A TD Rep Critiqued My Portfolio: Passed!

I got a call late last week from my neighbourhood TD branch to arrange an interview with one of their experts who would critique my portfolio. I have always said "no thanks" to these invites but not this time. I decided to toughen up and take some criticism.

So, today at 10 a.m. sharp I was sitting in a small office with a TD rep hearing how well I was doing. He liked my all equity portfolio. He understood why I had absolutely no bonds in my portfolio and agreed with my decision. Quelle surprise! 

I explained how I made all the withdrawals from my RIFs and LIFs demanded by the government as withdrawals inkind. Withdrawals above the minimum, the ones that are taxed immediately, I withdraw as cash. He could see my reasoning and as my approach has been working for the past fifteen years or so, why disturb something with a solid history of working. If it ain't broke . . .

We sat and chatted for an hour. I escaped being given a dressing down. He had one suggestion and only one suggestion: I should maximize my effort to reduce the money held in my RIFs and LIFs. Upon the death of my wife and me, the money in these registered accounts will be income for my estate and may face an income tax of something like 53%. He told me to find some ways to pass more money onto my children and pass less onto the government.

I liked this rep and will spend some time with all the info he gave me as I departed.

Bank of Montreal Looking Good

The Bank of Montreal is down $1.59 right now to $119.69. Its dividend is at 5.18%. Its price could drop more. It has sold for much less in the past year.It dropped to a low of $102.67. I own enough BMO but if it got down to $102.67 again, I'd be buying.

If I did not own so much BMO today, I believe I would be adding to my holdings. The last BMO I added was in the $117 range. I have not regretted the purchase. Analysts see the stock going to $130.59 in the coming year.

For a retiree this is a no-brainer. The Bank of Montreal has the longest run of any Canadian bank of never missing a dividend. The run is approaching two centuries. If one is buying BMO for the dividend, for the 5.18%, your dividend is pretty safe, but, of course, there are no 100% guarantees. A $20,000 investment would return a little more than a thousand dollars annually if the stock was purchased today and it is not hard to see a possible gain of $1800 in the coming year.

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The Bank of Montreal closed last Friday a full three dollars lower than the price posted above. BMO is now yielding 5.3%. Nice. I am watching this stock closely. There will come a time when it will be hard not to add a hundred shares to my holdings.

Can ETFs best a high yielding stock portfolio in retirement?

Managing an income portfolio sounds time consuming. It could be but done right, and that means doing the minimum, it just sits essentially untended spitting out dividends. The overall value may go up and down at the whim of the market but as we are not paying all that much attention, the gains and losses go mostly unnoticed.

Over a lifetime of investing, I've invested in mutual funds, ETFs, stocks and bonds. I found mutual funds generally paid out too much in MER charges. Bonds, either purchased outright or bundled into an ETF like XBB, left me unimpressed. ETFs had their strengths, diversity being a big one, and pure stock portfolios delivered excellent yields thanks to the dividends. As you can see, I gravitated to owning individual stocks and ETFs.

Today, I own almost two dozen stocks and three ETFs and there are almost no surprises. I own Emera and Fortis, doesn't every retiree. I own the top six Canadian banks. The bank dividends are safe dividends. The Canadian banks have a history of hundreds of years of uninterrupted dividend payments. I also own pipelines and telcos. All the usual stuff. My portfolio has been more volatile than I like but I can ignore the ups and downs when the dividends continue to pay the bills. My portfolio yields 5% today.

But my mainly stock portfolio may be nearing its end. I have been experimenting with a nine ETF income portfolio with the stocks chosen for their overall excellent historic performance and a yield that is as good as my present stock portfolio. I insist on the yield being generous enough to cover all annual expenses so that one is not forced to sell units in order to live.

The nine ETFs making up the portfolio are:

• CDZ: iShares S&P/TSX Canadian Dividend Aristocrats Index ETF
• RIT: CI Canadian REIT ETF
• VIDY: Vanguard FTSE Developed ex North America High Dividend Yield Index ETF
• ZUT: BMO Equal Weight Utilities Index ETF
• ZWC: BMO CA High Dividend Covered Call ETF
• ZWG: BMO Global High Dividend Covered Call ETF
• ZWH: BMO US High Dividend Covered Call ETF
• XEI:iShares S&P/TSX Composite High Dividend Index ETF
• XSP: iShares Core S&P 500 Index ETF (CAD-Hedged)
  

I'd go into more detail but until I know more about how well this portfolio performs I am going to go light on the details. To work out the percentage of each ETF in the portfolio, I created a spreadsheet. I varied the percentages until I got something that I could live with and that delivered dividend income similar to my stock portfolio.
I have withdrawn $3,666.66 in each of the last two months as I created this portfolio in April with an amount of money equal to my actual portfolio on that day. My nine ETF portfolio has a value today of slightly more than my actual portfolio. In other words, so far this ETF approach is working. I kept about 10% of the portfolio in a cash account paying 4.55% and so it is no surprise that I have not had to sell any investments to raise money for the monthly payments.
There is one other portfolio approach that I am testing using Portfolio Manager and that is putting all my retirement savings in the iShares Portfolio-in-One-ETF: XEQT. I chose XEQT because it invests in about 10,000 stocks worldwide and it does not own any bonds at all. If you prefer a balanced portfolio containing some bonds, there are companion ETFs from iShares that include bonds.
As this is a very new portfolio opened with very little cash, I sold 69 units of XEQT this month in order to withdraw an amount of money equal to the amount  withdrawn monthly from my actual retirement portfolio. Of the three portfolios being tracked, the one that has the most value today is XEQT even after the unit sale.