ZPAY vs original Million Dollar Portfolio

• This is an older screen grab of my ZPAY DEMO Portfolio. It was taken Tues. afternoon, June 29th. This is an amazing total value for a demo portfolio opened at the end of Nov. 2020 with an initial value of $1,000,000. For updated values, scroll down to bottom of post.
  

My Million Dollar Retirement Portfolio DEMO has performed very well since Fisher Investments Canada inspired me back in November to "put my money where my mouth is."  Fisher claimed withdrawing a full four percent annually from one's retirement portfolio would likely result in total portfolio depletion at some point. I agreed but many retired seniors, like me, have no choice. We must withdraw at least four percent annually to make ends meet in retirement.

Fisher used million dollar portfolios in their examples. Following their approach, I started a million dollar demo portfolio in Nov. of 2020. Each month I have withdrawn $3,330 to emulate the withdrawals made during retirement.

This is where it gets interesting. The value of my stock holding gained so much in this bull market that my yield expressed as a percentage dropped dramatically. My creative solution? Liquidate the Million Dollar Retirement Portfolio and put all the funds, the original million plus all the gains, into the BMO exchange traded fund ZPAY. My ZPAY Million Dollar Portfolio had a rough first day but it is recovering quite nicely. As you can see, on Tuesday, June 29, 2021 it had a balance of $1,230,293 at market close.

What do I hope to gain from the switch to ZPAY? In a word: yield. With my original portfolio, I'd have felt I was doing well if I removed four percent of the original investment annually ($40,000 on a $1,000,000 investment) and added an annual increase based on inflation. This would not have been good enough for Fisher Investments Canada, I'm sure. Following their withdrawal approach, I'd run out of funds at some point.

With ZPAY I can be more generous. If the portfolio gains value during the year, I will remove a full four percent on the new increased balance on top of my original withdrawal. I will attempt to never remove less than the four percent calculated on the original million or $40,000.

So far, I believe I am on track. Time will tell.

Date                               Original Portfolio                       ZPAY Portfolio             Total Withdrawals

• June 30/2021             $1,229,607.45                       $1,232,308.60                $23,310
  
• July 3/2021                $1,234,006.25                       $1,228,277.65                $26,640 *
  
• July 6/2021                $1,236,530.39                       $1,242,387.15                $26,640
• July 8/2021                $1,234,255.95                       $1,248,837.39                $26,640
• July 16/2021              $1,242,484.29                       $1,260,125.31                $26,640
• July 19/2021              $1,227,570.05                       $1,266,172.41                $26,640
• July 20/2021              $1,235,784.70                       $1,265,769.27                $26,640
• July 24/2021              $1,238,918.44                       $1,258,109.61                $26,640
• July 31/2021              $1,237,770.71                       $1,252,360.77                $29,970 *

It's too early to say a lot about these figures but note how well ZPAY performed on bad market days.

A screen grab from the close Thursday, July 8, 2021.

Million Dollar Portfolio Yields $77,400 annually

What if I sold everything in my Million Dollar Portfolio Demo? Why would I do that? Two reasons: One, it now has more than a quarter of a million dollars in unrealized gains. And two, the dividend income is now below 3% when calculated on the most recent values. Fisher Investments Canada will be saying, "Told you so!"

This brings us to my latest brain wave: Sell everything in order to let it all ride on ZPAY. If this sounds risky, if this sounds more akin to gambling than investing, it may well be just that: risky and a bit of a gamble.

I created a new demo portfolio based on selling my Million Dollar Portfolio, paying all the associated costs and buying 40,314 units of the BMO ZPAY exchange traded fund. This action cost me hundreds of dollars in fees but I think it may be a wise if risky move. Why? My gut tells me that in a downturn, ZPAY will not lose more than a quarter of a million. If my gut is right, my original principal is safe.

ZPAY yields 6.31% annually or $1.92/unit annually or 16-cents/unit monthly. That gives an income of $77,402.88 annually. At the moment, I am removing $3330 every month to emulate the money that a retiree would expect to realize in order to help cover  his or her monthly expenses in retirement.

Here is how I see this gambit playing out at the moment. ZPAY yields $6450.24 monthly. $3330 is removed from this amount to pay bills in retirement. The remainder, $3120.24, is used to buy some good, dividend paying stock like BCE. After 12 months I have more than $37,400 in stock. (With such a large portfolio, it might be possible to work out a reduced trading fee. I'd certainly contact TD WebBroker and have a chat with a supervisor.)

Why would I even contemplate making such an extreme move? Equities reward an investor with more capital gains then ZPAY and spreading the risk is never a bad idea and owning a mess of stocks and ETFs certainly spreads out the risk. Yet, on the other side, ZPAY is not just one investment but a mix. This is par for the course when it comes to ETFs. ZPAY may not be quite as single-minded a play as it appears. And ZPAY will make the 4% withdrawal easy.

I will try to never remove less than $3330 per month and, if the portfolio increases in value, I will recalculate the withdrawal every January if necessary and increase the withdrawal rate back up to 4%.

• June 22, 2021 -- $1,227,172.71 after paying all the buy/sell associated fees (Almost immediately after I made my purchase, my ZPAY demo investment dropped several thousand dollars. Ouch!)
• June 26, 2021 -- $1,224,350.73. Despite making $1209.42 today I am still down thousands in just days.
• June 28, 2012 -- $1,227,575.95. This is after withdrawing the July $3,330 payment.
  

Oh, the original portfolio is still intact and functioning for comparison.