In the eight months since Donald Trump was reinstalled as the American President, monetary policy south of the border has been subjected to political interference at an unprecedented level. Most observers are of the opinion that Jerome Powell has performed his duties honourably and that the monetary stance taken has been broadly reflective of overall macro circumstances.
Given how relentlessly Trump has berated Powell throughout the year, any move to ease rates could be interpreted as a form of capitulation. Of course, if the economy is weakening and inflation remains benign, a move to lower rates would be entirely justified. Observers need to be careful not to imply political causation when the rationale behind such a decision is properly based on economics.
Now August is over and a September interest rate decision looms. For months now, I have been warning that the American economy (and by extension, the global economy) may be heading for a bout of stagflation. The current circumstances are delicate, and few people envy the task in front of central bankers around the western world.
The challenge is especially acute in the United States, not only because the stakes are highest because of the size of the economy, but also because the objective metrics for the economy continue to flash red. No one wants to make a policy error, but when you’re already walking on a knife edge, even the slightest miscalculation can be devastating.
Tariffs a curious case of mistiming
This may lead to a curious case of cause-and-effect mistiming. It appears the tariffs that have belatedly been imposed by Donald Trump have caused employment numbers to suffer somewhat, while giving importers time to make band-aid adjustments. The delays in implementation have allowed importers to stockpile inventories in anticipation of the tariffs ultimately being imposed in the ensuing months. It is against this backdrop that the central bank needs to weigh its options. There are numerous commentators who believe inflation will manifest once those inventories are drawn down, which seems imminent. Continue Reading…
I recently updated the returns for the Canadian asset allocation ETFs. The returns over the last year and three years can be described as abnormal returns. So much so that I had to double-check the performance for the equity markets that fuelled this incredible run. How did they do it?
Over the last three years equity markets have delivered average annual returns that are 60% to 100% greater than historical averages. The U.S. has delivered outsized returns over the last five years and beyond. In fact, coming out of the financial crisis U.S. equity returns are nothing short of spectacular.
Here’s the Canadian asset allocation ETF page that shows the returns for the major Canadian asset allocation ETF providers. You’ll also see a ranking by risk level.
And here’s an overview of the assets that drove the returns for the (wonderful) managed all-in-one global ETF portfolios. Also, bonds stopped being a portfolio anchor over the last three years, as inflation is under control (for now).
U.S. stocks XUS-T
International stocks XEF-T
Canadian stocks XIC-T
Canadian bonds XBB-T
U.S. bonds (in U.S. Dollars) AGG
A look at iShares asset allocation ETFs
Here’s an example of the returns for iShares asset allocation ETFs.
The returns are incredible, especially over the last year and three years. Five-year returns are abnormally generous as well.
Here’s an example of the asset allocation and holdings of iShares XGRO, with a target of 80% equities to 20% bonds.
How do your returns stack up?
Everyone should benchmark their personal returns. Of course, if you have an advisor and are invested in high-fee mutual funds your returns are likely waaaaay behind. Remember: Â Canadians should avoid most mutual funds.
The shift to ETFs and asset allocation ETFs can be a life-changing move. Consider it. High fees are a wealth destroyer. Use the Contact Dale form on this page if you want to know how to make that happen. And if you want low-fee global ETF portfolios, advice and financial planning …
If you’re a self-directed investor you should also benchmark (compare) your accounts to the asset allocation ETFs of the same risk level. That is, you will match the equity to bond ratios. If you’re underperforming you can discover why. Continue Reading…
The Financial Independence Retire Early (FIRE) community is a very supportive and tight-knit one. One thing I appreciate from the diverse FIRE community is that there are people ahead of us who are always willing to share their knowledge and help others slightly behind them on the FIRE journey.
I would like to welcome Mark McGrath, CFP and CIM, who entered the world of semi-retirement on April 30. Before semi-retirement, Mark worked as a financial planner and associate portfolio manager at PWL Capital Inc. Based in Squamish, BC, Mark has been helping Canadian physicians, small business owners, and high-net-worth families on their financial decisions about portfolio management, retirement planning, tax planning, estate planning, and risk management. If you like the Rational Reminder podcast, Mark is one of the regular contributors as well.
Q1: Hello Mark, welcome to this little blog of mine. Can you tell us a little bit about yourself?Â
Mark McGraff, CFP (Linked In)
Thanks Bob!
I’ve been a financial planner for the past 15 years or so, and have worked primarily with physicians and their families. My most recent role was as a Financial Planner and Associate Portfolio Manager for PWL Capital, and as of May 1st I’ve decided to semi-retire and step away from full-time employment.
In 2022 I started creating educational financial content, writing mostly on Twitter and LinkedIn. I’m a huge advocate for basic financial literacy and getting the big things right, and while I occasionally write about more complex topics, a lot of my content is focused on those core basics like index funds, using your RRSP and TFSA, getting insurance in place, etc.
Outside of work, I spend most of my time with my wife and two young children, and I enjoy reading, playing strategy games, listening to music, and playing the guitar. We like to travel as well but haven’t had much time for that over the past few years, but hopefully that changes now that I have more free time.
Q2. Congrats on your semi-retirement! You mentioned that financial planning is more than spreadsheets, retirement projections, and optimal portfolios, it’s really about helping people find and fund a good life. What is your definition of a “good life?” Explain why it’s important to focus on having a good life rather than spreadsheets and projections.Â
Having worked with hundreds of Canadians of varying ages and backgrounds, I’ve realized that many of us never really decide what a good life is for us. We follow the traditional path – go to school, work your whole life, and retire at 65 – without pausing along the way to reflect on what’s important. Retirement can end up being very anti-climactic as a result, and those who haven’t prepared mentally and emotionally can find themselves lost. I saw this happen with my own father, unfortunately, and have spoken to literally hundreds of people who know someone who has gone through something similar.
I recently had this conversation with a 66-year-old professional client of mine, who was having what he called an identity crisis: Â he had worked hard for decades, amassed a small fortune, sent his kids through university, and was now unsure about what he was supposed to do with his life. Designing a good life, intentionally and earlier on in his career, may have led him to optimize his time more instead of his wealth. Avoiding this type of regret is a big impetus for my decision to semi-retire.
A good life means different things to different people, of course. For us, it means optimizing the use of these precious years with our young children while we have the energy to do it, and while they still want to hang out with us. My kids are 7 and 2, and growing up fast. I still love financial planning, and likely always will, but we wanted to design our lives so that I could engage in that on my own time, at our own pace.
For me, that means more writing and creating educational content, and likely taking on a select number of clients on a fee-only, advice-only basis. If I can do that successfully, it also means I can do it from anywhere in the world, so we plan on travelling extensively as well. My wife is a systems and industrial engineer specializing in supply chain management and data analytics. She’s basically a math and data nerd. She stepped away from work about 4 years ago to be a full-time mom, but she also wants to find a way to put her skills to use on her own terms.
Q3. It was not easy to walk away from PWL and reach the decision on semi-retirement. Walk me through how you and your wife reached the decision.Â
The genesis of this idea came over Christmas in 2023. My wife is from Mexico, and most of her family, including her parents, still live there. We try to visit them twice a year. Her sister Tamara, and her sister’s husband Fernando, moved to Sweden for work four years ago and joined us in Mexico for Christmas that year. Fernando’s hobby is photography, and he was showing us pictures of all the amazing places in Europe they’ve visited since moving to Sweden. My wife and I kept joking that we should just retire and travel as well.
Over the next 15 months or so, that joke kept coming up, and we realized neither of us was really joking. The more seriously we looked at it, the more apparent it became that we had to do it. At first I had planned to see if PWL would let me be a digital nomad, but we quickly shot the idea down – working full time, but just in a different country wouldn’t do – we wouldn’t have control of our time, and would be dealing with different time zones, potentially making work even harder. PWL is an incredible firm with incredible people, and it was really my dream job. At first, I thought I might be crazy for leaving. But I eventually realized I would be crazy to stay.
Being a financial planner I’ve always had a good head for our own personal finances. We saved as much as we could, and I’ve largely used index funds for the past decade. We got lucky a few times in the housing market as well, so our finances were in good shape. That obviously made the decision viable in the first place. That said, I tried not to overthink this decision from a financial perspective. I didn’t model a hundred different scenarios or anything like that.
Knowing that each of us can find a way to generate income if needed, and that we have a decent sized portfolio, was enough analysis for us on that front. Most of the decision making process was a discussion about the non-financial aspects of retirement – purpose, identity, how we want to spend our time, the benefit of being there for our children, etc.
Tawcan: Interesting that your sister-in-law and brother-in-law inspired you on the early retirement idea.
Q4. Tell me more about your plans for the new chapter of your life.Â
This summer we’re going to travel Europe, primarily Spain. I plan to fully disconnect from work over that time period and reassess in the fall. I do really like writing and creating educational financial content, so I’m going to focus more on that when we return, though I’m not exactly sure what that looks like yet. Likely a blog at least, perhaps another book or two in the future. I’ve wanted to get into video for some time now, so maybe a YouTube channel at some point.
Other than that, I plan to provide advice-only financial planning, but not full-time. I’m fortunate that I’ve built up a social media audience and an incredible network of other financial professionals, so generating an income this way likely won’t be a challenge for me. So I’ll do that as a way to stay engaged in the planning community and bring in a few bucks to pay the bills as needed. Continue Reading…
Investing for Income vs. Total Return, why choose?
Leading off this Weekend Reading edition, a theme I’ve written about from time to time here: income investing vs. total return.
Is there a right way to invest? Which one is better?
Both approaches have merit: which was the subject of my enjoyable debate with passionate DIY income investor Henry Mah a few weeks ago. You can watch it here!
Personally, while I’ve always had a passion for owning some dividend-paying stocks in my portfolio and likely always will, I can’t ignore the benefits of total return.
At the core:
Investors often focus on total return and likely should during their asset accumulation years in particular since total return encompasses both income generation, such as dividends, and capital appreciation (changes in the market value of your investments). We should all know by now that growth/price increases remain an essential component of wealth-building: prices moving higher and higher than what you paid for them is good.
Income investing focuses on generating regular cash flow from your investments, rather than solely relying on capital appreciation or downplaying it based on your stock selections. Income funds, income-oriented Exchange Traded Funds (ETFs) or in Henry’s particular case, owning a small basket of concentrated stocks from the TSX that pay dividends has provided income-focused investors like Henry arguably lower-risk for him while growing his income higher over time via higher dividend payments.
Source: Honestmath related to income vs. total return debate.Â
In the TD debate here, I argued striking the right balance between income needs and growth in the total return equation is probably best for most: it has historically delivered long-term success and there is no reason to believe why a basket of global stocks won’t continue to do so.
So, I get the income investor debate, I really do, and maybe moreso given I consider myself in semi-retirement now; my part-time work started a few months ago.
Investing for income via dividend stocks often includes these benefits for retirees:
Tangible income: shares of companies that distribute a portion of their profits to shareholders, are often mature and established businesses that have ample cashflow to sustain their payment obligations. This tangible income (and arguably stable income) can help cover living expenses.
Rising income:Â such established companies can also raise their dividends year-over-year, rewarding shareholders with rising income that can help offset inflationary pressures. Sustained 3-4% or more dividend increases by some companies can be inflation-fighters.
Academic history lessons along with any Google search on this subject will show various charts and graphs that demonstrate the critical role that dividends – and, in particular, reinvested dividends – play in delivering an attractive total return to investors over time. But this just makes sense, in that reinvested dividends are like not getting any dividend payment paid to you in the first place …
Another important contributor to equity market returns has been dividend growth. Equities are growth assets – which I argued in the TD debate – so companies who tend to grow their revenues, profits and earnings over time, is the reason why they can continue to reward their shareholders with higher dividend payments. Growth is needed, for total return, for your/our juicy dividend payments to continue. Continue Reading…
Life is unpredictable and as the economic landscape evolves, driven by inflation, health care expenses, tax reformation and global volatility, families need to consider proactive financial strategies. Your plan should include strategic trusts, tax optimization and investment frameworks aligned with long-term family goals. A smart approach will ensure your family’s legacy continues for generations.
Assess your Family’s Finances
Make a list of all fixed and variable income and expenses. Then, establish which expenses can be adjusted in your budget and find a clear financial goal. The most important aspect is to consult a professional about how your income and expenditure impact estate planning.
Only 24% of Americans have a will, a key estate planning document. An estate plan is a comprehensive strategy outlining how funds will be distributed throughout one’s lifetime and afterward. Your plan should include trust creation, estate tax optimization and sophisticated investment strategies. It should also adapt to inflation, health care costs and downturns.
Create a Trust
A trust is created when a settler grants permission to a third party — also known as the trustee — to manage assets for the beneficiary. The trustee draws up the documentation, which the settler approves. When the settler seeks the guidance of a trustee, they can create a trust for three reasons: tax minimization, asset preservation and wealth protection from creditors. Trusts are tools that provide control and seamless transfers throughout generations.
Trust funds are categorized into revocable and irrevocable trusts. Revocable trusts allow the settler to remove and change the trust during their lifetime. Irrevocable trusts cannot be changed or revoked once created. Based on your family’s needs, you can choose between several types of trusts with the help of a corporate trustee.
Maximize Estate Tax Efficiency
Tax efficiency means keeping more of your money by legally reducing what you owe in taxes. Without a trust, your assets go through probate and the slow court process, which can negatively affect the amount of money you receive.
When you use a trust, your family gets the funds faster with fewer tax fees. Certain trusts — like irrevocable ones — remove assets from your tax estate, so your family may pay less taxes later.
You can also use gift exemptions. As of 2025, you [an American] can give up to US$19,000 to a person tax-free annually.
Use a Long-Term, Sophisticated Investment Strategy
Saving is important but building wealth is about how and where you save it. Smart allocation, tax efficiency and diversification are essential. Â
Tax-inefficient investments: Place your tax-inefficient investments — like bonds — in 401 (k)s.
Tax-efficient investments: Place your tax-efficient investments in taxable accounts.
Tax-loss harvesting: Sell your investments that have declined in value so the realized losses can reduce your taxable capital gains. You can then reinvest the proceeds into another investment.
AI-driven planning tools: Use various platforms to assess real-time asset rebalancing.
Plan for Surprises
Inflation erodes purchasing power because when prices increase for goods and services, you get less value for your money. Plan for inflation, health care costs and economic downturns. Â Continue Reading…
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