How Did You Do in 2017?

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
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always_learning
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Re: How Did You Do in 2017?

Post by always_learning »

First of all, I just love this quote from couponstrip:
couponstrip wrote: 16 Jan 2018 12:32
What a run this market is having. I'll have to remember how much fun this part was when it's not fun.
For me, 2017 was indeed fun: my XIRR in C$ was 13.5%.

With the safety of a defined-benefit pension plan, I have an all-equity asset allocation of
US 27%
C 44%
EAFE 24%
EM 5%

Going forward, I'll continue with the multi-year plan to gradually trim oversized individual stocks, taking the capital gains hits (as the stocks are in a non-registered account) and reinvesting the proceeds in broad-based ETFs. Other than that, no major changes planned for 2018.

a_l
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kcowan
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Re: How Did You Do in 2017?

Post by kcowan »

It would seem that TTDI lacks input from true investors. They seem to be tinkering without making true progress.
For the fun of it...Keith
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Koogie
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Re: How Did You Do in 2017?

Post by Koogie »

always_learning wrote: 18 Jan 2018 13:44 With the safety of a defined-benefit pension plan, I have an all-equity asset allocation of....
I've often heard people with DB pensions say that*

That they treat them as the equivalent of FI and therefore put all their savings 100% into equities.

I suppose it can be an indication of how much you trust your pension and it's administration/backstop ? Obviously, less of a stretch with publicly
funded pensions. But for others, is this perhaps to trusting of an approach ? The pension itself is invested in equities.. what about it suffering a prolonged downturn at the same time as your own equities ? What if the pension becomes underfunded or other nefarious goings on happen ?
(see: Nortel / Sears. etc..)

A friend is in the Ontario public service and this is his approach. I've nodded along with his rationale before but occasionally wondered if it is really as rock solid an approach as he supposes.

*not meant to pick on you in particular or to bash public DB pensions. Well, not today anyway... :wink:
nisser
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Re: How Did You Do in 2017?

Post by nisser »

+16.4% for 2017
70% canada, 30% US. No bonds


I started using that online google document but I'm finding it exceedingly unwieldy and slow. Any other options.
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always_learning
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Re: How Did You Do in 2017?

Post by always_learning »

Koogie wrote: 18 Jan 2018 18:09
always_learning wrote: 18 Jan 2018 13:44 With the safety of a defined-benefit pension plan, I have an all-equity asset allocation of....
I've often heard people with DB pensions say that*

That they treat them as the equivalent of FI and therefore put all their savings 100% into equities.

I suppose it can be an indication of how much you trust your pension and it's administration/backstop ? Obviously, less of a stretch with publicly
funded pensions. But for others, is this perhaps to trusting of an approach ? The pension itself is invested in equities.. what about it suffering a prolonged downturn at the same time as your own equities ? What if the pension becomes underfunded or other nefarious goings on happen ?
(see: Nortel / Sears. etc..)

A friend is in the Ontario public service and this is his approach. I've nodded along with his rationale before but occasionally wondered if it is really as rock solid an approach as he supposes.

*not meant to pick on you in particular or to bash public DB pensions. Well, not today anyway... :wink:
You make a good point, and I don't feel picked-on at all.
BTW, I don't think it's fair that I get to have a DB pension -- I'm just reporting the facts. Getting back to the topic of risk, though: the pension is backstopped by the province of NS, so I think it's safe short of a depression.
By contrast, a friend of mine who works for the city of Baltimore has a DB pension backstopped by Baltimore. Given that some US cities have been unable to meet their pension obligations (e.g. Detroit), and many US cities (including Baltimore) are in severe financial difficulties, I have told my friend that that pension is not 100% safe. So I agree with much of yor concern.

And the Sears case proves your point. IMO that pension fund got raided, and I'd be really pissed off if I had worked at Sears.

So: if I had a Canadian DB plan backstopped only by a Canadian company, that would be a different story.
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kcowan
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Re: How Did You Do in 2017?

Post by kcowan »

I treat my DB pension as FI because it delivers a fixed amount of money every month. Is there a finite risk that the amount might change? Yes. But I put that risk low enough to be negligible. It is similar to risk associated with a LIRA.
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Re: How Did You Do in 2017?

Post by chufinora »

kcowan wrote: 19 Jan 2018 07:11 I treat my DB pension as FI because it delivers a fixed amount of money every month. Is there a finite risk that the amount might change? Yes. But I put that risk low enough to be negligible. It is similar to risk associated with a LIRA.
The risk associated with a LIRA could be very low or exceedingly high, all depends on what you choose to invest in your LIRA.
longinvest
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Re: How Did You Do in 2017?

Post by longinvest »

Koogie,
Koogie wrote: 18 Jan 2018 18:09
always_learning wrote: 18 Jan 2018 13:44 With the safety of a defined-benefit pension plan, I have an all-equity asset allocation of....
I've often heard people with DB pensions say that*

That they treat them as the equivalent of FI and therefore put all their savings 100% into equities.

I suppose it can be an indication of how much you trust your pension and it's administration/backstop ? Obviously, less of a stretch with publicly
funded pensions. But for others, is this perhaps to trusting of an approach ? The pension itself is invested in equities.. what about it suffering a prolonged downturn at the same time as your own equities ? What if the pension becomes underfunded or other nefarious goings on happen ?
(see: Nortel / Sears. etc..)

A friend is in the Ontario public service and this is his approach. I've nodded along with his rationale before but occasionally wondered if it is really as rock solid an approach as he supposes.

*not meant to pick on you in particular or to bash public DB pensions. Well, not today anyway... :wink:
You're raising an interesting point.

I have a defined benefit employer pension plan. I don't treat it as equivalent to bonds. Its annual report says that the plan is invested into some bonds but more of other things such as stocks, real estate, private investments, commodities, and alternative investments (whatever such things can be). I see no reason to consider as bonds a pension plan which has no flexibility to modulate withdrawals with market returns, fully exposing it to sequence of returns risk. Actually, the adverse risk exposure can be amplified by those quitting their job choosing to move their money elsewhere (like a LIRA) more frequently when market returns are low (e.g. when the solvency ratio is lower).

In my personal planning, I consider future income promises (like OAS, CPP, and employer pension) separately from my portfolio. The way I currently deal with embedded the risk of my employer pension plan is to discount its promised pension by the insolvency ratio ( = 100% - solvency ratio ) of the pension plan in addition to the projected cost of its missing inflation indexing (see: Any way to "translate" a fixed pension/annuity to an inflation adjusted one? - Bogleheads.org).
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Re: How Did You Do in 2017?

Post by SQRT »

I treat my DB pension as a FI proxy. Have virtually no concern relating to collecting it over my lifetime. Owed by a big bank.
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Mordko
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Re: How Did You Do in 2017?

Post by Mordko »

To me, it's fair to treat DB pension as fixed income. Anything else forces you to allocate too little to the market.

In practical terms, it's almost a bond,or rather an annuity. In other words, its an obligation by a firm to pay X dollars monthly from the moment of your retirement. Discounting DB pension doesn't make sense to me; in fact it usually involves other benefits beyond the monthly $ value.

No form of fixed income has a 100% certainty. Government bonds come close; same goes for government DB pensions. Private companies can fail, but Sears still pays something like 90 cents to the dollar; not sure what the bondholders are getting.

The only time when DB pension behaves somewhat differently from an annuity is when you "surrender the value" early. That would be a good time to reassign your fixed income allocation.
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AltaRed
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Re: How Did You Do in 2017?

Post by AltaRed »

kcowan wrote: 19 Jan 2018 07:11 I treat my DB pension as FI because it delivers a fixed amount of money every month. Is there a finite risk that the amount might change? Yes. But I put that risk low enough to be negligible.
I agree. I would only add some probability to the amount if there was some reason to be concerned, such as a retailer. Similar to SQRT, my pension is with a blue chip employer with a AA or AAA credit rating. I cannot fathom a risk scenario over the rest of my remaining life.
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Re: How Did You Do in 2017?

Post by kcowan »

Well it is the approach I have been using for 25 years since I left that blue chip employer and started collecting my DB pension. It has worked very well so far so I do not intend to reduce it by the investment risk that the administrator: the trust division of Royal Bank (formerly Royal Trust) carries. The employer currently has their obligations funded to 97%. I expect that will change (thanks Wynne) but we are forming a supervisory committee as a result of Wynne to look after our interests. It will come at a small cost to the fund but we consider it necessary now.
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