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.
What does a diversified portfolio look like? A well-diversified portfolio balances risk by spreading investment holdings out across industry sectors and more
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What does a diverse portfolio look like? It’s a question we hear often from the Pat McKeough Inner Circle. We believe a well-diversified portfolio has a few specific qualities, including holdings spread out across most if not all of the five main economic sectors, geographic diversification, both conservative and more-aggressive holdings, and both market leaders and laggards. These asset allocation strategies help ensure long-term stability.
All in all, you will improve your chances of making money over long periods, no matter what happens in the market, if you diversify your holdings as we recommend, and so successfully answer the key question: what does a diverse portfolio look like?
What does a diversified portfolio look like? Holdings in the five main sectors
As we recommend to the Pat McKeough Inner Circle, we believe you spread should your money out across most, if not all, of the five main economic sectors: Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities.
Here are some tips on diversifying your stock portfolio by sector:
When it comes to answering the question what does a diverse portfolio look like? remember stocks in the Resources and Manufacturing & Industry sectors expose you to above-average share price volatility.
Stocks in the Utilities and Canadian Finance sectors, however, entail below-average volatility.
Consumer stocks fall in the middle, between volatile Resources and Manufacturing companies, and the more stable Canadian Finance and Utilities companies.
Most investors should have investments in most, if not all, of these five sectors to successfully answer the question what does a diverse portfolio look like? The proper proportions for you depend on your investment temperament and circumstances. These asset allocation strategies should be reviewed regularly.
The Pat McKeough Inner Circle, like most conservative or income-seeking investors, may want to emphasize utilities and Canadian banks for their high and generally secure dividends. Regardless, it always pays to look closely at a company’s recent acquisitions and the risk associated with that growth strategy.
More-aggressive investors might want to increase their portfolio weightings in Resources or Manufacturing stocks. However, at the same time, you’ll want to spread your Resource holdings out among oil and gas, metals and other Resources stocks for diversification within the sector, and for exposure to a number of areas.
What does a diverse portfolio look like? Balanced across geography
As it’s a mistake to focus your portfolio on a company that relies on a number of recent acquisitions for growth, one of the worst things you can do is invest so that your portfolio would suffer a great deal due to a localized downturn in any one city, province or state. Good portfolio management also means balancing your investments geographically.
Like the Pat McKeough Inner Circle’s most successful investors, you should avoid focusing your portfolio on any one country or region. And a lower-risk way to add international exposure to your portfolio is to hold multinational U.S. stocks such as, say, IBM, McDonald’s and Walmart. We cover all three of these companies in our Wall Street Stock Forecaster newsletter. Continue Reading…
My latest MoneySense Retired Money column looks at a recently launched Retirement Club devoted to Canadians in or near the cusp of Retirement.
Primarily online, Retirement Club was launched by occasional MoneySense contributor Dale Roberts and a partner, Brent Schmidt. You can find the full MoneySense column by clicking on the highlighted headline: Retirement planning advice for people who don’t use an advisor.
Roberts, who once was an advisor for Tangerine, is known for his Cutthecrapinvesting blog and in the U.S. for his contributions to Seeking Alpha. While I have no financial or business interest in the club I did become a member. There are regular Zoom calls where (mostly) recent retirees exchange views on topics like the 4% Rule, RRSP-to-RRIF conversions, ETFs, Asset Allocation in the age of Trump 2.0 and many of the topics this Retired Money column often attempts to tackle.
You can find Roberts’ own announcement of the club – which charges an annual fee of $250 – on my own site earlier in mid-April. (+HST, but it may qualify as an Investment Counsel fee deductible on your personal tax returns). As always check with your accountant, advisor or tax professional).
My initial impression is that the club seems to involve a lot of work for someone who describes himself as semi-retired. But that seems to be par for the course for financial writers approaching retirement. I’m in a similar boat, as is the American blogger Fritz Gilbert, who recently announced the similarly ironic fact that he was retiring from Full-time Blogging about Retirement. (also in April).
Aimed at self-directed investors
In his introduction, Roberts wrote that many of his audience are self-directed investors. That jibes with his site’s campaign against high-fee investment funds, in favor of low-cost index funds or ETFs purchased at discount brokerages. While some, like myself, may also use the services of a fee-for-service advisor, many DIY retirees are in effect running their own pension plans. In theory, one of those much-written-about All-in-one Asset Allocation ETFs can do much of the heavy lifting for such investors, but in practice, there’s a fair bit of anxiety about markets, the Canadian government’s rules about TFSAs, RRIFs etc., Asset Allocation, the ongoing Trump Trade War and much more. So it makes sense to gather in one place and exchange views with others going through a similar process.
In a regular email update to Club members, Roberts explains that “the key concern of Retirement Clubbers is financial security and how to use their portfolio assets in the most efficient and cost-effective manner. That’s why we have a master list of retirement calculators (free and pay-for-service) to test.”
Delaying Government Pensions
As you’d expect, the Club regularly addresses the major chestnuts of Personal Finance as it relates to those within hailing distance of Retirement. The most common ‘Retirement Hack’ espoused by the Club is to delay receipt of the Canada Pension Plan [CPP] and Old Age Security [OAS] past the traditional retirement age of 65 to allow for more generous payouts at age 70. Most club members lean to taking these benefits as late as possible but of course personal circumstances may dictate earlier start dates.
To bridge the income gap (from age 60 to 70 for example) RRSP/RRIF accounts will be harvested (spent) in quick fashion: often termed an RRSP meltdown. TFSA and Taxable accounts can also be tapped to provide necessary funding as retirees delay receipt of those CPP and OAS benefits. Continue Reading…
Here’s a look at some of your best retirement investment management options and choices. These include pensions, RRSPs, RRIFs and more.
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Your retirement investment management plan should build in contingencies for long-term medical needs and supplemental health insurance. As well, you should factor in caring for loved ones who are unable to take care of themselves.
When you work out a plan for your retirement, make sure that you aren’t basing your future income on overly-optimistic calculations that will end up leaving you short.
Retirement income can come from many different sources, such as personal savings, Canada Pension Plan, Old Age Security, company pensions, RRSPs, RRIFs, and other types of investment accounts.
Learn how your retirement investment management works in a Canada Pension Plan (CPP)
The Canada Pension Plan, or CPP, is the name for the Canadian national social insurance program. The program pays out based on contributions, and it provides income protection for individuals or their survivors in the instance of retirement, disability or death. Since 1999, the CPP has been legally permitted to invest in the stock market.
Nearly all individuals working in Canada contribute to the CPP, unless they live in Quebec, where the Quebec Pension Plan (QPP) exists and provides comparable benefits.
Applicants can apply to receive full CPP benefits at age 65. The CPP can be received as early as age 60 at a reduced rate. It can also be received as late as age 70, at an increased rate.
Here’s a look at some of the pensions or benefits provided by the Canada Pension Plan:
Retirement pension
Post-retirement pension
Death benefit
Child rearing provision
Credit splitting for divorced or separated couples
Survivor benefits
Pension sharing
Disability benefits
Use a Registered Retirement Savings Plan (RRSP) as a starting place when you look into retirement investment management
RRSPs were introduced by the federal government in 1957 to encourage Canadians to save for retirement. Before RRSPs, only individuals who belonged to employer-sponsored registered pension plans could deduct pension contributions from their taxable income.
RRSPs are a form of tax-deferred savings plan. They are a little like other investment accounts, except for their tax treatment. RRSP contributions are tax deductible, and the investments grow tax-free.
You might think of investment gains in an RRSP as a double profit. Instead of paying up to, say, 50% of your profit to the government in taxes and keeping 50% to work for you, you keep 100% of your profit working for you, until you take it out.
Convert an RRSP to a RRIF to create one of the best investments for retirement
Converting your RRSP to a RRIF is clearly one of the best of three alternatives at age 71. That’s because RRIFs offer more flexibility and tax savings than annuities or a lump-sum withdrawal (which in most cases is a poor retirement investing option, since you’ll be taxed on the entire amount in that year as ordinary income). Continue Reading…
Inspiration for this post arrived from attending a few retirement parties of late with work colleagues, another one as recently as yesterday and a few more to attend this spring.
Is age 50 too young to retire?
What about age 55? Age 60?
After talking to some work colleagues who submitted their retirement letters and who are now moving on, I know their ages. The celebration yesterday was for someone in their early 60s. They talked and yearned about more time at their cottage, doing small home reno projects, and leaving early morning Microsoft Teams calls in the rearview mirror.
They also talked about their desire to retire now since they “had enough” both mentally and financially: support from the latter after working with their financial advisor or planner and doing some retirement math on their own to bridge the gap between spending needs now and when their pension benefits would kick in, at age 65, including their firm intention to take CPP and OAS at that age too.
Although I’m leaping to lots of assumptions here, this makes me believe that the personal retirement savings of some work colleagues (the sum of RRSPs, TFSAs, non-registered investments or other assets) is likely small to modest beyond a workplace pension: in that they needed to work to ensure they were not sacrificing their personal portfolio too much, too soon. I get that. After decades of raising a family, buying a cottage, paying down a mortgage or two along with other expenses I’m sure, it seems my colleague was more than ready to permanently slow down; cut the cord from work and enjoy their time more while they still have decent health. Good on them. 🙂
This individual is however not the first person to mention the following to me:
“Oh, I can’t afford to retire yet but thinking age 63 or so should be fine since that’s when I can get my full OAS and decent CPP income.”
And my work colleague is hardly alone …
In looking at some stats (Source: StatsCan) the average age of retirement is hardly for anyone in their 50s:
These are also not easy times to retire…
Rising general inflation, uncertain tax rates, and higher healthcare costs could very well impact many retirees at any age. Myself included. Certainly, starting to save for retirement early and often and getting out of debt faster than most would be enablers – and I hope they have been for us.
You are too young to retire – is early retirement right for you?
Although many Canadians seem to expect to retire between the ages of 60 and 70 above, there is absolutely no hard and fast rules about when you need or must stop working of course.
Your retirement timeline will depend on many factors, I’ve highlighted some milestone ideas below:
Somewhere between 3-5 years before retirement, it’s probably wise to get some retirement details in order. Accuracy isn’t overly important IMO but the process of planning is.
I recall focusing on our desired lifestyle and spending habits to go with it: what early retirement or semi-retirement or full retirement might look like:
We started estimating our retirement spending levels, our income sources, and inflation factors.
We started evaluating our portfolio returns over the last 5- or 10-years.
We looked seriously at our sustainable cashflow from our portfolio (passive dividend and distribution income since we’d be too young to accept any workplace pension or any CPP or OAS government benefits).
We started tracking our spending in more detail to challenge those spending assumptions.
1-2 Years Before Retirement
As recently as early 2024 for us, things got more serious.
In the year or so leading up to any big decisions, more detailed planning kicked into higher gear:
We spent more time as a couple talking about how to put some travel dreams into reality – multi-week vacations in the coming years away from icy/cold Ottawa winters.
We started to explore ways at work to test some semi-retirement assumptions; the desire but also the financial flexibility to work part-time vs. full-time (i.e., could we still make ends meet).
We started to look into post-retirement healthcare insurance options, where needed.
We started to talk about our purpose (if not working at all) – what would we do with our time?
Although we might be in this timeline, not sure, since part-time work is now occurring with our solid employer (this could continue for both of us??) but this is where the real retirement countdown calendar probably begins for most people…as you strike full-time working days off your calendar: Continue Reading…
Discover unconventional paths to Financial Freedom that go beyond traditional advice. This article presents surprising strategies, backed by expert insights, that can transform your approach to wealth-building. From maintaining your lifestyle despite income increases to investing in non-financial assets, these innovative methods offer fresh perspectives on achieving financial success.
Maintain Lifestyle Despite Income Increases
Access High-Value Real Estate Through Syndications
Build Wealth with Niche Websites
Invest in Non-Financial Assets for Growth
Profit from Surplus Business Equipment Sales
Turn Discarded Inventory into Profitable Ventures
Monetize Legal Downtime with Tech Solutions
Transform Teaching into Wealth-Building Opportunity
Generate Passive Income by Renting Unused Space
Leverage Prop Trading Firms for Capital Growth
Maintain Lifestyle despite Income Increases
One unconventional yet effective method I tried to grow wealth and become financially independent is strategically managing lifestyle deflation in alignment with income changes. In simpler words, this means continuing to maintain the same lifestyle and budget even when your income increases, instead of adjusting your expenses alongside it.
I learned to prioritize this in my younger years after seeing people around me struggling to maintain their lifestyles despite rising income. I noticed they were increasing their expenses as their income grew. Most of these expenses were smaller differences that usually go unnoticed but compound to a bigger sum when you see them in total. Examples include subscribing to more services than before, buying more expensive items because they can now afford them, etc. Seeing all this, a thought nagged me often: “What would happen if they saved the raise they got instead of spending it immediately?”
As I learned more about personal finance, budgeting, etc., I started making a conscious effort to maintain the same lifestyle as always even as my salary grew. I funneled the extra sum into various investments instead. Over the years, this habit helped my net worth increase without compromising my quality of life.
Here are some tips I will offer others in this regard:
Automate the transactions into specific accounts: Immediately redirect your extra amount into another savings account for debt repayment and investments. This will help you avoid impulsive spending.
Understand wants vs needs: Take a broader look at your budget, including things you spend on usually. List all the expenses you make and consider which are important and which you can postpone for later since there is no immediate need. Doing this will help you stay focused.
Track net worth monthly: Make sure to track your investments frequently. Seeing your net worth grow will keep you motivated to continue your habit and avoid unnecessary purchases. — Lyle Solomon, Principal Attorney, Oak View Law Group
Access High-value Real Estate through Syndications
One unconventional way I’ve built wealth that surprised me on my journey to Financial Independence is through the strategic use of real estate syndications. While many focus on buying individual properties, I discovered that pooling resources with other investors allowed me to access high-value opportunities I wouldn’t have been able to tackle alone.
This method allows you to invest in larger commercial properties with a group of people, benefiting from economies of scale and shared risks. I first came across this approach through networking with experienced investors and learning about the power of group investment.
My advice to others would be to build a solid understanding of how syndications work and start small with reputable groups. It’s a unique way to scale wealth while minimizing individual risk, and it’s often overlooked compared to traditional property purchases. Collaborating with experienced partners can unlock doors to lucrative projects that wouldn’t be accessible otherwise. — Jonathan Ayala, Licensed Real Estate Salesperson | Founder, Hudson Condos
Build Wealth with Niche Websites
One unconventional way I’ve built wealth that really surprised me was by doubling down on building tiny niche websites. Early in my career, I thought the only path to success was creating huge, authority-style blogs. But after some experimentation, I realized that smaller, hyper-focused sites could generate a steady income without requiring a massive team or overhead.
I stumbled onto this by accident while testing out ideas that didn’t quite fit my main business. A few of these small projects started making a few hundred dollars a month each, and when you scale that up across multiple sites, it becomes something compelling. The magic is in finding a narrow topic where you can be the absolute best resource online, even if it’s something super specific.
For anyone interested, I suggest thinking smaller, not bigger. Find those underserved niches where competition is low, but passion or need is high. Focus on genuinely helpful content, optimize it properly, and be patient. It’s not a get-rich-quick strategy, but it is an incredibly reliable way to build passive income streams.
This approach allowed me to diversify without putting all my eggs in one basket and played a big part in reaching Financial Independence sooner than I expected. — James Parsons, CEO, Content Powered
Invest in Non-Financial Assets for Growth
One unconventional way I built wealth was by keeping a “no-market” year. For twelve months, I chose to remove myself from investing in anything that required speculation, interest, or growth. Instead, I focused on building non-financial assets: time, skill, energy, and relationships. I tracked it like a portfolio: hours of learning, time saved by simplifying routines, days reclaimed from overcommitting, and people I could count on for collaboration. That “quiet compounding” brought in far more than my typical quarterly gains ever did. I walked into the next year with three new paid projects, two solid partners, and almost double the free time.
I discovered it accidentally after turning down a contract that would have pulled me out of integrity. I gave myself permission to step back and see what kind of return I could build without putting money anywhere. I suggest trying this as a 90-day experiment. Track the non-financial gains as seriously as you would your net worth. Value created in learning, trust, and creative space often turns into money later. The catch is, you have to believe it is real before anyone else does. Once you see it, it is hard to go back. — Adam Klein, Certified Integral Coach® and Managing Director, New Ventures West
Profit from Surplus Business Equipment Sales
Purchasing and selling surplus business equipment was much more profitable than previously thought. Initially, it was just a game of turning what companies didn’t want into something useful. But as time went by, I learned what had actual value was an awareness of where the demand was: what buyers were searching for but couldn’t be found easily. That gap became an opportunity.
I became interested in it on a whim when assisting someone with liquidating their lab, and saw its inefficiency. So we built a system around it. My advice? Identify supply chain omissions or inefficiencies in industries that people do not pay much attention to. The more untrendy it sounds, the more opportunities you’ll have if you’re willing to master it inside out. — Joe Reale, CEO, Surplus Solutions
Turn Discarded Inventory into Profitable Ventures
I started buying leftover inventory from failed event suppliers. Half the time they were happy just to offload it for $0.10 on the dollar. I mean, we once picked up $35,000 worth of LED wall panels for $2,800, stacked them in our warehouse, and rented them out per gig for $650 a pop. In under four months, they paid for themselves, and we have since generated over $48,000 in revenue from those same panels. Everyone wants to build wealth from stocks or SaaS. I just bought junk others walked past and turned it into profit. Continue Reading…
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