Therefore, you probably will go with either a conservative all-in-one ETF or a balanced all-in-one ETF.

If you are younger with a longer investment time horizon, you want to aim for portfolio growth. Therefore, you’d probably go with either a growth all-in-one ETF or an all-equity ETF to maximize your return over the long term.

Best Conservative All-in-One ETF

As mentioned, if you are a conservative investor who needs a steady investment income with stable portfolio value growth, a conservative all-in-one ETF is probably the best choice for you.

The question is, which conservative all-in-one ETF is the best?

Let’s compare TCON, ZCON, XINC, XCON, VCIP, VRIF, and VCONs all of which are heavily exposed to fixed income.

Fixed income to equities Mix MER  1 yr return 3 yr return 5 yr return Yield %
TCON 70-30 0.17% 12.48% 4.41% N/A 2.26%
ZCON 60-40 0.20% 13.94% 4.79% 4.87% 2.45%
XINC 80-20 0.20% 9.97% 2.81% 2.86% 2.70%
XCON 60-40 0.20% 14.38% 5.07% 5.35% 2.17%
VCIP 80-20 0.25% 8.90% 1.99% 2.11% 2.86%
VRIF 70-30 0.32% 10.44% 3.08% N/A 3.55%
VCON 60-40 0.24% 13.61% 4.45% 4.71% 2.51%

Among ZCON, XCON, and VCON, which all have the same 60-40 mix, it’s interesting to see that XCON had the best returns consistently, but XCON has the lowest distribution yield.

Among TCON, XINC, VCIP, and VRIF, TCON has had the highest returns, most likely due to the lower MER fees.

Not surprisingly, ETFs with a higher exposure to stocks have had higher returns in the last five years. Continue Reading…

How to invest and shop during Trump idiocracy

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Theatrical release poster for the film, Idiocracy. via Wikipedia.

By Mark Seed, myownadvisor

Special to Financial Independence Hub

A few months ago I wrote:

“Yes, interesting times may call for interesting portfolio changes! Or not. :)”

Well, here we are.

Regardless about how you feel about the current U.S. Administration, I would think most people would agree that this U.S. President feels very emboldened right now. With no future term to go: this is his last shot at taking shots at pretty much anything and everyone he wants without too many consequences near-term. At least it seems that way …

Since writing this post below from December I thought I would update such a post about any recent portfolio changes and beyond that, how our shopping habits have shifted (if at all) in recent months.

How to invest and shop during Trump idiocracy

I put the term “idiocracy” in the post title since it’s very much how I feel right now.

It’s like watching the Ferris Bueller movie scene: on tariffs.

History repeats.

Now that tariffs are in place and we’re now in a (trade) war between Canadian and U.S. businesses, consumers and workers (sadly), I’m expecting these tariffs will roil stock markets for months or years to come.

I have.

This is how I intend to invest and shop during some prolonged Trump idiocracy.

Approach #1 – What investments can withstand stagflation?

New tariffs are likely, in my opinion, to trigger a sustained period of low economic growth and even higher inflation: which will impact everyone.

At the most basic level, inflation means a rise in the general level of prices of goods and/or services over a period of time. When inflation occurs, each unit of currency buys fewer goods and services. Inflation results in a loss in the value of money and purchasing power. We will all be impacted by this.

Stagflation is essentially a combination of stagnant economic growth, high unemployment, and high inflation. When you think about it …. this combination probably shouldn’t exist: prices shouldn’t go up when people have less or no money to spend. This could be a place where things are trending…

Farmland might perform well during stagflation but we don’t own any.

Instead, I own some “defensive stocks” including some in key economic sectors like consumer staples, healthcare and utilities in my low-cost ETFs that should be able to weather a prolonged disruption. I also consider a few selected stocks we own as defensive plays: waste management companies. At the time of this post, both Waste Management (WM) and Waste Connections (WCN) we own have held up very well and provided stellar returns over the last 5+ years that I’ve owned them.

  • WM is up almost 100% in the last 5-years.
  • WCN is up over 100% in the last 5-years.

We’ll see what the future brings and my low-cost ETFs are a great diversifier: regardless.

Approach #2 – Staying global while keeping cash

Beyend certain sectors, investors should always consider holding a well-diversified stock portfolio across different sectors and different economic regions to reduce the long-term reliance on industries directly affected by tariffs.

While I have enjoyed a nice tech-kicker return from owning low-cost ETF QQQ for approaching 10 years now, and I will continue to hold some QQQ in my portfolio, I could see technology stocks tanking near-term. To help offset that, I own some XAW ETF for geographical diversification beyond the U.S. stock market. Thankfully. 

Times of market stress are however times to buy stocks and equity ETFs.

Near-term and long-term investing creates buying opportunities for disciplined investors. A well-structured, diversified global mix of stocks including those beyond the U.S. could provide some decent defence against a very toxic, unpredictable economic and political agenda.

For new and established readers on this site, you might be aware I’ve mentioned that our investing approach could be considered a “hybrid approach” – a structure that was established about 15 years ago as follows:

  1. We invest in a mix of Canadian stocks in our taxable account: to deliver income and some growth, and
  2. Beyond the taxable account, we own a bunch of low-cost ETFs like QQQ and XAW inside our registered accounts: inside our RRSPs, TFSAs and my LIRA for extra diversification.

I like the hybrid approach, the process and the results to date.

At the time of this post, I just don’t see how I should be making any significant changes to our equity portfolio.

Beyond our portfolio of stocks and equity ETFs we keep cash/cash equivalents.

Cash savings remains a good hedge for a very uncertain near-term future. We have a mix of Interest Savings Accounts (ISAs) / High Interest Savings Accounts (HISAs), along with Money Market Funds (MMFs) in particular in our registered accounts. Generally, plain-vanilla savings accounts offer very low interest rates. So, if you want to earn more on your savings deposits (rather than simply using your savings account) then consider an ISA or HISA.

The greatest appeal of ISAs and HISAs for taxable savings IMO is liquidity, while earning interest, and member financial institutions of Canada Deposit Insurance Corporation (CDIC) insure savings of up to $100,000. It’s good business for banks and institutions as well since money deposited generates interest by allowing the bank to access those funds for loans to others. There are usually no fees for these accounts and while interest rates have come down in recent months, ISA and HISA interest rates are consistently north of 2% at the time of this post.

I believe some form of savings account / ISA / HISA remains the cornerstone of everyone’s personal finance portfolio since 1. your money is saved for future expenses or ready for emergencies, 2. it is safe/low risk, 3. it is liquid, and 4. you still earn returns.

Let your equities do as they wish after that.

Approach #3 – Shop local, buy local, and avoid U.S. travel

We are fortunate to live in an area in Ottawa where we can shop local and buy from local farmers. We will continue to do that.

For those that want to shop more in Canada and buy more Canadian goods visit here:

We’ve been fortunate to save up some money in our “sunshine fund” as I call it for some future travel. I/we have no near-term plans to spend our money in the U.S.

I’ve been fortunate to visit many, many U.S. States over the years but given this recent trade war initiated by this current U.S. Administration I hardly have any desire to spend my money in a country whereby that government talks about annexing us.

It’s that simple for us.

I encourage other Canadians who can and do travel, to consider the same – avoiding the U.S. – not because of its citizens but the U.S. Administration decisions. 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…

We Don’t Recommend the Dogs of the Dow Investing Approach: Here’s Why

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Here’s a Look at the Dogs of the Dow Investment Strategy

1. The Traditional Dogs of the Dow Approach

Photo by Pexels/Arwa Askafi

The Dogs of the Dow approach involves buying the highest-yielding stocks in the Dow Jones Industrial Average. It’s based on the idea that a high dividend yield is an indicator of an undervalued stock.

To apply this approach, at the end of each year, you pick the 10 stocks with the highest dividend yields from the 30 stocks that make up the Dow index.

You then invest an equal dollar amount in each of these 10 stocks and hold them for one year. You repeat the selection process and re-jig the portfolio at each year-end.

In theory, these stocks should outperform the market (the DJIA or the S&P 500).

2. The Small Dogs of the Dow Approach

In another variation, you pick the 10 highest dividend-yielding stocks, then select the five with the lowest stock price. Invest an equal dollar amount in each of those, hold them for a year, and repeat. This variation is known as the Small Dogs of the Dow, or simply The Dow 5.

Here’s a Dogs-of-the-Dow ETF

The ALPS Sector Dividend Dogs ETF (symbol SDOG on New York) follows its own version of the Dogs-of-the-Dow strategy. It picks five stocks with the highest dividend yields from each of the 10 sectors of the S&P 500 index. These sectors are consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunication services, and utilities.

Each holding begins with roughly the same dollar value, so every company starts out with a similar influence on the ETF’s total return. The end result is a portfolio of 50 large-cap stocks.

Currently, the fund now holds a number of stocks we recommend as buys for subscribers of our Wall Street Stock Forecaster advisory. They include AT&T, Verizon, Kraft Heinz, Snap On, 3M, Newmont Mining and IBM. However, the ETF also holds a lot of stocks we don’t recommend.

Should you Follow the Dogs of the Dow Approach?

One best-selling book of the early 1990s advised investors to buy the Dogs of the Dow: the lowest-priced, highest-yielding Dow stocks. Followers of the approach made money. Of course, anybody who bought stocks in the early 1990s made money.

The Dogs of the Dow strategy worked well in the 1990s because interest rates were going down. This tended to raise all stock prices. But high-yielding stocks were affected more than most because they attracted bond investors who were switching into stocks.

That’s how things work with most formulaic approaches: Sometimes they seem to add value, because they happen to lead you to invest in stocks that were likely to go up for some reason other than the formula’s actual focus.

Of course, you also need to keep in mind that high yields can signal danger, rather than a bargain.

All in all, we don’t recommend the Dogs of the Dow strategy.

Here’s why high yields can be a danger sign

To reiterate: a high dividend yield may be a danger sign. It may mean insiders are selling and pushing the price down. A falling share price makes a stock’s yield goes up (because you still use the latest dividend payment as the numerator to calculate yield: but the denominator, the price, has dropped). But when a stock does cut or halt its dividend, its yield collapses. Continue Reading…

Playing Defence with Canadian Utilities

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By Dale Roberts, cutthecrapinvesting

Special to Financial Independence Hub

The utility sector is known for its defensive qualities, providing a stable investment option in times of market uncertainty. By overweighting defensive sectors, investors can lower the volatility (risk) of their portfolios. Many will refer to Canadian utilities as ‘bond proxies’ due to their steadiness. However, the true strength lies not in the dividends they offer but in the inherent defensive nature of these companies. Utility stocks are considered defensive because they tend to perform well during economic downturns. Consumers continue to need electricity, water, and other essential services even when the economy is struggling. So here we’ll take a look at Canadian utility stocks and ETFs.

There are a few reasons for an investor to embrace the utilities sector. They may want a portfolio that is less volatile. A retiree can witness a real financial benefit as a portfolio that experiences lesser drawdowns in recessions can create greater and more durable income over time.

Defensive sectors

In this post, the Defensive sectors for Retirement, the three defensive sectors were almost twice as good as a traditional balanced stock and bond portfolio. That is to say, the portfolio moved through the financial crisis of 2008-2009 and left the retiree with a portfolio almost twice as large as the traditional 60/40 balanced portfolio.

Keep in mind past performance does not guarantee future returns. That said, consumer staples, utilities and healthcare have a long history of offering greater portfolio stability.

Canadian utility stocks and ETFs

That above posts looks to U.S. staples, utilities and healthcare stocks. There’s no better place to find multinational consumer staples and healthcare stocks. The healthcare sector is non-existent in Canada. Our consumer staples sector in Canada (XST.TO) is very good, but is mostly domestic. More on that later.

In the Globe & Mail Rob Carrick offered an article (sub required) on Canadian utility ETFs. Rob noted that the fees for these ETFs are quite large compared to market index-based ETFs. The fees are in the 0.32% to 0.61% range. That said, that is the norm for ‘specialty’ or sector ETFs. Rob looked at three Canadian utility ETFs …

The two high-fee funds are the BMO Equal Weight Utilities Index ETF ( ZUT-T), with assets of $500-million and 14 total holdings; and the iShares S&P/TSX Capped Utilities Index ETF ( XUT-T) with assets of $379-million and 15 holdings.

A third fund, the Global X Canadian Utility Services High Dividend Index ETF ( UTIL-T) will on March 4 reduce its current MER of 0.61 per cent to an estimated 0.32 per cent. UTIL has assets of $379-million and 15 holdings.

Core utilities or extended universe?

One key decision that an investor will make is: what types of utilities do you want to own? You can stick to the traditional power/electricity producers, or you can include pipelines and the modern utilities known as the telcos.

ZUT.TO and XUT.TO are traditional power utilities. They are very similar, except the BMO ZUT is equal-weighted while the iShares XUT is cap-weighted (the largest companies get the greater weighting within the index). I’d give the edge to the BMO ETF. Continue Reading…