Tag: diversification

What’s in my retirement portfolio (Feb 2025)

RobH4 Comments

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

Portfolio Construction

The retirement portfolio is spread across a bunch of accounts:

  • 7 RRIF accounts (3 for me1, 3 for my spouse, 1 at an alternative provider as a test)
  • 2 TFSA accounts
  • 5 non-registered accounts2, (2 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 high interest savings accounts (list available to me shown here)

The view as of this morning

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

Overall retirement portfolio by holding, February 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 holdings in HISAs (DYN6004/5 in CAD and 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 is due to a small re-balancing exercise. I replaced some of my XGRO (which is an 80/20 equity/Bond asset allocation fund) with XEQT (a 100% equity asset allocation fund). I do re-balancing any time my asset allocation drifts more than 1% off my target allocations3. The trigger for me was an overweighting in bonds, which had drifted to represent 16% of my portfolio instead of the desired 15%. Upon reflection, the reason was obvious: both AOA and XGRO are 20% bonds, and if I want only 15% bonds, I will periodically need to fund an all-equity alternative. The net effect will be that you will see more XEQT show up in the portfolio over time.

The observant reader will also notice a bit of a shift between DYN6004 and DYN6005. The reason? I raided some USD from DYN6005 to pay my US credit card bill and replaced it with CAD in DYN6004 using the spot FX rate at the time. Seemed the easiest way to get some USD4 without having to resort to my friends at Knightsbridge.

SCHF percentages drifted down a bit since that’s the ETF I’m selling in my non-registered portfolio to augment my monthly RRIF payments. That will continue for the next few months at least since the USD payouts are needed to fund a few holidays5 I’m taking that are billed in USD.

Otherwise, nothing interesting to see in the month to month changes.

Plan for the next month

The geographic split looks like this

Overall retirement portfolio by market, February 2025

The international equity percentage is below my target of 24%, and so I’ll have to fix that. SCHF seems a good choice in USD6 since it’s free to trade with QTrade. XEF would be a perfect fit in the Canadian market.

A quarterly activity that I’ll be performing this month is to shift some of my USD RRIF holdings into my CAD RRIF. This wasn’t something I had planned to do but since my provider has backtracked on allowing me to get paid out of my USD RRIF in USD, I needed a way to keep the USD exposure at a constant-ish level in the overall portfolio. I’ll talk about the USD in my portfolio in a future dedicated post.

One final note: my retirement savings continue to grow even though I’m now actively removing assets out of it. On paper, this makes perfect sense since an 80/15/5 portfolio ought to grow at a rate greater than my rate of removal. In practice, of course, it’s rather stock market dependent. Here’s the monthly returns for the 2 ETFs that make up the lion’s share of my portfolio7.

XGRO and AOA monthly returns so far8
  1. For me, that’s one personal RRIF that has 2 accounts, one for CAD, one for USD, and one spousal RRIF. My spouse has one spousal RRIF in two currencies, and a personal RRIF. The alternative provider RRIF exists because I wanted to give Wealthsimple a try. ↩︎
  2. For me, two because one each for CAD and USD. The 2 joint accounts are my cash cushion accounts for the VPW methodology outlined here and here. ↩︎
  3. Completely spreadsheet-driven. I don’t trade on news, analyses, gut feelings, hot tips, or guesses. ↩︎
  4. I did hesitate a bit because the interest rate on DYN6005 is over 1% higher, but given the amounts involved, I’m clearly overthinking things. ↩︎
  5. All booked before this current tariff nonsense. Sorry. ↩︎
  6. Although it does have a 9% exposure to the Canadian market so not 100% “international”. Hard to beat the MER of this, though. ↩︎
  7. I don’t think this tool accounts for FX so it’s probably not totally accurate. Check out https://moneyengineer.ca/tools-i-use/ for other useful tools. Canadian dollar gained 1.4% against the USD in the past 30 days, per https://www.bankofcanada.ca/rates/exchange/daily-exchange-rates/ so that will reduce the effective return of AOA by the same amount. ↩︎
  8. “Without dividends reinvested” since these two ETFs only pay out quarterly. There haven’t been any yet. ↩︎

Why you can fire your advisor: Asset allocation ETFs

RobH28 Comments

Summary: Asset allocation ETFs1 let you buy exactly ONE fund to meet your investing needs. Buy ONE fund, and forget about it. Really? Really.

In the run-up to getting ready for retirement, I greatly simplified my portfolio. On the Canadian dollar side, it’s almost all invested in two places: XGRO and DYN6004 (a Canadian high-interest savings account). On the US dollar side, it’s almost all invested in two equivalent places: AOA and DYN6005 (a US high-interest savings account). XGRO is an example of an Asset Allocation ETF that trades in Canadian dollars, whereas AOA is an example of an Asset Allocation ETF that trades in US dollars. The overarching objective of my retirement portfolio is to keep allocations at 5% Cash and the rest in XGRO or AOA. Effectively, this puts me at about 80% stocks.

What’s an Asset Allocation ETF?

Very simply, they are a kind of ETF that allow you to make one investment decision based on your desired risk profile. Risk is a personal decision, based on factors like timeline before needing the money, how much you agonize over stock market fluctuations and so forth.

More risk means better long-term growth prospects means more stocks.

Looking for higher long term growth? Choose an asset-allocation ETF that has a higher percentage of stocks. Looking for lower long term growth with less volatility? Choose an asset-allocation ETF that has a lower percentage of stocks.

There are many Canadian providers out there who provide their own families of asset allocation ETFs.

Which provider you choose may boil down to which is the most convenient / least expensive to buy and sell. For example, BMO Investorline clients can buy and sell the BMO family with no charges, while QTrade clients can trade the iShares family with no charges.

I personally don’t think that there is much to differentiate each of the families. Each provider is just trying to capture your business. So whether you buy ZEQT or XEQT or HEQT or VEQT 2 probably doesn’t matter very much in the big picture.

I summarized them below:

ProviderETF SymbolsRead more
BMO100% Stocks: ZEQT
80% Stocks: ZGRO
60% Stocks: ZBAL
40% Stocks: ZCON		https://bmogam.com/ca-en/products/exchange-traded-funds/asset-allocation-etfs/
iShares100 % Stocks: XEQT
80% Stocks: XGRO
60% Stocks: XBAL
40% Stocks: XCNS
20% Stocks: XIC		https://www.blackrock.com/ca/investors/en/learning-centre/etf-education/asset-allocation-etfs
Global X3100% Stocks: HEQT
80% Stocks: HGRW
60% Stocks: HBAL
40% Stocks: HCON		https://www.globalx.ca/asset-allocation-etfs
TD90% Stocks: TGRO
60% Stocks: TBAL
30% Stocks: TCON		https://www.td.com/ca/en/asset-management/insights/summary/all-in-one-td-etf-portfolio-solutions
Vanguard100% Stocks: VEQT
80% Stocks: VGRO
60% Stocks: VBAL
40% Stocks: VCNS
20% Stocks: VCIP		https://www.vanguard.ca/en/product/investment-capabilities/asset-allocation-etfs

The magic? Reallocation.

The real magic of asset allocation ETFs is that they do the work of reallocation for you. This is subtle, but crucial. Automatic reallocation takes the emotion out of investing, and means you’re buying low/selling high, every quarter. What?

Take for example XGRO. Per the product brief you can see that its target composition is

  • 20% XIC (the TSX 60)
  • 36% ITOT (the S&P total US stock market, about 2000 companies)
  • 20% XEF (international developed stock market)
  • 4% XEC (international emerging stock market)
  • 16% Canadian bonds (XBB and XSH)
  • 4% Non-Canadian bonds (GOVT and USIG)

The observant reader will note that 80% of this list is made of stocks, divided up over multiple geographies. Anyway, the “target composition” is key here. What this means is that every quarter stocks get bought and sold to re-establish the targets. If the US stock market goes on a tear while the Canadian stock market is tanking, the US gains will be locked in and the Canadian market will get picked up at a discount. It’s a perfect system. No emotion. Just ratios. No work on your part.

What’s the catch?

There is a small cost associated with owning an asset-allocation ETF. Most charge you about 0.20% every year. If you instead decided to own the underlying assets you could probably save on the order of 0.10%. (This is, more or less, what I had in place before I started simplifying my portfolio). But that assumes that you do the rebalancing yourself in a timely way, and the trading fees are negligible.

Wrap up

Asset Allocation ETFs are a great way to get a diversified, risk-appropriate, emotion-free, inexpensive investment portfolio. They are the ultimate tool in the DIY investor’s toolkit.

  1. Also known as “all in one” ETFs. Also known as “funds of funds”. They all mean the same thing. ↩︎
  2. Geez, no points for originality on the ETF names… ↩︎
  3. Global X has additional ETFs on the same page that add leverage to amplify returns. I don’t use them, since the amplification works both ways — in good AND bad markets. ↩︎