Tag: aoa

What’s in my retirement portfolio (May 2025)

RobH3 Comments

This is a (hopefully monthly) look at what’s in my retirement portfolio. The original post is here. Last month’s is here.

Portfolio Construction

The retirement portfolio is spread across a bunch of accounts:

  • 7 RRIF accounts (3 for me, 3 for my spouse, 1 at an alternative provider as a test)
  • 2 TFSA accounts
  • 4 non-registered accounts1, (1 for me, 1 for my spouse, 2 joint)

The target for the overall portfolio is unchanged:

  • 80% equity, spread across Canadian, US and global markets for maximum diversification
  • 15% Bond funds, from a variety of Canadian, US and global markets
  • 5% cash, held in savings-like ETFs.

The view as of this morning

As of this morning, this is what the overall portfolio looks like:

Retirement holdings by ETF, May 2025

The portfolio is dominated by my ETF all-stars; anything not on that page is held in a non-registered account and won’t be fiddled with unless it’s part of my monthly decumulation. Otherwise I’ll rack up capital gains for no real benefit.

The biggest changes were caused by two events that happened over the past 30 days:

  • I did a small rebalancing exercise to reduce my exposure to the Canadian equity market, selling VCN in favor of XEQT. (XEQT is only 23% Canadian equity per dollar invested; VCN was 100%). This sort of rebalancing happens whenever I drift more than 1% off of my target allocations.
  • I took some cash from a HISA and invested it in ZMMK; for reasons too boring to report here, that money was effectively not being tracked in these pages until this month — that anomaly won’t be repeated in subsequent months since ZMMK and ICSH are where I park the “cash” position of my portfolio.

Plan for the next month

The asset-class split looks like this

This looks to be pretty close to my target percentages which haven’t changed:

  • 5% cash or cash-like holdings like ICSH and ZMMK
  • 15% bonds (almost all are buried in XGRO and AOA)
  • 20% Canadian equity (mostly based on ETFs that mirror the S&P/TSX 60)
  • 36% US equity (dominated by ETFs that mirror the S&P 500, with a small sprinkling of Russell 2000)
  • 24% International equity (mostly, but not exclusively, developed markets)

So, the plan for next month is, do nothing out of the ordinary. Reinvest cash (dividends, TFSA contributions) in one of AOA, XEQT/XGRO, ICSH or ZMMK depending on the asset category most in need on the day of the reinvestment. All these ETFs are covered on my ETF All-Stars page.

One thing I may do is to try to make shifts2 to get a little more return out of my cash position. US interest rates are quite a bit higher than Canadian rates, and so if my cash position is held in USD, I stand to eke a few more points of return there. TBD.

Overall

My retirement savings had a nice bounce-back this month, looks like I can cancel the mega-pack of pot noodles I had on order.

Monthly retirement savings, as percentage of Jan 2025 value

The salary I collect month to month recovered a bit, too, although not as quickly. That’s the magic of using VPW’s cash cushion — neither boom nor bust months translate into large changes in the take-home pay.

Monthly salary, as percentage of Jan 2025 salary

  1. That’s up one from the previous month. In order to collect on Questrade’s transfer bonus, (which they have yet to pay me, they are apparently in a world of hurt on the IT front) you have to have a non-registered account to get paid into. The other 3 are “normal” — one non-registered account for me, one for my spouse, and jointly held one that serves as a cash cushion to smooth out month to month variations in my retirement salary. Read more about that over at https://moneyengineer.ca/2025/01/31/im-retired-now-how-do-i-get-paid/ ↩︎
  2. With Questrade, all ETF trades are free to make, so I don’t have any real reason not to make such changes. ↩︎

What’s in my retirement portfolio (April 2025)

RobH3 Comments

This is a (hopefully monthly) look at what’s in my retirement portfolio. The original post is here. Last month’s is here.

Portfolio Construction

The retirement portfolio is spread across a bunch of accounts:

  • 7 RRIF accounts (3 for me, 3 for my spouse, 1 at an alternative provider as a test)
  • 2 TFSA accounts
  • 3 non-registered accounts1, (1 for my spouse, 2 joint)

The target for the overall portfolio is unchanged:

  • 80% equity, spread across Canadian, US and global markets for maximum diversification
  • 15% Bond funds, from a variety of Canadian, US and global markets
  • 5% cash, held in savings-like ETFs.

The view as of this morning

As of this morning, this is what the overall portfolio looks like:

Overall retirement portfolio by holding, April 2025

The portfolio, as always, is dominated by AOA and XGRO which are 80/20 asset allocation funds in USD and CAD, respectively. The rest are primarily either cash-like holdings in two ETFs: ZMMK in CAD and ICSH in USD) or residual ETFs held in non-registered accounts for which I don’t want to create unnecessary capital gains just for the sake of holding AOA or XGRO.

The biggest month over month change was a small decline in AOA and a small uptick in XEQT, about a 1% shift overall. This was because I shifted some of my USD assets to CAD assets in the RRIF using Norbert’s Gambit2. I chose XEQT over XGRO because the contribution of bonds in the portfolio was slightly over my asset allocation target3. XEQT is essentially XGRO, minus the bond holdings (it’s a 100% equity fund).

There was also a noticeable reduction in the contribution of ICSH to the portfolio; this was largely due to the unfavourable change in the USD/CAD exchange rate over the course of the month, and not due to any change in the holdings there.

Plan for the next month

The asset-class split looks like this

Overall retirement portfolio by market, April 2025

This looks to be pretty close to my target percentages which haven’t changed:

  • 5% cash or cash-like holdings like ICSH and ZMMK
  • 15% bonds (almost all are buried in XGRO and AOA)
  • 20% Canadian equity (mostly based on ETFs that mirror the S&P/TSX 60)
  • 36% US equity (dominated by ETFs that mirror the S&P 500, with a small sprinkling of Russell 2000)
  • 24% International equity (mostly, but not exclusively, developed markets)

So, the plan for next month is, do nothing out of the ordinary. Reinvest cash (dividends, TFSA contributions) in one of AOA, XEQT/XGRO, ICSH or ZMMK depending on the asset category most in need on the day of the reinvestment. All these ETFs are covered on my ETF All-Stars page.

Overall

My retirement savings declined 5.75% over the month (down 7% since January) due to the continuing meltdown in the equity markets. It’s not a pretty picture!

Net worth of retirement savings compared to start of retirement

This has not translated to a the same degree of change in my monthly salary. Why? My retirement payouts are calculated by Variable Percentage Withdrawal (VPW), which I cover here. VPW has a built-in cash cushion, which serves to dampen month to month swings in my net worth, either up or down. As you can see in the chart below, my monthly salary has stayed within a 1% band of the first salary I drew in January.

Month over month salary, as compared to start of retirement

  1. Since Questrade combines USD and CAD assets under the same account umbrella, I was able to reduce the number here. ↩︎
  2. I shift funds from the USD to the CAD side of the RRIF more or less quarterly since all RRIF payments are currently coming out of the CAD side of the portfolio. ↩︎
  3. That’s the optimistic point of view; it’s perhaps more accurately stated as “bonds haven’t melted down quite as much as the equity portion of my portfolio”. ↩︎

Rebalancing the portfolio: A real-life example

RobH1 Comment

If you adhere to asset-allocation strategies (as I do) then rebalancing your assets to reset them back to your targets is a way to make sure you stay on track1. Some people do this on a regular basis (monthly, quarterly, annually) but I try to do it whenever the drift becomes noticeable (more than 1% off of my targets2). The targets for my portfolio are

  • 5% cash
  • 15% bonds
  • 20% Canadian equity
  • 36% US Equity
  • 24% International equity

Given the week we’ve just had, it’s not really a surprise to see that I’m overweight in cash, and underweight in foreign equity. Some of my cash is untouchable because it’s the built-in cushion that Variable Percentage Withdrawal (VPW) requires3, so that’s out. The majority of the cash in play is found in my RRIF accounts, and most of that is found in USD.

So the problem to solve for is to find a low-cost International Equity ETF that sells on the US market. Let’s walk through the steps I go through for that.

Copy what’s in my USD all-in-one ETF

Long time readers will know that most of my USD holdings are invested in AOA. (What’s the deal with AOA? Asked and answered here.) Since AOA is an all-in-one ETF, and since I know that AOA has international holdings (around 28%), and I know that AOA is inexpensive to hold, I can just do what AOA does, right?

So that is certainly a possibility, but as it turns out, AOA invests in TWO international ETFs, namely:

  • IDEV, which is a broad international ETF that tracks the developed world (you can see the Sector and Geographic breakdown here)
  • IEMG, which is a broad international ETF that tracks emerging markets (Sector and Geographic breakdown here)

IDEV and IEMG are both excellent funds, but I don’t really want to buy two funds if I can help it. AOA holds these two in a roughly 3:1 ratio, and I am too lazy to keep that straight.

So time for plan B.

Google for an appropriate ETF

So I type “international ETF USD” into Google and see what I get.

The first hit is linking to etfdb.com which isn’t my favourite website. They always list 100 ETFs when I want to choose from maybe 4. So I skip that link.

Then I get a hit for IXUS, which is an iShares product. This one I’ve heard of, and it has a clever name (ex-US, get it?). On IXUS’ overview page, I see three promising factoids:

  • It provides “exposure to a broad range of international developed and emerging market companies4“
  • It has a MER of 0.07%, which is acceptable.
  • It’s not clear to me how much is in emerging markets, but the geographic exposure breakdown includes some non-G7 economies, so that’s good.

So that’s pretty good, but I want to look at least one more ETF to be a good comparison shopper.

A little bit further down I get a hit for VXUS, a Vanguard product. Like IXUS, it has a clever name (ex-US, get it?) and so I feel compelled to look closer.

And I see three factoids again:

  • It provides “Broad exposure across developed and emerging non-U.S. equity markets”
  • Its MER is 0.05%
  • The geographic exposure breakdown looks an awful lot like IXUSes, even though the underlying index it’s tracking is different5

And so, with that, the decision is made: we go with VXUS because it’s 0.02% cheaper than IXUS.

Actually DOING the rebalancing

This will be new ground for me, because it will be using my new provider for the first time (Questrade). My old provider let me sell one ETF and immediately buy another, and I assume that Questrade will also allow this, but until I try it, I’ve learned not to assume things.

Oh, yes, the “cash” in my USD RRIF is actually also an ETF, namely ICSH, which is because Questrade doesn’t provide any other means to earn money on “cash”.

So anyway, on Monday, a few hours after the stock market opens, I’ll take a look and see if trading is still a advisable — has the market suddenly recovered? Is it so volatile it warrants sitting on the sidelines? I’m guessing both of those will be a solid “no”, but I will wait until Monday to follow through.

Rebalancing (Somewhat) Complete

I signed in yesterday to my brokerage account around lunchtime so I missed all the morning’s excitement. After everything I wrote above, I didn’t buy VXUS after all — since my US equity portion was also significantly below target, I bought AOA instead, thus increasing both my US and International equity positions at the same time. I used a limit order since the bid/ask spread was like 20 cents, far higher than I’m used to seeing.

When markets are this nutty, I don’t like making all purchases at once. Since Questrade trading of ETFs is now totally free, I can take my time and incrementally shift the portfolio back to targets.

  1. Long time readers may wonder why rebalancing in my portfolio (which is dominated by asset allocation ETFs) is required at all — one of the reasons to invest in an all-in-one is BECAUSE it rebalances automatically. The answer is simple — although MOST of my portfolio is in all-in-ones, not ALL of it is. As I prepared my portfolio for retirement (read more about that here), I couldn’t justify selling assets and attracting capital gains in my non-registered account just to make the portfolio simpler. ↩︎
  2. I track those targets using the Multi-Asset tracker found here ↩︎
  3. VPW is how I get paid in retirement. You can read about the method here. ↩︎
  4. Closer reading of the product page shows IXUS tracks the MSCI ACWI ex USA IMI Index ↩︎
  5. VXUS tracks the FTSE Global All Cap ex US index ↩︎

How I think about investing: Asset classes

RobH9 Comments

Passive investing while ensuring good diversification has been my strategy for decades. But how do I define “diversification”? For me, it’s always been about paying attention to how much of my total portfolio was invested in each of five1 asset classes and keeping them aligned with my targets:

  • Cash or cash equivalents
  • Bonds2
  • Canadian Stocks
  • US Stocks
  • International Stocks3

I got this idea from my last financial advisor who provided me with a lovely Cerlox4 bound annual report showing me how hard they were working on my behalf5. The report included a pie chart of how my investments broke down. This is what that pie chart looks like in my portfolio this morning:

Retirement portfolio by asset class, March 28, 2025

This pie chart has been my guiding principle: have a target percentage for each asset class in mind, and adjust your portfolio as needed to keep the percentages in line. This simple principle has been adopted by so-called asset allocation ETFs aka “all-in-ones” like (my personal favourites) XGRO6 and AOA7.

But are these even the right asset classes? Where are REITs8? Where’s precious metals? Where’s Bitcoin9? What’s your bond duration? Do you have enough exposure to high-growth geographies?

Short answer: just like I’m too lazy to pick stocks, I’m too lazy (and not smart enough) to pick a “winner” of a given asset class. The “periodic table” of investment returns by asset class is a must-read for DIY enthusiasts out there: https://themeasureofaplan.com/investment-returns-by-asset-class/ (go ahead, take a look, I’ll wait).

The folks at Measure of a Plan agree that trying to figure out the “hot” asset class is a very difficult task:

It’s no easy feat to pick the winner in a given year. The asset class rankings appear to be randomly tossed about over time, with the top performer in one year often falling down to the middle or bottom of the table in the next year.

https://themeasureofaplan.com/investment-returns-by-asset-class/

By keeping an eye on the pie chart, and shifting investments to align with my targets, I’m never at risk at being overweight in any one asset-class, and beaten-down asset-classes naturally get more funds to get the percentages right. It’s naturally causing “buy low, sell high” behaviour.

So: what about the asset classes I’m using? Are 5 asset classes too many? Too few? I don’t know. “Good enough” is sort of my philosophy in the spirit of trying to keep things simple.

The spreadsheet I’ve used to help me track my portfolio breakdown is found here. In future posts, I’ll talk a bit about how to make it work for you.

  1. For a long time, “cash” was not part of the consideration. Leading up to retirement, I started to carry a 5% cash weighting to help cushion market swings. ↩︎
  2. In years past, I did try to keep track of short-term versus mid-term versus long-term bonds. I gave up on that. ↩︎
  3. In years past, I did try to keep track of developed markets versus emerging markets. I gave up on that. ↩︎
  4. I had to look up how this was spelled. https://www.collinsdictionary.com/dictionary/english/cerlox ↩︎
  5. The fact that this report looked the same as the reports generated by two other advisors led me to the conclusion that my hard working advisor was perhaps being assisted by commercial software. ↩︎
  6. Overview of XGRO’s asset allocation strategy: https://www.blackrock.com/ca/investors/en/literature/product-brief/ishares-core-etf-portfolios-brochure-en.pdf ↩︎
  7. Overview of AOA’s asset allocation strategy: https://www.ishares.com/us/literature/product-brief/ishares-core-esg-allocation-brief.pdf ↩︎
  8. My first list of asset classes prepared circa 20 years ago did include REITs but I dropped that class, figuring (perhaps incorrectly) that the bond portion of the portfolio was good enough. Doing a bit of digging, I see that both AOA and XGRO hold REITs, and both consider them “equity” investments. ↩︎
  9. It’s actually obligatory for any article on investing to mention one (or more) cryptocurrencies, and/or one (or more) meme stocks 😉 ↩︎