Tag: investing

My rules for retirement investing

RobH3 Comments

I provide some rules here to help you understand some of my own biases. They may not align with yours. But at least you know where I’m coming from.

Retirement investments are distinct from savings and day-to-day expenses

I have always maintained a firewall between investments and all other money. “Investments” for me always meant “money to be accessed only in retirement”. Whether that money was in an RRSP, TFSA or non-registered account made little difference. I never mixed the two. My rationale was that by keeping things separate, I made it much more difficult to “borrow” from retirement to fund today’s expenses. And it allowed me to take on the appropriate level of risk in my long-term investments, which helped boost my returns in the long run. I had another rainy-day cache of money to deal with unexpected expenses, and this money had to be absolutely liquid (no GICs, for example). My long term investments were always in place for “future me”.

More return requires more risk which requires holding more of your investments in stocks (aka “equities”)

If you want more return on your investments, you have to take on more risk. “Risk” doesn’t (or shouldn’t) mean “my money may go to zero” (that’s called “gambling”), but it does mean that in a given short-term period (one quarter, one year, three years) your money may not grow or even shrink. I have always maintained an 80/20 portfolio — 80% equity, 20% bonds. As I neared retirement, I moved to 80% equity, 15% bonds, 5% cash. Here’s my portfolio in real time (love Google Sheets for this).

Portfolio breakdown
The 80/15/5 portfolio, with breakdowns of Canadian, US, and International Equity Shown

Diversification helps mitigate risk

I don’t pick stocks. I only buy indices. You can certainly build a great portfolio at rock-bottom prices by buying individual stocks but I’m too lazy to do the necessary research. I’ve always spread my investment equity in different markets: Canada, USA, International. You can do this all through ETFs purchased on the Canadian stock market. Did I say “ETFs”? You can actually buy the 80/20 (or 60/40…or 40/60) portfolio in exactly ONE (1) ETF. More on that in a future post.

Dividends are nice, but total return is what really matters

I think a lot of the literature out there focuses on dividend stocks because they generate income. I think this is seen as attractive because many people can’t bear the thought of selling their holdings to pay the hydro bill. (“I want to just live off my dividends”). And while you can certainly be successful by buying into dividend stocks exclusively, I think you can miss out on maximizing the total return of your portfolio this way. And you may end up with a larger-than-intended estate when you die. The overall yield of my portfolio is somewhere around 2.5%, which is pretty paltry, but the total return is much higher.

Demystifying ETFs

RobH3 Comments

I’ve built my investments using Exchange Traded Funds (ETFs). In years before ETFs were commonplace, I invested in mutual funds instead. But why have I used ETFs?

Attribute 1: They are easy to buy and sell.

They list on the stock markets, meaning that buying and selling (should be) easy and cheap.

Attribute 2: They are portable.

Because they list on stock markets, you can buy them using any self-directed investment platform. Whether it’s one of the bank’s platforms (e.g. CIBC’s Investor’s Edge, BMO’s Investorline) or one of the independents (e.g. Questrade, QTrade, Wealthsimple), it shouldn’t matter who you do business with.

Attribute 3: ETFs offer a passive, inexpensive way to invest in an index.

As stated elsewhere, I am not a stock-picker, and I don’t worry about sector analysis. I buy, and I hold. A “passive” ETF is one that simply follows the makeup of a given stock index. Some of the more common indicies you’ll come across are the TSX 60 (for Canadian stocks), the S&P 500 (for US stocks) and MSCI EAFE (for everywhere else). The easiest way to judge the priciness of a given ETF is to look for the MER, which is the “Management Expense Ratio”. Canadian passive index ETFs should be at or below 0.20% MER, meaning that they should cost you less than 2 dollars for every thousand dollars you have invested, per year.

But not all ETFs are created equal.

As the ETF market has exploded, companies have launched all manner of kooky ETF products that adhere to attributes 1 and 2, but break attribute 3. They are typically not passive (and have highly paid money managers pulling levers behind the scenes), not cheap (because of the money managers, pay attention to the MERs). So the blanket statement “ETFs good, mutual funds bad” is not universally true.

Many ETFs copy each other.

A quick google search for “TSX 60 ETF” reveals a bunch of ETFs, that, on the face of it, all look to track the S&P/TSX60 index.

  • Blackrock’s iShares XIU
  • BMO’s ZIU
  • GlobalX HXT (this one is quite different1 from the other two from a tax perspective, but otherwise, it mirrors the makeup of the other two).

Picking one ETF over the other may be a matter of seeing if your provider treats them differently. For instance, my provider (QTrade) allows HXT to be bought and sold at no fee. Not so for XIU/ZIU. On the other hand, BMO Investorline clients can buy/sell ZIU at no charge. Avoiding unnecessary fees, no matter how small, is an ongoing hobby.

ETFs: The simple, portable, inexpensive way to build a diversified portfolio at a risk level that’s appropriate to you

ETFs are what I have used to build my retirement portfolio at an average cost of around 0.2% of the overall value. A typical financial advisor will charge 5 to 10 times as much. For me, that math doesn’t work.

  1. This is a gross simplification, to be sure. I’ve used HXT in my non-registered accounts because of its unique tax treatment, but don’t use it elsewhere. ↩︎

Moving from DPSP to RRIF: Cautionary Tale

RobH4 Comments

A few things I’ve learned as I undertake the preparation to retirement that may be helpful in the future. For those of you who don’t know, a DPSP (Deferred profit-sharing plan) is a CRA-approved vehicle to invest monies donated by corporations in the context of RRSP contributions (matching contributions). A brief reference can be found here. A DPSP is best thought of as an RRSP that is tied to your employer. Until and unless you leave the payroll of the employer, the DPSP is effectively untouchable by you, the beneficiary.

My employer included a DPSP as part of their compensation package; once I retired, that DPSP became portable and so I initiated the process to move it to my RRIF accounts.

A question you may have is “Why convert to a RRIF at all? Why not just withdraw money directly from the RRSP? “ You can, but it becomes likely that deregistration fees will be owed to your financial services provider. Not only that, but you will also be subject to withholding tax in this scenario. When RRIF minimums are withdrawn, there is no withholding tax, and there is no deregistration fee. Just 100% of the money you expect.

So my plan was to retire on December 31, 2024, and start collecting from my RRIF as a source of income in 2025. My plan had a small flaw, however. With a RRIF, you are required to withdraw a minimum amount from it based on your age and the value of your RRIF in the year after your RRIF is created.


You can access RRIF money as soon as the RRIF exists, but the annual minimums stated above are only calculated for the first time the year AFTER it’s opened. Practically, what this means is that if you try to withdraw money from a RRIF in the year it’s created, your withdrawals will be subject to withholding tax (boo).

So my little plan has a problem. My DPSP is only available to me as of Jan 1, 2025. Which means this account will only be converted to a RRIF in 2025. Which means I can only withdraw tax-free from the RRIF starting January 1st, 2026.

So that’s my tiny cautionary tale for y’all. If you’re planning on retiring, and you’re planning on getting near-immediate access to your DPSP funds via RRIF, I would NOT recommend a Dec 31st retirement date. A month earlier would be better, so you have time to set up the RRIF and access the RRIF funds in January.