Early Start, Early Retirement? Critique my initial portfolio.

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
BRIAN5000
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by BRIAN5000 »

As long as an individual spends less than they earn, you either arrive with a full truck or a full bucket.
The expectation is you arrive with a full truck, the Reality is no one knows what will happen.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by FI40 »

Flaccidsteele wrote:
8Toretirement wrote:Your 1 mile from the grocery store and you need a gallon of milk, which do you take your Ferrari or the Honda.
This analogy doesn't make sense.

90/10 stocks isn't a Ferrari nor is 50/50 a Honda.

We're not talking about speed. Every 20-something gets to age 65 at the same rate. It's 40-odd years for everyone. Nobody can go faster or slower than anyone else. 40-odd years of accumulating money, for every 20-something.
Maybe the analogy could be that a 90/10 allocation has the potential to get you to your FI number faster, although less assuredly as it might break down, like a Ferrari. I'd argue age has not much to do with it. Once you reach a sustainable level of assets so that you can live off the passive income, you can theoretically live off it forever.

I like the U shaped stock allocation idea proposed by Pfau - safest at time of retirement, riskiest at the beginning and the end. Age having not much to do with it aside from govt assistance.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by Flaccidsteele »

FI40 wrote:Maybe the analogy could be that a 90/10 allocation has the potential to get you to your FI number faster, although less assuredly as it might break down, like a Ferrari.
I understand what you're saying. You're focusing on the asset class and creating a relationship to speed (i.e. equities = Ferrari, bonds = Honda). I consider the "destination" to be an age. So the "speed" from age 20 to 65/67 is the same for everybody.

Also the only reason I exclude the risk of "breaking down" is that US equities have never "broken down" in a 40+ year period (to me, to suggest such is marketing-driven fear mongering to get young investor-clients to do things that they shouldn't be doing).

Every 20-something has 40+ years to go until retirement. That kind of time is an investor's single biggest advantage.
FI40 wrote:I'd argue age has not much to do with it. Once you reach a sustainable level of assets so that you can live off the passive income, you can theoretically live off it forever.

I like the U shaped stock allocation idea proposed by Pfau - safest at time of retirement, riskiest at the beginning and the end. Age having not much to do with it aside from govt assistance.
I appreciate your opinion. And I can respect what you're saying.

I think we must agree to disagree.

My argument is that age has everything to do with it.

If a person works from the age of 20-something, until retirement at age 65 (or 67) or whatever, this is a 40+ year runway. Nobody goes through 40+ years faster or slower than any other. As long as this person spends less than they earn and regularly invests the difference, compounding will do the rest. For 40+ years.

Many posters focus on the temperament of the investor. Which I understand and appreciate. However, not many appreciate the duration of a 40+ year investing runway. Coming from someone in their 40s, I personally consider 40+ years to be an insane length of time to be invested in equities.

As long as a person works, spends less than they earn, and invests the difference. All they should worry about is how they want to spend spare time with their family.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by adrian2 »

Flaccidsteele wrote:If a person works from the age of 20-something, until retirement at age 65 (or 67) or whatever, this is a 40+ year runway. Nobody goes through 40+ years faster or slower than any other. As long as this person spends less than they earn and regularly invests the difference, compounding will do the rest. For 40+ years.

Many posters focus on the temperament of the investor. Which I understand and appreciate. However, not many appreciate the duration of a 40+ year investing runway. Coming from someone in their 40s, I personally consider 40+ years to be an insane length of time to be invested in equities.
Let's check the case of a Japanese investor, starting his investment career in 1989. Everything is going fantastic for Japan, equities are roaring, Nikkei is at 40k+, the land under the Imperial Palace in Tokyo is said to be worth more than California.

What can go wrong? He's got an insane length of time to be invested in equities.

Fast forward 27 years to the present. Nikkei is at around half the level it used to be, yields are very low. Maybe the remaining 13 years of the runway will be enough for takeoff, but who knows?
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by rhenderson »

adrian2 wrote:
Flaccidsteele wrote:If a person works from the age of 20-something, until retirement at age 65 (or 67) or whatever, this is a 40+ year runway. Nobody goes through 40+ years faster or slower than any other. As long as this person spends less than they earn and regularly invests the difference, compounding will do the rest. For 40+ years.

Many posters focus on the temperament of the investor. Which I understand and appreciate. However, not many appreciate the duration of a 40+ year investing runway. Coming from someone in their 40s, I personally consider 40+ years to be an insane length of time to be invested in equities.
Let's check the case of a Japanese investor, starting his investment career in 1989. Everything is going fantastic for Japan, equities are roaring, Nikkei is at 40k+, the land under the Imperial Palace in Tokyo is said to be worth more than California.

What can go wrong? He's got an insane length of time to be invested in equities.

Fast forward 27 years to the present. Nikkei is at around half the level it used to be, yields are very low. Maybe the remaining 13 years of the runway will be enough for takeoff, but who knows?
:thumbsup:
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by cannew »

Just made this comment for another person starting young!

Wish I had taken Saving for the Future seriously when I was 27. Good for you.
Having said that you should seriously consider putting aside money each month that will be considered UNTOUCHABLE and is savings for your future. I'd suggest you start with $100 per month and add more periodically or increase the amount if your earnings increase.

Where to put the money? Some might suggest ETF's, others Mutuals (which I doubt because the fees are higher), some might even say a savings account like Tangerine and invest when the amount grows to $1,000 or more. The choice is yours and either will grow over the long term, but slowly as you are not investing large amounts.

For small amounts I always recommend DRIP's. Check out http://www.dripprimer.ca/aboutdrips for details about DRIP's. We have our 18 yr old grand daughter investing in this method and she has $100 per month coming out of her chequing account and buys about 1 1/3 shares a month of a major bank. Each quarter she receives a dividend and those funds are used to buy more shares. With DRIP's there are no fees to buy shares or reinvest and one buys fractions of shares so it compounds quicker. At some point when the number of shares or value of the DRIP grows, she'll transfer some of the shares to her TFSA account, keeping taxes down and still allowing her to invest with no fees. That's the problem with etf's, there is a fee, even if it's only a fraction of 1%, but as your portfolio grows so does the amount of the fee. Plus one owns a lot of stocks one might not want to own, just to get diversification. I'd also suggest maxing out your TFSA before using an RRSP (unless you can get your company to contribute a portion to an RRSP).

*What I didn't say was that I prefer sticking 100% with Solid Dividend Growth stocks. Pick a major Bank, Communication, Utility, Pipeline, Railway and Consumer, or just start with one as our grand daughter is. You won't regret it in the long term.

Anyways, there's lots of info available. Take the time to read and learn then decide.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by adrian2 »

cannew wrote:For small amounts I always recommend DRIP's.
And as I never tire to say, for taxable accounts I recommend avoiding DRIP's like the plague.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by AltaRed »

adrian2 wrote:
cannew wrote:For small amounts I always recommend DRIP's.
And as I never tire to say, for taxable accounts I recommend avoiding DRIP's like the plague.
I avoid them like the plague too for a number of reasons, but if someone really wants to do all the bookkeeping effort necessary to keep track of ACB Ina taxable account, that is their call. On the plus side, DRIPs do help keep investors somewhat disciplined.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by pmj »

I'd hazard a guess that most new investors would primarily be using TFSAs and RRSPs, where the ACB "problem" of DRIPs is irrelevant. Even in a non-registered account, it's only really a "problem" if one sells part-positions in a stock.

I find the "dump on DRIPs" thesis kinda repetitive. Maybe (but I'm not looking for work here :oops:) we should create a finiki page describing the pros and cons of DRIPs, and agree to direct anyone looking for more info to it?
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adrian2
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by adrian2 »

pmj wrote:I find the "dump on DRIPs" thesis kinda repetitive.
I was just responding to repetitive praises of DRIP's.
IMHO, accumulating fractions of a share makes very little difference in the long run.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by ghariton »

I kind of like the OP's suggestion to use the money to buy a villa in Transnistria.

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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by Quebec »

pmj wrote:Maybe (but I'm not looking for work here :oops:) we should create a finiki page describing the pros and cons of DRIPs, and agree to direct anyone looking for more info to it?
You mean something like this? :wink:
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by pmj »

Quebec wrote:
pmj wrote:Maybe (but I'm not looking for work here :oops:) we should create a finiki page describing the pros and cons of DRIPs, and agree to direct anyone looking for more info to it?
You mean something like this? :wink:
Exactly! I went to the finiki front page, and from there I explored the Investment Management page: http://www.finiki.org/wiki/Category:Inv ... management .... and finding nothing there I thought I'd be safe to post my suggestion :oops:.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by Quebec »

pmj wrote:Exactly! I went to the finiki front page, and from there I explored the Investment Management page: http://www.finiki.org/wiki/Category:Inv ... management .... and finding nothing there ...
Hummm........

pmj, you were looking at the right place. But DRIPs are in the ''Investment styles‎'' subcategory of the ''Investment Management'' category. Therefore, unless you click on ''Investment styles‎'', you won't find DRIPs. This probably needs to be improved. Thanks for posting about your way to navigate and the lack of success on finding what you were looking for.

(The easiest way to find the DRIP article in finiki is to enter ''DRIP'' in the search box at the top right. That's how I did it.)
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by cannew »

adrian2 wrote:
cannew wrote:For small amounts I always recommend DRIP's.
And as I never tire to say, for taxable accounts I recommend avoiding DRIP's like the plague.
For those who's taxable earning are less then about $45,000 there will be no tax on the dividends. That's why one transfers share to a TFSA account, to eliminate the taxes on the dividends.

AltRed: As for the accounting, our grand daughter will be making 16 entries per year in an Excel worksheet, not exactly major stress to keep her transactions recorded and track her ACB.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by AltaRed »

As I have said before, to each his/ her own. Probably not a bad idea for a newbie to learn the ACB ropes early so maybe keeping track of DRIPs is a good classroom type lesson.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by OnlyMyOpinion »

Sorry - off-thread, but perhaps still helpful to the OP:

Cannew, I agree the tracking exercise is not too onerous. And unless it is something your granddaughter is totally disinterested in, I think it can help educate and cultivate interest in saving and investing. My son has long term etf holdings but also owns things like GOOG, TD and BCE that he can relate to as a consumer (and monthly bill payor), so he takes an interest in their performance. They seem more tangible than the etf's multi-stock 'universe'. Of course that can sometimes be a bad thing (lack of diversity), so I'd still consider limiting exposure in an individual equity to be prudent (max 5%-10%).

Are your granddaughter's shares in a synthetic DRIP held in a Cdn$ brokerage account? If so, our experience with TDDI has been that the book value (acb) is correct if shares have always been held/bought/sold in that account. We've seen it track correctly through buy/sell/drip transactions, even US traded shares as long as they are held in the Cdn$ side (i.e. US>Cdn$ conversion is done correctly for BV).
Still worth doing your own tracking IMO in case something gets messed up and needs to be corrected by the brokerage. And of course whatever activity/values are reflected in the account is what the CRA will have on record.

Oops, similar to AltaReds' message that got posted whilst I was typing.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by cannew »

OnlyMyOpinion wrote:Sorry - off-thread, but perhaps still helpful to the OP:

Cannew, I agree the tracking exercise is not too onerous. And unless it is something your granddaughter is totally disinterested in, I think it can help educate and cultivate interest in saving and investing. My son has long term etf holdings but also owns things like GOOG, TD and BCE that he can relate to as a consumer (and monthly bill payor), so he takes an interest in their performance. They seem more tangible than the etf's multi-stock 'universe'. Of course that can sometimes be a bad thing (lack of diversity), so I'd still consider limiting exposure in an individual equity to be prudent (max 5%-10%).

Are your granddaughter's shares in a synthetic DRIP held in a Cdn$ brokerage account? If so, our experience with TDDI has been that the book value (acb) is correct if shares have always been held/bought/sold in that account. We've seen it track correctly through buy/sell/drip transactions, even US traded shares as long as they are held in the Cdn$ side (i.e. US>Cdn$ conversion is done correctly for BV).
Still worth doing your own tracking IMO in case something gets messed up and needs to be corrected by the brokerage. And of course whatever activity/values are reflected in the account is what the CRA will have on record.

Oops, similar to AltaReds' message that got posted whilst I was typing.
Her shares are with Computershare (so she getting partial shares as well) and she has No interest in tracking or following the market. What she did find interesting is that she kept receiving higher and higher dividends each quarter even though we or she were not adding money to the account. So when she got a part time job, she decided to add $100 per month to buy more shares. Now she watches the dividends more closely as they are growing faster. She's not concerned that she only owns one stock, to her its money shes saving for her retirement. If it continues to grow as it has over the past 9 years and with adding funds, she'll retire with a nice income stream coming in.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by BRIAN5000 »

Let's check the case of a Japanese investor, starting his investment career in 1989. Everything is going fantastic for Japan, equities are roaring, Nikkei is at 40k+, the land under the Imperial Palace in Tokyo is said to be worth more than California.

What can go wrong? He's got an insane length of time to be invested in equities.
There is also precedent for this in the US, DIA took 25 years to recover from the sept lows in the 1929 crash. My guess is there is only a few of us on here that could carry on as normal for this length of time. I'm only hoping for another good 20 however.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by SkaSka »

BRIAN5000 wrote:
Let's check the case of a Japanese investor, starting his investment career in 1989. Everything is going fantastic for Japan, equities are roaring, Nikkei is at 40k+, the land under the Imperial Palace in Tokyo is said to be worth more than California.

What can go wrong? He's got an insane length of time to be invested in equities.
There is also precedent for this in the US, DIA took 25 years to recover from the sept lows in the 1929 crash. My guess is there is only a few of us on here that could carry on as normal for this length of time. I'm only hoping for another good 20 however.
The DJIA based on prices took 25 years to recover back to the same price level, however *if* dividends had been reinvested, you were back even in terms of purchasing power in a few years after the crash and the market bottom (due to deflation and the "extra" shares you got to pick up at rock bottom prices through dividend reinvestment).

Of course, this is theoretical on the basis that an investor had the fortitude to keep holding and reinvesting dividends through the worst US market crash in the 20th century... much easier said than done in the real world :)
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by cannew »

SkaSka wrote:Of course, this is theoretical on the basis that an investor had the fortitude to keep holding and reinvesting dividends through the worst US market crash in the 20th century... much easier said than done in the real world :)
That's the nice part of holding quality DG stocks. Even through the worst of times, such as 2009/2009 they continue to pay the dividend and some even increased them. We had one cut MFL.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by SQRT »

cannew wrote:
SkaSka wrote:Of course, this is theoretical on the basis that an investor had the fortitude to keep holding and reinvesting dividends through the worst US market crash in the 20th century... much easier said than done in the real world :)
That's the nice part of holding quality DG stocks. Even through the worst of times, such as 2009/2009 they continue to pay the dividend and some even increased them. We had one cut MFL.
We should change your name to "Johnny One Note". At least your posts are consistent.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by cannew »

SQRT wrote:We should change your name to "Johnny One Note". At least your posts are consistent.
I'll take that as a compliment, thanks.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by SQRT »

cannew wrote:
SQRT wrote:We should change your name to "Johnny One Note". At least your posts are consistent.
I'll take that as a compliment, thanks.
No problem. One comment I would make about your views relating to yield on cost though. While div growth is absolutely key and yield on cost highlights this, I believe it is better to focus on the actual div growth rate rather than yield on cost.

For instance I have a fair amount of TD bought over a long period. Average cost is very low so yield on cost very high. However, yield on cost will be dependant on when I bought the stock. Div growth has been strong over past 5 rears averaging a little over 10% per year but this is expected to decline to about 6-7% over the foreseeable future. Certainly good results but I fail to see how quoting a yield on cost of 16% or 18% or 50% (if you bought TD long enough ago) makes any sense. Might make you feel good, but in my view actual div growth is a better way to look at it as it blends both historical and prospective future results.

This has been debated ad nauseum and I hesitated a bit to bring it up again.
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Re: Early Start, Early Retirement? Critique my initial portfolio.

Post by Flaccidsteele »

Obviously a high equity allocation isn't for the OP if 1) they don't understand why US <> Japan and 2) think that mindlessly contributing to, and holding, a low cost US equity fund for decades is hard

I guess I should also add it's not for the OP if they have Alzheimers or other mental disorders since we want to make sure we cover all the bases :lol:
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