I've been asked why I am posting so few updates and new articles. The reason is simple: I'm a retired senior who started this to encourage discussion and it hasn't happened. I'm not a financial expert but only a senior trying to make ends meet at a time when interest rates are at historic lows.
With interest rates so low, it is possible to earn less on one's retirement savings than one loses to inflation. I see this as negative income. (An oxymoron.)
Before retiring, I worked as a journalist at a newspaper. I was mainly a photographer but I also wrote a couple of columns and took third place in a journalism competition one year. I thought some of the journalists with whom I worked would jump at the chance to discuss some of the stories that run in the newspaper. But there was no interest.
Take the story that ran last weekend in my local Post Media paper. The story was right: the problem of where to put one's retirement savings is complicated. That said, the article failed to deal with the complications by failing to take a firm, positive stand on the historically good reasons to hold stocks rather than bonds.
I hold no bonds directly. Why not? I cannot afford to. It is that simple. I aim for an income of at least 4% on my retirement funds. That yield is not possible with bonds unless one starts depleting principal.
I'm waiting for the next big correction, more than 15%, or the next bear market, a drop of more than 20%. My present strategy, and it may change a little, is to build the following portfolio:
2% Canadian Imperial Bank of Commerce (CM)
2% Enbridge (ENB)
1% H&R Real Estate Investment Trust (HR.UN)
2% Inter Pipeline (IPL)
2% Peyto Exploration & Development Corp (PEY)
The above stocks are all highly respected and deliver a fine dividend with a promise of an increase in share value over time. These stocks give my portfolio yield a nice hit of dividend income.
18% iShares Canadian Select Dividend Index ETF (XDV)
The above gives me more exposure to a wide range of Canadian dividend paying stocks. Diversity is good.
37.5% iShares U.S. High Dividend Equity Index ETF (Cad-Hedged) (XHD)
17.5% Vanguard FTSE Developed ex North America High Dividend Yield Index (VIDY)
The above ETFs give me exposure to markets outside of Canada, and even the States, while continuing to deliver good yield.
15% 2-year maturity GIC paying 2.44%
3% Cash held in and paying 1.6% in TDB8150
I went with a GIC rather than a bond fund or bond ETF as the GIC has a definite value. Most bond ETFs never mature, they are sold a year before maturing and are replaced with more bonds. The value of the fund will go up and down. One can lose money and this is defeats the goal of owning teh bond fund or ETF.
Add up all the percentages shown above and you should get 100%. Oh, I do hope so. For stories like this an editor is not a luxury but a necessity.
I'm hoping to realize about 4.25% yield and thus be able to keep the wolf away from my door for another year in retirement. So far I have gone for ten years and removed about 3.5% annually to live while seeing my overall portfolio grow some 60%.
As the Post Media article correctly points out: This strategy only works if you stick to the strategy when markets are down. But the flip side, the owning bond side, simply doesn't work in today's climate. If I had gone into bonds, say 40% or 50% bonds as often advised for retirees, my principle would most likely be diminished today. I'd be depleting my principal rather than growing it.
I look forward to any comments but I'm not holding my breath.
