Author Paul - The Wry Eye Guy

Investing Advice & Weather Forecasting

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Pick the Best Lounger!

I’m going to tell a story today, no numbers & stuff. Just light reading for a Friday afternoon. TGIF!

I was enjoying a nice lunch on an oceanside patio earlier this week. It was a beautiful sunny day in Nova Scotia. Everyone was basking in a summer heat that was perfectly tempered by the breezes coming across the bay. An Ontario couple at the neighbouring table were asking our server about the harsh winters in Nova Scotia. At the next table, a person in a group of Quebec visitors chimed in that they were interested in hearing about that too. To cut a long story short, the people from Ontario wanted to confirm that winter here was way harsher than winter in their neck of the woods. Our young server, a born & bred Nova Scotian, agreed that winter on the coast was absolutely awful. The Quebec group included a couple that were interested in moving to Nova Scotia, so they were more than a little disappointed to hear this news. They really wanted to move to a place with a milder winter than theirs. Another couple in the Quebec group lived in a apartment building in downtown Montreal. They were connected to the underground city complex there & could work & live a very full life in Montreal without ever having to go outside during the winter months. Though they did head outside to the ski slopes periodically. They didn’t care what Maritime winters were like, they thought Montreal’s winters were great!

What was happening here was quite incredible. Ontarians who had never been to the Maritimes in winter set the stage by claiming winters here were horrendous. Maybe the worst in Canada. Their opinion was confirmed by our server. A local who grew up with Maritime winters. But he had never been to Ontario in winter & couldn’t really make that comparison with any authority. We all have our blind spots, eh! On top of that, the disappointment of the Quebec couple simply reinforced the negative echoes that were bouncing around in this newly formed echo chamber. And the other Quebec couple couldn’t have cared less, they were totally happy with how they enjoyed their winters in Montreal.

What was going on here?

One uninformed opinion was reinforced by another uninformed comparison, & this developing feeling was augmented by an additional negative emotional reaction. While yet another emotional reaction, albeit from a totally different perspective, served to further confirm the groupthink conclusion. That Nova Scotian winters were just awful. Regardless of how true this might (or might not) be, this is how echo chambers work.

Fortunately, for all the people in this story, I was there to save the day. As it happens, I have lived through several winters in all three locations! It’s not often in life that we are presented with opportunities to strut our stuff from a position of 100% conviction. In I waded, pointing out how awesome that coastal winters are & how they compare very favourably to the truly horrible winters in Ontario & Quebec. I might even have gone overboard, just a little, extolling the almost tropical nature of winters in the Maritimes! By the time I was done, they were all moving to Nova Scotia.

Okay, I’m kidding, they were not all doing that. But the couple who wanted to move were a little relieved. And the rest were actually mildly surprised that coastal winters weren’t as bad as they’d imagined. But despite my obviously superior level of knowledge & experience (😜) relating to this specific question, this was still just my opinion on the matter. Yes, it does snow, but it usually melts pretty quickly. And then it’ll probably rain & do some other weird stuff. And we really don’t have that many hurricanes & sou’westers, eh! Or is it nor’easters? I don’t know. But I do prefer the frequent melts we get here, compared to Ontario & Quebec. And that makes east coast winters better … but only in my opinion. Those who prefer to ski in winter, for example, might not agree. In my mind, I might have been right, but my version of right might not suit everyone. So even with my supposedly strong level of knowledge, backed by experience, my right answer will not necessarily be right for everyone. In fact, it might not even be right for me going forward. What if I wanted to start skiing in winter!?! Okay, that’s unlikely, but never say never.
Of course, I was careful to warn my new found friends that past performance is no guarantee that things will be the same in future. Sorry, couldn’t help that one!

So what’s the point of the story? Echo chambers are easily created. And we enjoy spending time in them. That’s not surprising, since we like to hang out with people who share our likes & dislikes. Be it for weather or for investing. But it can be enlightening to pull back & consider alternative perspectives. I think it’s worth trying to keep an open mind. And to spend time trying to find our own blind spots. Sometimes, facts & evidence are elusive. We need to push back against our personal biases to ensure we are seeing things clearly. If only to see if we might enjoy a winter skiing holiday in Quebec. Now to be honest, I might not hit the slopes. But I do need to practice my French lessons. And I really enjoy the food in Quebec. Regardless of the season!

If you’re a regular reader here, watch out for my biases!

PS … I had the fish and chips. Again! LOL

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Declutter an Investment Portfolio

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A tidy portfolio can deliver growth or income with less work!

Managing a bag of stocks & ETFs is difficult. The fund companies have come up with products that have the potential to take away much of this pain. The all-equity ETFs & the all-in-one asset allocation ETFs offer a complete portfolio, wrapped in a single ticker symbol. Of course, no matter how good these products are, there might be some emotional investing needs too. Investing is both mathematical and psychological, eh? So maybe a little tweaking is okay!

Owning an ETF like BMO’s ZEQT (or iShares XEQT, VEQT from Vanguard Canada, etc.) is probably a good core choice for many investors. An ETF like this is already globally diversified. It’s geographically weighted according to market size & importance. It includes what many consider to be a reasonable home country bias. It holds large, mid, & small cap companies. It’s a really big haystack that I think Jack Bogle would approve of. According to Nobel Prize winning economist, Harry Markowitz, diversification is the only free lunch in investing. These funds meet that bar too. And finally, it’s a simple approach that is a lot less work for a DIY investor.

Do you spend your time figuring out if you should be dumping some of the tech ETF, so you can buy more of the gold one? Or trying to figure out when you should be selling the US market off, in order to buy Europe & Asia? Are you trying to work out what to do with this week’s hot & cold stocks? Worried about sector ETFs that might be going in, or out, of favour? Surging or failing markets? It’s all quite stressful & time consuming, eh? Life is too short. Especially as we get older! An ageing brain needs some challenge. But not torture. The globally diversified funds have everything in there. Some stuff will go up, some will go down. These funds are diversified & that’s how they work. And there’s one other important point to simplicity: if there’s a chance that the investing manager of a couple might depart first, a decluttered portfolio might be greatly appreciated by the surviving partner. The simpler the investing solution in place, the better it’s likely to be.

Want bonds? Choose one of the all-in-one ETFs (ZGRO, XBAL, VCNS, etc.) with a bond allocation that matches your needs. These are very simple solutions for highly diversified, asset-allocated portfolios, & they come with built-in rebalancing. Some investors might prefer an all-equity ETF that is complemented by separate bond & cash-like ETFs. There are some good arguments for breaking out the bond & cash allocations. It’s a little extra work, but it may make sense for some.

Now different investors have different approaches, so it’s not just about growth & accumulation. Fortunately, there is often a simple solution for many of the other investing styles too. For example, an income investor that favours high yield funds can choose something like the EQCL ETF, from Global X Canada, for the equity portion of their portfolio. It’s very similar in asset mix to the all-equity configuration of ZEQT. But instead of focusing on growth, this fund uses covered calls & leverage to drive a far higher distribution. People are different. Some are happy to go for maximum growth & sell off shares for income. Others prefer that the fund company delivers a bigger income stream for them. Rather than selling shares, these people are more comfortable figuring out how much of the big distribution they need to reinvest, in order to sustain & grow that income stream. Some investors like to mix & match such strategies. There are those who use different strategies in different accounts, so one style will be used in the TFSA & another in the RRSP. If you are new to these income funds, note that there are some total return & tax characteristics that are different to the regular type. Take the time to learn before diving in. Though that suggestion applies to everything. And it should have previously applied to the messy portfolios we sometimes find ourselves with! LOL

BMO offers yet another approach with their T6 Series ETFs. These funds dole out a targeted 6% distribution with funds like ZGRO.T & ZBAL.T. Here the fund manager is delivering the extra income, primarily via return of capital, but without the investor having to manage the sale of shares. This is cool for those who think that the 4% Rule isn’t allowing them to spend as much as they’d like. But it’s not as biased towards the far higher distributions that come from some of the high yield funds. This is more of a middle ground for income seekers. Don’t assume that this 6% distribution is a given for an inflation beating income stream for a full retirement lifecycle, by the way. Read this post on the Safe Withdrawal Rate in Retirement on why that might not work all the time. Nonetheless, the T6 funds will take care of automatically delivering a higher monthly yield, based on the value of the underlying fund at the end of the previous year. You still need to pay attention to the variability of the income stream over time. There may be a need to reinvest a little extra when income goes up after a great year, for example. That might safeguard against an income drop if the markets go down the following year. If the fund is subject to successive down years, the income stream will decline too. No solution is perfect when we try to predict the future, eh? But the bottom line is that simpler solutions exist for most investing styles & strategies. And for varying levels of distributions. Regardless of the investing strategy that is preferred, it shouldn’t stop an investor exploring ways to tidy up a messy & confusing portfolio. Especially if it reduces stress, while improving visibility & returns. Decluttering can be both refreshing & potentially rewarding.

If you can’t get your head around having so few holdings, how about putting the BMO one (ZEQT) in the RRSP, the iShares one (XEQT) in the TFSA, & Vanguard’s (VEQT) in the non-registered. Each one of these is globally diversified. They own a little piece of everything traded on the public markets. These are all essentially identical. But I get it. I totally feel the need to spread it around the different fund companies myself! There is also something to be said for making the single ticker solutions the core of a portfolio. While leaving a smaller allocation available for some gambling on the side. Sorry, I meant some intelligent macro investing on the side to boost alpha! If you know you can do it well, or if you can afford the greater uncertainty of return for a small part of the portfolio, then it might be fun, no it’s still crazy, okay! 😜

One other consideration. If the current messy portfolio performance is seriously lagging that of a single ticker solution, ask why. There may be good reasons why. And good reasons to justify staying the course with existing investments. But if we can’t come up with good answers (that aren’t guesswork or wishful thinking!), then consider this … if a portfolio is consistently underperforming the single ticker ETFs by an amount that is significantly more than 1%, it might be better off in the hands of an advisor who only charges 1% to manage the portfolio. Even if all the advisor does is invest it all into ZEQT or VBAL & manage the financial planning & cashflows for the investor thereafter!

There is also one big caution with all this. Decluttering a portfolio isn’t like spring cleaning at home. Do NOT rush into selling a bunch of stuff without getting some professional tax & investing advice. A long-term holding in a non-registered account, for example, may have significant capital gains tax liability if sold off. It might bump income up to a higher tax bracket. It might generate income that exceeds an OAS clawback limit, & so on. There are many potential issues, so seeking professional help is often the best course. There can be other challenges with balancing different fund types across the different account types. If you don’t know how to manage all this, get some help. Even if you’re just not sure if you know enough to manage all this, get some help first!

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Beware of Advice from Recent Retirees!

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Gambling on Retirement!

It’s unfair to tarnish all retirees with that statement, some might be offering great advice. But I’d be a little more circumspect about advice from those retirees advocating for earlier retirement because of their recent success. Some of these well-meaning folk might be suffering from recency bias. What’s that?

Anyone retiring in the past 15 years, with big stock market exposure, has probably been pretty lucky. Or, as they might prefer to see it … they are brilliant investors! This is especially true if their portfolio was biased towards the US markets. S&P500 Index® funds have returned close to 14% annually. The tech heavy Nasdaq 100 Index® has done even better.
I have to admit, some of them do look like investing geniuses!

Over the past decade & a half, it almost didn’t matter what strategy was employed. Just about any broad based American equity funds worked well. The growth investor did well & dividend investors did well. Investors who choose funds delivering huge yields via covered calls & partial leverage did well. They are all still doing well. Some of these retirees are mocking the old 4% Rule. As they sip frozen margaritas on a beach in the Caribbean! They are having a ball. And it’s hard to argue with success. But this might not apply to the next batch of retirees. And those with more limited finances need to be especially careful.

The 4% Rule is not a rule, it’s a rule of thumb. A guide only. But there are good reasons for its existence. Reasons that are at least broadly acknowledged by most. In a “normal” world, the safe withdrawal rate of 4% generally worked. In the “modern” world, it seems like you can haul out 12 or 13% every year & ride that gravy train all the way to the bank. Or the beach! That’s been the story for anyone retiring from 2010 onwards. The few blips we had along the way, like the one earlier this year, another in 2022, the 2020 downdraft for covid. They all repaired so quickly that nobody really noticed these as bad events. In fact, all those rapid blips did was reinforce the “buy the dip” philosophy. And, for those who didn’t panic, that has worked out very well.

But there will almost certainly come a time, where the dips will hurt a little more than these recent examples. There will be more enduring dips. And in such times, the 4% withdrawal rate may be more appropriate for managing retirement income risk. Ask anyone who retired in 2000. I’m not kidding, find an older retiree & ask. You probably won’t find them on social media! The experiences of more recent retirees is not how things always were. And while the good times are still rolling, they may not continue forever.
In case you can’t track down one of those older retirees, read this post on the Safe Withdrawal Rate in Retirement.

If you were planning on saving a million bucks before retiring, but you’ve only made it to half a million so far, pause a minute. Think very, very carefully about taking any advice that suggests you can retire immediately on your half-sized stash. Some recent retirees may think it’s okay to use 10% withdrawals nowadays. Or maybe they suggest that you can buy a bunch of funds yielding 10, 12, or even 15%, & go enjoy life sooner. This might not be good advice. Remember the old investing disclaimer: past performance is not indicative of future returns? In fact, it’s more likely going to be the opposite. After such an amazingly good run of returns, it’s far more likely that future returns will not be as good.

Look, I don’t know what the future holds. Maybe these enthusiastic retirees are right. But for anyone on the threshold of retirement, or for those younger retirees with a longer retirement timeline, caution is warranted. I’m sure I would enjoy spending a little more after a really good year of returns. And I’d probably do that again the following year, if there was another good year in the bank. But I would not start out a full retirement cycle of 20 or 30 years with the expectation that 10% a year is going to be the norm. While it’s not a commandment, I would treat that 4% Rule of Thumb with a little respect. I sure hope that we might still enjoy some good years of 5 or 6% spending. Who knows, maybe even a little more than that from time to time. Actually, let’s be honest here, I’m really hoping that 10% thing holds up for my retirement, from beginning to end! But I’m not taking that optimistic hope to the bank for the long haul. It’s probably not going to work as a good financial planning number!

If you can’t figure this all out on your own, please see a qualified financial planner & step through the process carefully with them. They will help you figure out how much you need to save to retire. And how much you might be able to spend during retirement. I know it’s expensive to work with a financial planner, but it might prove to be money well spent. Rather than finding out that you got it wrong half way through retirement.

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Growth or Yield for Retirement Income?

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Growth or Yield?

Since Jack Bogle came up with the idea, it’s been difficult to beat a market index portfolio for total return. This approach can work well over decades of saving & investing for retirement. But we can feel differently about things as we get older. After a lifetime of picking up a regular paycheque, we’d really like a regular paycheque in retirement too, eh? And if there isn’t a nice pension ready to deliver that paycheque, income investing might have appeal.

Interest rates & bond yields have declined over the past couple of decades, so not much income to be had there. Even old-fashioned dividends have declined, particularly in the US equity market, as valuations increased. Some years ago, fund companies realised the boomer retirement market was in search of bigger income streams. In response, they created covered call funds with higher distribution yields. More recently, fund creators are adding some leverage. This not only boosts the distribution yield, but it also boosts the potential to recover the some of the return that covered call writing tends to lop off. Here’s one example of how this might work …

This is a simple comparison between HYLD (Hamilton Enhanced U.S. Covered Call ETF) & VSP (Vanguard S&P 500 Index® ETF). Hamilton describes HYLD as having an “overall sector mix broadly similar to the S&P 500®”. Since it’s hedged back to the Canadian dollar, we are comparing it to VSP, from Vanguard Canada, which is also hedged. The equivalents from iShares (XSP) & BMO (ZUE) would also work for this. HYLD has only been around since February 2022, so it’s far too short a time to say how it will fare over the long-term. For this exercise, I trimmed off the first year’s performance for HYLD. Because it contained some third party funds that might have impacted performance. These were gradually replaced by Hamilton’s own funds & performance improved. Though it shortens the timeline, I think it is a fairer comparison for guesstimating what it could look like going forward.

With all dividends & distributions reinvested from March 2023 up to July 25th, 2025, the result sees VSP compounding at a shade over 21.6% annually & HYLD comes in at 20.9%. Over that time HYLD actually took the lead occasionally but, for the most part, they tracked very closely together. I think it’s fair to call it a tie. For a $100k investment, VSP would have grown to about $160.5k, while HYLD would have turned into about $158.2k. In contrast, the yield from VSP is only about 1%, while HYLD is currently throwing off almost 13%. Despite the huge difference in yield, the total return is virtually identical.

Each investing strategy brings its own unique challenges for a retiree. The “growth” investor has to decide how many shares to sell to augment the income. The “income” investor has to decide how much of the distribution should be reinvested to ensure the success of the portfolio into the future. That’s a bit of a challenge for either one, so we’ll start by paying out $1,000.00 a month. That’s a simple annual withdrawal rate of 12% based on the starting value. And, to keep pace with inflation, we’ll adjust the income stream over time. Since the annualised growth rates were over 20% for both funds, that sounds reasonably conservative, eh? With this arrangement, both funds deliver an identical income stream of just over $29k to the investors over the almost two & a half year period. After all withdrawals, HYLD has an end value of $122.2k, with $124.2k in VSP. Again, little to no difference. This is a great outcome for both investing strategies.

Along with a great monthly cheque, the other important thing here is that the remaining value of both portfolios, after all withdrawals, is well up from the original $100k invested. Using the Bank of Canada’s inflation calculator, a portfolio value of $100k at the start of 2023 would equate to a value of about $107.5k in 2025. Since both funds are well ahead of this number by the end of the comparison, that bodes well. In fact, we could have started with a $1,400.00 dollar monthly withdrawal & the end values of both funds would have been in line with the inflation adjusted portfolio value needed for the future. But my crystal ball was broken back in 2023, so I took a safer path! 😜
That larger withdrawal amount would have been a withdrawal rate closer to 17%. Wow!

Some huge words of caution about this example: 12% is not a typical withdrawal rate over the course of a 30 year retirement. High yield percentages can not automatically be used as a withdrawal rate either. It may be possible for a time, but we also need to keep an eye on the underlying share price. And on the trajectory of the income stream. Is it going up or down? Are we keeping up with inflation? Unfortunately, we have to plan for an uncertain future. We can’t depend on the markets delivering consistently incredible returns over a long retirement timeline. Indeed returns are very uncertain over any future timeline, long or short. Look at the total return profile of your portfolio, not just the yield. In this case, there are older S&P 500 Index® funds that can be back-tested to show how precarious retirement life can be. At times, withdrawal rates much closer to 4% were required. It will be interesting to see if some of the newer funds can do better.

There are some very good reasons that the 4% Rule (of Thumb!) was used as a baseline for evaluating retirement plans. These days, a financial planner will use some pretty sophisticated software to plot out what’s possible for a given set of circumstances & predictions. In addition, the plan may produce higher or lower income streams based on individual investor choices. Financial plans should be reviewed regularly. Each new year starts with the new return estimates. Along with age revisions (money needed for fewer years with each passing year!), revised needs & wants, etc. And, of course, the current portfolio value is now the new portfolio value for planning the rest of the retirement journey. An investor that is willing & able to tolerate large income swings from one year to another may be able to sail closer to the wind on higher withdrawals. As would a retiree with a large guaranteed income stream from pensions, for example. Without that safety net, it can be far more challenging. The superb performance of the US markets for the past decade or more might have us believing that there are unicorns & leprechauns underneath all the rainbows & sunbeams. Tread very carefully. For most of us, it’s likely worth shelling out for a professional financial planning review to see what’s possible. The good & the bad.

One last thing: regardless of which strategy you favour, it’s usually worth listening to the other point of view. I know both growth & income investors that are killing it with their chosen strategy. Then there are some that aren’t quite sure how well, or how poorly, they are doing. We can all learn something new, eh? There may even be circumstances, both data driven & psychological, that encourage using a combination of strategies to navigate retirement. It’s usually worth taking the time to see a different perspective. And it might help to Benchmark Your DIY Portfolio against one of those recommended by experts & professionals in the field. Knowing how your portfolio behaves may help with engagement during the financial planning conversion.

Happy retirement spending!

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.

Benchmark Your DIY Portfolio

Paul - The Wry Eye Guy 1 Comment
Measuring Portfolio Performance

How does your portfolio stack up against a simple, globally diversified, broad market index portfolio? Does it matter? It might. Most of us, short of placing some lucky bets, are unlikely to beat the markets over the course of our decades-long investing lifetime. But that doesn’t stop us trying. And that can get messy. Do you know what’s in your basket? And how well it’s working? If you find yourself wondering about this every now & then, it might be worth checking. How do we do that?

Plug your portfolio details into one of the online tools that provide portfolio comparison features. I like the Backtest Portfolio feature in Portfolio Visualizer for this. Once your portfolio is loaded, compare its total return performance to one of the all-equity ETFs like ZEQT, VEQT, or XEQT. If the equity side of your portfolio is crushing the returns of these all-equity funds, well done. Do you know why? Is it luck or skill? Can it continue? If you think it can, keep doing what you’re doing & get ready to enjoy your retirement!

If things are not going that well, it might be worth exploring why not. Of course, some investors may deliberately choose a portfolio mix that lags index funds. Not that the goal is to lag, but other attributes (low volatility, increased cash flow, whatever) may be favoured over maximising total return. It also doesn’t matter if you have a growth, dividend, or income investing approach, benchmarking total return performance can still be enlightening. And useful. Sticking with any strategy, even one that lags, is a decision best made when we know the cost.

I’ve left out a bond or cash component. However, that’s easily added. Make sure it’s in the same ratio as in your own portfolio, for an apples-to-apples comparison. Or use one of the asset allocation ETFs, like XGRO, VBAL, ZCON, etc. as your benchmark. These are the all-equity ETFs with bond funds built in. Select one with a built-in bond percentage that matches your own portfolio. I prefer not to use an S&P 500 Index® fund as the benchmark, because it’s less geographically diversified than I prefer for my portfolio. For for those who invest only in the US market, it’s a valid choice.

Most of the comparison & performance tools will require a subscription if you want to take advantage of the full capabilities. But, despite the limits, the free access can still be very useful. For example, Portfolio Visualizer allows 15 holdings & 10 years of back testing under the free tier. While stock pickers will almost certainly be challenged here, most ETF investors are likely to have fewer holdings. But if you’ve got more, choose all the bigger ones & hopefully the top 15 holdings will make up the bulk of your portfolio value.

Another challenge with making comparisons is that the first of the all-equity ETFs only launched in 2019. That limits how far back we can look for direct comparison. But there are some tricks that we can employ. Like breaking down a fund into older constituent (or similar) ETFs. For example, we can use an all-equity ETF proxy made up of VUN (USA 45%), XIC (Canada 25%), XEF (International Developed 25%), & XEC (Emerging 5%). This gets us a comparison all the way back to September 2013. On the flip side, if your portfolio has a bunch of new funds, there won’t be much history to look at. And, in general, the shorter the timeline, the lower the value of the comparison.

This next proxy drifts further away from using a single all-equity ETF. A comparison portfolio of SPY (USA 45%), XIU (Canada 25%), & EFA (International 30%) is a rough approximation that allows benchmarking all the way back to September 2001. It would have been interesting to see the impact of the dot-com implosion in 2000, but EFA wasn’t old enough to catch that event. I guess we could use a 50:50 portfolio of SPY & XIU to get back to 2000. The problem with both these “created” benchmarks is that the funds are in different currencies. This further muddies the waters. Pretty significantly. That said, for rough comparisons, they look back about 25 years. But why are we bothering with all this history stuff anyway?

We all know that past performance does not predict what the future holds. But benchmarking against one of these all-equity ETFs, or against a proxy for longer timeline comparisons, can throw up some interesting insights. It’s good to know how an asset mix survives things like the dot-com meltdown & the great financial crisis. There is tremendous value in seeing how things worked while accumulating. And then how things can change, sometimes seriously, while decumulating in retirement. I know some people are shocked by the outcomes from these comparisons. If that’s you, I hope you are positively shocked. Because of how well your portfolio has performed. And if so, congratulations!

If you are negatively shocked, you might want to reconsider what you are invested in & why. If the equity portion of your portfolio is way behind the returns of the globally diversified fund, is that acceptable to you? Is your original investing hypothesis intact? Ah look, I’m trying to tiptoe around asking you if you know what you’re at here! And if you don’t, consider this …

Should an investor seriously trailing an ETF filled with globally diversified, total market index funds think about the potential for buying that ETF instead? Or maybe this investor should consider talking to an advisor. I know that is a heretical thing to say out loud amongst DIY investors. But if the results are likely to be better, after paying an advisor 1% to just buy the all-equity ETF for you, why would you not think about this? And if this advisor throws in some fancy financial planning, that’s an added bonus. Look, DIY investing is not a religion. And we didn’t take a vow. We don’t have to remain committed to underperformance. Particularly if we can’t figure out how to fix it on our own. Of course, it can be as challenging to choose a good advisor, as it is to build a good portfolio! Seems like there is no escaping the need to invest in learning when it comes to making enlightened decisions about our money.

I guess this is all a bit simplistic, eh? But if you’ve been doing your own thing for a bit, it can be insightful to benchmark your performance against a simple off-the-shelf portfolio, like the all-equity ETF we used for benchmarking. And it’s an EFT that some academics & professionals argue might be the best long term investment choice for many DIY investors anyway. Only you can decide what to do once you see the results of a benchmarking exercise. Just don’t jump from the frying pan into the fire!

There are other considerations, of course. Some favour lower volatility portfolios. Others treat & handle risk differently. Retirement cashflow or income can be a big influence on portfolio choices for those nearing retirement. Worries about sequence risk in early retirement can factor into portfolio selection. And on & on it goes. But, regardless of these many influences, measuring & comparing performance can provide insight. And the insight may help guide us towards better solutions going forward. And if you do decide to have a discovery chat with an advisor, why not benchmark the advisor’s proposed portfolio against one of the all-equity ETFs as part of that process. After going through all this, I’m now questioning my own portfolio. Think I’ll head off & do a little benchmarking of my own. Catch up with you later! 😜

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.