The big guy delivered some good days leading into the holiday. But even without the little Santa Claus rally at the end, 2025 was a great year for investors. Globally diversified investors were finally rewarded for investing outside the US markets. This time last year, who would have guessed that the Canadian market would have topped the performance charts?
Here’s what market performances around the world were like up to now in 2025 …
This chart is built by comparing popular broad market ETFs that trade in Toronto. All dividends & distributions are reinvested to maximise total return. The last column is one of the popular all-equity ETFs that are globally diversified. It hold chunks of all the other columns in this chart, with a serious overweight to the world’s biggest market, the US. And the Canadian market is also overweighted, especially compared to its size. Because we all love a bit of home country bias, eh! The US market has outperformed in recent years. Starting out, I would not have guessed that 2025 was going to be the year where it lagged. And it would have been an even bigger stretch to imagine that Canada was going to come out on top. As usual, the pundits & talking heads are all over which markets are going to do well next year. Is it possible they only get it right accidentally!?!
My prediction for 2026 is that I’ll probably be better off if I put any spare couch-cushion-cash I find into one of the all-in-one ETFs that matches my asset allocation goals. Of course, I am prone to thinking I know better from time to time. And while I can occasionally get lucky, I mostly screw up when doing my own stock, sector, or market picking! 🤪
Thank you for joining me here throughout the year, I guess we’re all done for 2025. And here’s hoping the world is a nicer, kinder place in 2026. May whatever light that lights your way shine ever brighter this holiday & beyond!
Best wishes,
Paul
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.
Financial planning is based on estimates & projections. It’s educated & data-driven guesswork. The return projection numbers are so precise that they run to two decimal places. Reality is not that predictable! Planning projections for equities have been about 6.5%, give or take, for the past few years. On a year by year basis, it’s been way off. Markets have done far better. They could have done far worse. But the projections generally work well, when considering average returns, over longer timelines. After the exceptional market returns of the 90s, a financial plan using 6.5% for projections might have been considered too conservative. But a 50/50 mix of the US & Canada would have returned an average of almost 8% annually, from 2000 up to today. Looking back, that 6.5% wouldn’t have been a bad number to create a plan with in 1999, eh? But things can get crazy over shorter time horizons. Especially when retirement withdrawals come into play.
Grumpy old guys & gals who retired in the last 10 or 15 years complain about not being able to draw down their big RRIF accounts fast enough. Their portfolios are growing faster than they can spend them down. While many of these retirees are probably brilliant investors, some just got lucky! They timed the start date of their retirement pretty much perfectly. The 50:50 US & Canada portfolio would have returned almost 12% annually since 2010. Almost double that 6.5% planning number. Now there’s nothing wrong with being lucky. But luck is not always good enough for retirement planning.
That same 50:50 portfolio would only have returned a little more than 2% annually from 2000 to 2009. An investor who went all in on the American market over that decade would have had a negative return. The US market lost money over that 10 year period. And that’s without withdrawing any retirement income from it. The really big question with financial planning going forward, especially for new or imminent retirees, is this … what will the next few years be like? Those early retirement years can matter. A lot. As we saw above, average return numbers work really well over the long haul. But a severe or protracted downturn in early retirement, like the 2000 to 2009 period, can make a real mess of a plan. Taking a big hit immediately after retirement can seriously impair income for all the years that follow. The message here is that we cannot assume that the high returns of recent years will continue. Planning must allow for these different outcomes.
Financial planning guidelines have to thread a needle with respect for a wide range of potential returns. And it’s wise to err a little on the conservative side of what the long term data say. Many recent retirees, & new financial advisors, have not experienced something like the lost decade back in the early 2000s. To varying extents, we are all influenced by recency bias. And recently, things have been great. But we may need to temper the optimism & plan a little more cautiously for the future. Especially if retirement is imminent. Despite our retired friend’s success over the past 5 or 10 years, thinking we can begin retirement & spend at a consistent 10% rate is very risky.
So if planning is just guesswork, should we ignore it? Absolutely not! Nobody can foretell what happens next, but that makes having a plan even more critical. The purpose is to figure out how to best use our money so that we can pay the rent & buy groceries all the way to the end. Plans include success rate estimates & simulations that show if the plan can survive the best & the worst combinations of market cycles. Plans can include fun things like bucket list travel & fancy cars. Along with some things we hope aren’t needed, like illness or meeting long term care needs. It’s important to have a plan that considers the many vagaries of retirement. It’s equally important to have regular plan reviews & revisions over the years to ensure things stay on track.
Getting a financial plan done professionally can be very expensive. If you are paying an advisor to manage your retirement, financial planning may, indeed probably should, be included as part of that service. A good financial plan is a crucial part of living a successful retirement. Even for those DIY folk with a good knowledge of what’s required, having another set of eyes review the plan may still make sense. Indeed, it may be worth having a plan done by more than just one professional advisor. I know, sorry!
DIY folk tend to be frugal by nature & some may not want to pay for a professional plan. I get that. But you could ask about getting a review of your DIY plan, or a freebie, or a demo plan from whatever institution you have your money at. Some financial institutions provide that service. Sometimes you just need to ask. Fortunately, more & more planning tools are becoming available for the DIY cohort nowadays. Maybe with AI, we’ll even get some apps for that! But until that perfect app arrives, & perhaps even afterwards, getting a professional financial plan done might matter for most of us. Planning, especially for retirement spending, is quite complex. If you are not using a professional to put a plan together, there are some tools available that may help. Check out some of the tools in this post DIY Financial Planning … An Update. I have used the Adviice platform mentioned there & there are others like Optiml & MayRetire that I haven’t played with yet. Doing our own planning on a spreadsheet usually carries a greater risk of error. Whereas these platforms are getting feedback from a wider public audience, which helps weed out the errors & improve the product over time. Some of them have an access path to professional planning services. It’s great to see tools coming onto the market for DIY financial planning. As they improve & get smarter, perhaps they’ll help the profession space to offer more competitive services too. But until that happens, we’re stuck paying more. And despite the high price, it’s worth the spend if it helps us avoid a bad outcome.
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.
Many years ago we visited some Italian friends for dinner. That was the first time I realised that pasta wasn’t meant to have a couple of pounds of stew heaped on top of it. Pasta in our house was usually over-boiled spaghetti, buried under lots of meaty-tomatoey stuff. Sometimes, we tossed in a few tablespoons of curry powder. Or maybe some jalapeños. And left-over spuds were always a no-brainer addition. Look, I’m not saying I didn’t enjoy some of these concoctions. But I was totally taken aback by how much I truly enjoyed the far simpler pasta that we experienced at our friends’ house. Portfolios are a bit like pasta in that respect. Sometimes, we can get carried away by having too many ingredients to choose from. Simpler can be better.
BlackRock’s iShares XGRO (20% fixed income) & XBAL (40% fixed income) have been available as all-in-one portfolio solutions since 2007. The arrival of the all-equity ETFs boosted interest in these off-the-shelf portfolios. In 2019, Vanguard Canada launched VEQT, their all-equity ETF. In that same year, the iShares XEQT ETF & Horizons (now Global X Canada) HEQT were also launched. And in 2022 we got BMO’s ZEQT. These funds are globally diversified, with about 45% of the allocation going to the US, 30% to Canada, & the remainder going to International, which includes a small allocation to emerging markets. These ETFs hold 10,000, or more, different company stocks from around the globe. That is some kind of diversification! And according to Harry Markowitz, a Nobel Prize-winning economist, diversification is the only free lunch in investing. There are a bunch of academic papers that support this level of diversification. While there are minor squabbles about percentages, or how great the American market is, I think some of us could benefit from using the allocation model employed by these highly diversified ETFs. Of course, that won’t stop us trying to mess with a good recipe from time to time, eh?
My own portfolio has gone through changes over the years. I was a growth investor at one time. Later, a dividend growth investor. Over time, new ETFs made it easier to chase the next hot sector or geography, so I started adding some of those. It wasn’t long before my portfolio looked more like one of my mad Irish-Indian-Mexican, & only vaguely Italian, pasta dishes! I finally got around to doing pasta the Italian way. It took me a little longer to learn how to apply that same keep-it-simple philosophy to my portfolio. But both cooking & investing are a little easier now. I will, however, admit that I occasionally toss a little hot pepper, or a little hot stock, into the recipe too!
Regardless of your preferred investment philosophy, there’s probably an all-in-one solution out there for you now. Along with the 100% equity ETFs, if you want 20% bonds, there are the V/X/ZGRO ETFs. The V/X/ZBAL ETFs cover the 40% bond allocation model. And so on. If you want the fund managers to take care of selling shares for you for income, BMO now has the T Series ETFs, like ZGRO-T & ZBAL-T. These ETFs dispense monthly income at the rate of 6% annualised. Now this distribution is well supported by recent market performance, but you should consult a professional to see if that 6% spending rate is sustainable throughout a lengthy retirement. Global X launched some funds for the high income investor. In 2023, EQCL provided a covered call & leveraged ETF that pays out at about a 12% rate. This sounds like a dream ETF &, since it was launched, it has been. Along with the fantastically high distribution, the underlying share price has continued to grow. But a 12% withdrawal rate might not be a safe bet for anyone starting out with a long retirement horizon. To complement this, Global X also have a globally diversified ETF with only covered calls. And another with only some leverage. What’s your favourite flavour?
With any fund that deviates from just holding & compounding plain old company stocks, it’s worth comparing its total return performance against an equivalent regular version. Regardless of huge differences in yield, total return comparisons offer a very useful perspective on relative performance. This is important to review during different parts of the market cycle. Many of these new funds look good, but they’ve only been active during a period of generally great market growth. Or with some smaller shocks that recovered quickly. Comparisons of these newer funds over recent shorter timelines are not as useful. Be wary of overly optimistic expectations until there’s some history of performance during longer or more severe downturns. Maybe these funds will do well. But getting it wrong with overly optimistic expectations can wreak havoc with retirement planning.
So what’s the message here? Having a big, sloppy, messy set of investments can add work & stress to the job of managing a portfolio. It’s worth comparing such a portfolio to the far simpler portfolios like those asset allocation ETFs we talked about above. If you are confidently outperforming an equivalent all-in-one or asset allocation fund, & if you don’t mind the work, then carry on doing what you’re doing. But if the off-the-shelf ETF is beating your portfolio over the long haul, you might want to ask why. Could the simple recipe be worth considering?
Of course you absolutely should consult a professional before you start moving investments around. There are so many things that can go wrong. You don’t want to get hit with a big tax bill from selling off investments in a taxable account, for example. Nor from shifting things between tax sheltered or tax deferred accounts incorrectly. That’s a huge no-no. Professional assistance may be required to avoid these, & other, potential pitfalls. And finally, if a big, sloppy, messy portfolio is underperforming by a significant amount, it may even be worth paying a professional to manage things. DIY investing isn’t something we’ve sworn an oath of allegiance to! At the very least, it may be worth interviewing a few financial planners & advisors, to get a feel for what they might do differently for you. Even if you decide to continue with the DIY approach, these encounters can be very educational. They may even help you create a better plan. You’ve already got a financial plan though, right?
Okay enough with all that for now, can you guess what’s for dinner tonight! 😜
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.
There are some simple tools that can help us figure out where we might stash some cash for a while. Preferably within registered accounts like the RRSP, RRIF, or TFSA. In a non-sheltered account, the tax exposure will negatively impact net returns, so factor that into the thought process. Regardless of the pros & cons of holding cash over the long haul, we can find ourselves wanting to sit on some cash from time to time. If the cash just sits there as cash, it’s under constant attack from inflation. The starting number remains the same. But the purchasing power is evaporating daily. Let’s see how that works.
Go to the Bank of Canada’s Inflation calculator & plug in $10,000.00, starting in 2014, & hit the calculate button. As of today, that returns a value of $13,108.11. That extra $3,108.11 is how much our original $10k would need to have earned in interest, in order to buy the exact same basket of goods in October 2025. If we were sitting in cash, earning nothing, we’ve lost almost a quarter of our buying power. The Bank of Canada rates are based on an average basket of consumer goods that track the consumer price index. We’re not average, of course, so our personal inflation rate might be different! Believe it or not, Statistics Canada can help with this. With the Personal Inflation Calculator! Here we can plug in the things we spend our money on & the calculator will give us our personal inflation rate, based on our individual spending biases. Don’t get all hung up on the finer detail of the results here, you just want some idea if you’re in the ballpark of the CPI numbers that the Bank of Canada produces. Depending on what you spend your money on, you may generally be a little higher or a little lower. Knowing that is sufficient for a reasonable comparison against the Bank’s data. For the purpose of this exercise, we’re going to assume we’re close to the Bank’s numbers.
On a side note: are you being bombarded by online advertising on short term promotional rates? I just saw one for a 4 month rate of 4.75% from a local credit union. Nice, eh? And hey, if you’ve got the time, & some cash sloshing around in a regular bank account, nothing wrong with hopping around to benefit from these offers. In regular accounts, be careful doing this with large chunks of money, where the yield might bump income into a higher tax bracket. Or into OAS clawback territory. In sheltered accounts, I prefer to avoid all the extra work required to chase interest yield. In these accounts, I like to keep it simple.
And the simple thing to do is to buy a HISA style ETF. There are many of them, so take your time finding one (or more) that you like. I’m going to use the Purpose High Interest Savings Fund, ticker PSA, for this example. It trades in Canada, in Canadian dollars, & it’s eligible for registered accounts. Today, the net yield (after MER is stripped out) is 2.44%. That’s an annualised number based on the rate for the past 7 days, so you can’t take it to the bank (🤪) for the long haul. But this yield number makes for an easy first-pass comparison to whatever else you might be looking at. There may be better rates out there on other ETFs, so do some hunting for comparison. But PSA is one of the older HISA types ETFs around & we can see what its total return is since 2014. And that’s why I used 2014 in the Bank of Canada example above.
If you had invested the same $10k in this fund when it launched, back at the end of 2013, it’d be worth $12,723.00 today. That is only 385 bucks shy of the inflation indexed number from the BoC calculator. After almost 12 years, that is a whole lot better than the $3,108.11 we’d have seen evaporate if we’d let the $10k sit in cash. By all means, shop around & see if can find something that suits you better. There are many HISA type ETFs on the market now, like CASH, HSAV, etc. There are also money market funds that provide a similar smooth line performance to the HISA ETFs, take a look at ZMMK, MNY, CMNY, by way of example. You can use the Interactive PerfCharts from StockCharts to do the comparison. While bond ETFs will usually outperform these cash type ETFs over the long haul, they are subject to greater volatility than the HISA & money market funds. I’ve included a couple of popular bond finds in the link so you can see how they compare. They may outperform over time, but people don’t like to sell shares of a bond ETF after a crash. And bond funds tend not to recover as well as equity funds do after a crash. The other thing to bear in mind here is that old investing adage: past performance is no guarantee of future results! But leaving money sitting in cash guarantees inflation erosion. Note – the link above has some of the ETF tickers already entered but the baseline time period is 200 days. Right click (or press & hold on a mobile device) the square at the bottom right of the chart where it shows “200 days” & select “All” from the menu that pops up. That’ll give you a longer timeline to look at.
Incidentally, owning a ladder of individual bonds is quite different to owning a bond fund. Buying individual bonds guarantees (for the most part!) that you’ll get your money back at the end of the term, along with getting the coupon payments en route. The mini-flash crash of some bond ETFs during 2020, & the bigger bond fund crash in 2022, have scared some investors into moving some of their hard-earned money into the more stable cash-like funds we are talking about here. You might need to talk to your financial advisor about how to balance across these products in your portfolio. But if you are going to hold some cash in interest bearing ETFs, some of these tools might help you evaluate your inflation exposure.
Purpose Investments Inc. also has a US currency fund – the Purpose US Cash Fund, ticker PSU.U. The current net yield on that is 4.03%, which could be useful if you have US dollars sitting around. And no, I am absolutely NOT suggesting that you go swapping your Canadian cash for US cash just to buy this for the better rate. There are a whole bunch of other considerations that surround currency exchange & conversion strategies. Learn how this all works before trying to play the currency game or it might cost more than it’s worth. But if you already have US cash sitting idle, an ETF like this might help offset the effects of inflation while it’s not being used.
I wish that interest rates could always be higher in our savings & investing accounts. While being almost nothing on our car loans & mortgages! 😜
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.
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.
The Wry Eye 