Tag retirement income

Old People Need Bonds

Paul - The Wry Eye Guy Leave a comment
Defensive Retirement Assets

Some say that a 100% equity portfolio can take us all the way through our investing lives.
Is that so?
Maybe.
But it might not be for everyone. And retirement can be different.

This exercise looks at why bonds might matter to a retiree. Using some older ETFs to create portfolios vaguely similar to the modern all-in-one types, we can make the comparisons from further back. Holdings & allocations are in the table below. There are more mixed currencies than metaphors here, but it’ll do for this simple comparison.

ETF TickerAll-Equity60/40
SPY (US)4527
XIU (Can)3018
EFA (Int’l)2515
XBB (Bond)030
XSB (Bond)010

Investing $100k in each of these portfolios at the start of 2002 would see the 60/40 grow to about $570k today. Not too shabby, eh? The all-equity portfolio would have grown to almost $860k. A nearly $300k beat. Bonds hurt the 60/40 portfolio’s returns over that timeline. But that’s only the accumulation story.

Now imagine two investors retiring at the start of 2002. They heard that markets only go up, so they wanted to withdraw more than the 4% Rule suggests! They also wanted to “melt down” their registered retirement accounts. These old guys might have been ahead of their time for back then, right?
They started with an 8% withdrawal rate, taking out $8k in the first year. And increased withdrawals every year, roughly in line with inflation.
How did that all work out?

The all-equity retiree ran out of money in 2018. The 60/40 portfolio chugged along for another year. Not huge, but still a win for the portfolio with bonds. In 2009, during the great financial crisis, the 29% portfolio drawdown gave our 60/40 retiree palpitations. But our all-equity guy had supraventricular tachycardia watching his portfolio plummet 50%. Us old people know some fancy medical terms like that! In addition to the 60/40 portfolio surviving longer, it was less gut-wrenching during the bad times.

Let’s look at another retirement scenario. To get back to 2000, we’ll dump the international fund & the Canadian bond funds. We’ll just ignore the international component & replace the two Canadian bonds funds with one American bond fund. The American bond fund slightly underperforms the Canadian combo, but that just makes the comparison favour the all-equity portfolio a little more. The all-equity portfolio now has an allocation of 60% to US equity & 40% to Canadian. That translates to 36% & 24% respectively in the balanced portfolio, with the remaining 40% going to bonds. Now we can look at the impact of the dot-com crash. That was some heavy duty sequence of return risk for anyone retiring back then.

And the result for our 2000 retirees was that …

The all-equity portfolio died in 2010. While the 60/40 carried on ’til 2013. For fun: a portfolio with an even bigger bond allocation of 80% would have survived to 2015. Looking at it another way: when the retiree with the all-equity portfolio went broke in 2010, the 60/40 guy still had almost $25k in his account. And the very conservative 20/80 retiree was looking at almost $47k. Bonds helped a lot here. As it happens, that was during a great era for bonds. It hasn’t been quite so good for bonds in recent years.

Despite today’s lower bond yields, there may still be value in the ability of bonds to tamp down portfolio volatility. That can matter to a retiree. Financially & emotionally. Despite how great the markets have been for the past several years, this exercise is also a reminder that stocks don’t only go up. Stocks are risky. Especially over the shorter timelines that make up retirement decumulation cycles.

Let’s look at one additional scenario that shows how equities can deliver in the good times. Though it muddies the waters still more, it’s important. Same portfolios as in the table above, but with investors retiring in 2010 this time. Both have been withdrawing exactly the same amount every year. The 60/40 retiree checks his portfolio balance today. It sits at just under $50k. Pretty good. However, the all-equity retiree now has a portfolio worth over $150k. Despite identical withdrawals, the all-equity portfolio has continued to grow in value over this timeline. The equity guy is probably having a chuckle at his buddy’s expense. Of course, the RRIF meltdown isn’t going so well for him. He might have to make bigger withdrawals & spend more going forward. How awful for him!
If you have to have a problem in retirement, this might be the one most of us would enjoy complaining about, eh?
As a side note, this period included 2022 where, unusually, bonds fell in concert with stocks. Sometimes, bonds can be risky too!

What does it all mean?

Who knows! There isn’t one solution fit for all investors. But if you go for coffee with the guys that retired in 2000 or 2002, they’ll tell you to include bonds in your portfolio. Spend time with the guys that retired in 2010 & you might find them doing a harder sell on the all-equity approach. We all have biases. These come from who we are & what we’ve lived through. Sometimes, they are shaped by the biases of the people we hang out with. Do you know what your biases are? Biases can be tempered by knowledge. Knowledge is usually a good thing. And while the past doesn’t predict the future, we can learn from it.

In retirement, we’re going into the final stretch of the investment lifecycle. And of our own time on earth. We don’t always have time to wait for a big market recovery. We no longer have the big earning power to make up for large losses either. Downturns can hurt a portfolio a lot more during the decumulation years. We need to assess the different risks of stock & bonds in light of those limitations. Along with our willingness, our ability, & our capability to tolerate those risks.

So how do we handle this? Too big a bond allocation might downgrade the quality of the retirement home we move to at the end. Under different market conditions, the right bond allocation might save us from homelessness. While some investors feel safer having more bond & cash-like funds in the retirement portfolio, they also worry that inflation will evaporate the value of these assets over time. There are other strategies that might help too. Like variable spending, investing for income, annuities, real estate, & so on. These approaches may provide some additional levers to help get us through the journey. But retirement planning is complex. And second guessing is a part of the annual review!

If you can ‘t shake off enough of the uncertainty, it may be worth spending some time & money with a qualified financial advisor or financial planner. A topic for another day!

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.

Diversification – Is One ETF Enough?

Paul - The Wry Eye Guy Leave a comment
Too many eggs or too many baskets?

Short of having a stock picking crystal ball, most investors agree that diversification is a positive thing for our portfolios. We have old sayings like “don’t put all your eggs in one basket” to remind ourselves of the value of spreading risk around. We generally think that more is better when it comes to being diversified. But that depends on how you look at things.

Considering only the equity portion of our portfolio, we have some fantastic solutions in Canada with globally diversified all-equity ETFs. BMO has ZEQT, RBC iShares offers XEQT, & Vanguard Canada manages VEQT. Other Canadian institutions, including TD, Mackenzie, Fidelity, etc., all have their versions or something similar. Global X & others offer income-focused covered call & leveraged variants, with similar global diversity. BMO created their T Series ETFs for income seekers who prefer to avoid covered call & leverage strategies. Do your due diligence on whichever of these strategies might work best for you, but they are all globally diverse solutions. And that’s the real message here.

Any one of these funds provides something close to the maximum market-weighted diversity obtainable in the global public markets. It just doesn’t feel like that when you stick all your money into one ETF. If you’ve switched from stock picking to index investing, going from 50 stock holdings to just one ETF, then one lonely ticker symbol in a portfolio does not look like diversification, does it? But it is. For many investors, it may be the optimal way to get diversification. These funds are holding ten thousand companies, give or take, from all around the world. And here’s the kicker: buying any ETF that is less diversified than these ETFs actually reduces the balance of market-weighted diversification!

If you buy an additional financial ETF, for example, you are overweighting banks & financial institutions in your portfolio, relative to their respective market weights. All the holdings in any additional ETF are already contained in, & appropriately weighted in, the all-equity ETF solutions. Same if you buy a tech ETF. Or an ETF that would add weight to a region, such as Canada, the US, or international. If you disagree with the weightings in the all-equity ETFs, either by sector or geography, then by all means rebalance the weights by buying additional ETFs. But adding an extra ticker symbol to your holding by buying your favourite Canadian bank ETF does not increase the diversification offered by these all-equity funds. It just overweights stocks that were already correctly weighted in the single ETF solution. Despite how scary it might look, one might be enough. Rather than being a single basket, it’s more a basket of baskets. With about the right number of eggs in each of those baskets.

That said, there may be other elements of diversification to consider.

It may make sense to diversify with ETFs from more than one provider. The global stock exposure is approximately the same across most of these funds, but that’s not the diversification angle here. Who knows what might happen down the road, maybe a data center goes off line for our favourite fund provider. If some unimaginable thing happens, & we’re all in on that company’s ETF, we might be stuck redeeming those funds. Even if only temporarily. However unlikely that possibility, there might be a justification for holding very similar funds from other providers too. Splitting holdings across ZEQT & VEQT, for example, might be a reasonable thing to do.

Or, depending on the use for various accounts, it might be useful to hold similar funds, but with different strategies, across different accounts. Young investors, or retirees planning a legacy, might use a vanilla all-equity fund in the TFSA account, for example. While retired investors with an income bias might prefer to hold higher yielding variants that employ covered calls & leverage in a RRIF account. Still others might prefer the T Series type, like ZEQT-T, for income. Maybe even some of both. But you get the idea: it’s a mix & match thing. But this is for diversification by investing style across accounts with different goals. It’s not significantly diluting or changing the balance of the global diversification offered by any of the market-weighted solutions.

So by all means, go buy something different for fun, function, or fund manager diversification.
Or by design, if you feel modifying sector or geographic allocations will suit your needs better.
But be aware of what you’re doing if you’re only doing it because you just can’t bear to look at one or two ticker symbols in each account.

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 versus Income Investing

Paul - The Wry Eye Guy Leave a comment
Growth or Income for Retirement?

The growth investor needs capital appreciation & the sale of shares for income in retirement. The income investor wants an income stream that can be used for living expenses without selling shares. Until recently, dividend paying stocks were the primary solution for an equity income stream during retirement. But with modern dividend yields so low, that takes a large portfolio. Over the past 5 or 6 years, a flood of new high income ETFs have changed that picture. These new income funds use options strategies & leverage to generate far higher distributions than are available from dividends alone.

But do they work?

According to some retirees, the answer is yes. Critics of this income investing approach say these funds tend to lag an equivalent growth fund. For the most part, that’s true. But some retirees are living higher on the hog than they expected to because of these funds. And they’re posting pics from their sunshine destination vacations to prove it. They can do this because their portfolio distributions run anywhere from 5 to 15%, with some far higher even.

To be fair, given the phenomenal market performance of the past decade & a half, a growth investor could also have spent far more than the traditional 4% Rule allows for. Investing in an S&P 500™ fund, from 2010 onward, could have delivered an inflation-adjusted withdrawal rate of about 12% all the way up to today. The great market performance of recent years makes the 4% Rule look a little outdated, eh? But there’s no guarantee that will continue! Of course most retirees would probably not be in a 100% equity portfolio. Instead they would have invested in the more common 60/40 balanced portfolio. And that portfolio would not have survived that 12% withdrawal rate from 2010 up to today.

Now this is where it gets interesting with income investors. Because they seem to have a bias towards a higher equity allocation. Some are 100% invested in equity income funds. While very few professional advisors would recommend a 100% equity portfolio for a retiree, these new income focused retirees seem to be less troubled about relying on an all equity solution.

So how does that impact the retirement picture?

I’m going to use ETFs from Global X by way of example, because they have globally diversified all-equity portfolios that serve all the strategies we’ve mentioned. Ticker HEQT is a regular growth ETF. EQCC is the same thing with covered calls. While EQCL employs option strategies & leverage. For further comparison, Global X also offers HBAL, a balanced 60/40 portfolio that we can use to represent a more traditional retirement mix. At the time of writing, the yield data below come from each fund’s web page. Be sure to check at each fund’s web page for current data.

It is very important to recognise that this comparison timeline is far too short to be very useful for assessing how funds like these might operate under a greater variety of market conditions, & over a longer time horizon. However, the characteristics displayed are in accord with what you’ll hear in some of the online arguments.

The all-equity HEQT is the best performer for total return. The traditional 40% fixed income allocation of HBAL makes for the poorest performance here, as the bond allocation drags down the total return during times of great market growth. Also as expected, EQCC delivers great income, but at the expense of some of the upside. In this example, over this very short time, the covered call version does outperform the traditional 60/40 portfolio. Finally, the leverage added to EQCL adds back some of the lost covered call upside, though not quite enough to catch back up to the returns of the vanilla all-equity fund. Note that the total return column is with all distributions reinvested.

From a pure numbers perspective, the total return of the regular all-equity fund comes out ahead. Regardless of how the income stream is delivered, total return is always important. The growth investor would typically concentrate on the ‘Total Return’ column & claim the win for HEQT. The income investor might look at the income column & favour the income streams from EQCL or EQCC. It’s worth noting that all these ETFs, with all distributions removed, left a fund that continued to increase the NAV well ahead of the inflation rate. That’s not always the case with all such funds. But even with the high yield funds in this example, you could have spent all that income in 2025 & still grown the NAV!

But again be warned … that’s only over this very short timeline when markets have performed well.

Let’s return to that 100% equity allocation thing we mentioned earlier. All our high yield funds above outperformed the traditional balanced portfolio. Retired growth investors are more likely to have a fixed income or cash component. Moreover, most financial advisors will probably not recommend 100% equity portfolios for retirement, regardless of the investment approach. But retirees investing in these new income ETFs appear to be able to tolerate a higher equity allocation. And that behaviour means that they have outperformed the traditional balanced portfolio in this instance. Indeed some income investors abandoned the balanced approach in favour of their new income strategy.

That’s the crux of the strategy comparison dilemma. Sometimes, we’re not really comparing apples to apples. The first big question is this: should a retiree have an equity allocation of 100%? And if that 100% equity allocation can be justified, would you want to own the growth or the income style portfolio? The answer is, as usual, it depends!

There are studies that support a 100% equity portfolio through the accumulation years and throughout retirement. One of the most recent, & one of the most thorough, is Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice, from July 2025 by Anarkulova, Cederburg, & O’Doherty. This paper is widely discussed amongst the gurus online, but even professional advisors seem reluctant to tell their older clients to jump on board an all-equity portfolio during retirement. However, if this proves to be correct going forward, then an income fund that only slightly (& I’m not sure how to accurately define ‘slightly’ here!) underperforms an equivalent all-equity growth fund might be useful. After all, investing is both a mathematical & a behavioural exercise. If the higher income stream helps a retiree stay the course with a higher equity allocation, might that be a better solution for retirement?

I don’t know the answer to that one either. But it is fun to think about!

We don’t have enough history to understand how these income funds, & their income streams, might survive a more severe crash or a prolonged downturn yet. But I certainly look forward to seeing how things play out going forward. Let’s be real here, if a fund can deliver a 10% yield while growing the underlying NAV faster than inflation, who wouldn’t want a piece of that action, eh! In fact, if it came with inflation security, I’d probably take that bet with a far lower yield!

Unfortunately, I don’t think we can consistently predict such positive outcomes for these income funds. They have done very well in recent years. But their recent successes probably shouldn’t encourage others to retire too early. If your retirement plan was to work towards having a million-dollar portfolio supporting a 5% withdrawal rate, it might not be prudent to flip everything into a fund with a 10% yield & retire earlier with only a half-million-dollar portfolio today. Indeed, any strategy running at its limits won’t work very well if things turn bad. And, given a long enough retirement timeline, there will almost certainly be some bad times ahead. We need to plan our retirement accordingly. On top of those style deliberations, the 100% equity allocation has been part of the solution for some. But it remains an open question for others. We didn’t even get into the active versus passive conversation today! There really are a lot of moving parts to consider with all this. I wouldn’t be surprised to find some investors doing a mix of these strategies. As they tread water, waiting to see how things play out over time.

One last thing to consider is the impact of all this on financial planning exercises. We need to be careful about conflating distribution yield and total return. They are not the same thing. We cannot assume that high cashflows will remain intact for income funds, in the event that a market downturn severely draws down the underlying portfolio. And especially if that happens over longer periods of time. Even if the yield percentage remains high, the actual income stream in dollars could still be seriously reduced. I think sticking with FP Canada’s projection assumption guidelines for financial planning makes sense, regardless of the investing approach. But that’s a whole other conversation that we’ll save for another day. And maybe a downturn will provide the insights we need before I get round to it!

Meantime, wear your water wings in the deep end & take care out there!

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.

Asset Allocation ETFs are like Pasta!

Paul - The Wry Eye Guy Leave a comment
Portfolios & Pasta!

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.

Declutter an Investment Portfolio

Paul - The Wry Eye Guy Leave a comment
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.