Apologies for the delay in posting. I guess even in retired life, things can be busy. Who would have thought that. Lol. So many people who retire talk about boredom and not knowing what to do with their days. I find that really confusing. I’ve spent this time away from the blog planning out nearly half a years worth of travel. I’m also updating this current blog post on the other side of the planet in Bangkok, Thailand. This will be the first year ever that I won’t experience a cold, snowy winter.
Let’s move on to the topic at hand and catch up on the monthly reviews going back to August 2022. I’ll then do a separate post for September 2022 as well as October 2022.
For those of you who are still on their journey towards financial independence as well as the retire early option, will your investment portfolio allow you to move to that next stage in your financial futures at the point that you expect?
As was previously highlighted, here is the break down what I’m going to consider as part of my monthly review.
- How are my B&D portfolio allocations doing?
- How is my B&D portfolio doing compared to the comparable portfolios?
- Is the B&D portfolio hitting it’s 7.50% overall annual growth target?
- What is the dividend yield for the B&D portfolio?
Let’s get started.
The b&d portfolio allocations
Since the last monthly update for July 2022, I made a few changes to the B&D portfolio which can be viewed here and here. I added back a portion of ZPR and I decided to add some XQQ bringing the portfolio as seen above to a 70/30 equity/fixed income split. Since that last change, I feel alright with the setup of portfolio even though I previously had a 65/35 equity/fixed income split.
Based on where things stand now, I’m going to apply the 5/25 rule I had previously discussed here. Based on the 5/25 rule, I don’t need to consider any immediate rebalancing of the portfolio at this time. Therefore, I’m going to leave things as they are for now.
The b&d versus the comparables
Here is a list of prior monthly summaries:
Compared to July 31, 2022, my B&D portfolio YTD return has deteriorated from -7.56% to -10.95%. I also now hold the number 9 position against 14 comparables.
When it comes to the average, mean, worst and best comparable, the difference between my own B&D portfolio and the comparables has also deteriorated. August 2022 has been a yoyo of a month for markets. My own portfolio is now a 70/30 portfolio as mentioned earlier while most of the other portfolios are 60/40. When the markets turn negative, the impact is felt more by my own B&D however the same is true when markets turn positive. I continue to feel that my portfolio construction has been holding up well in these uncertain times.
Now, let’s include the detailed breakouts of my own B&D portfolio and of each of the comparable portfolios.
The B&d portfolio growth targeT
Every calendar year, I set myself a goal of organically growing my B&D portfolio by 7.50%. When I say organic, I don’t mean hormone free, antibiotic free, free-range, or herbicide/pesticide free (beware, each blog post must contain a certain amount of cheese – if not, I should be flogged).
What I mean by organic is that any new funds added to the portfolio after the beginning of the calendar year from outside sources (e.g. from employment income) are excluded not to over-inflate the return. Also, as of 2023, funds coming from external sources will no longer occur as my reliance will be 100% on my B&D portfolio.
Obviously, with a YTD return for 2022 of -10.95%, I’m off by quite a bit.
Regardless, negative years occur and as was seen with the comparables above, my portfolio is still holding up considering the volatility we’re currently experiencing.
Next stop, let’s consider the dividend yield on the portfolio.
the B&D portfolio Dividend yield
My goal is to take a 4% SWR (safe withdrawal rate) from my B&D portfolio each calendar year. The dividend yield on my portfolio is a very important component of my SWR.
While I want as high of a dividend yield as possible, I want to ensure it’s made up of quality investments. I also want to ensure those quality investments pay dividends that are consistent, reliable and growing.
Also, the closer my dividend yield is to my 4% SWR, the less I’ll be reliant on selling investments to cover the difference between the dividend yield and SWR.
As at August 31, 2022, my B&D portfolio dividend yield is 3.1831%. This is slightly higher than the prior month but also possibly due to a rounding factor. Either way, what’s important to note is that although the capital value of the portfolio can fluctuate up and down quite a bit, the dividend yield continues to remain stable. This in turn allows me to plan out my expenses over a long period of time, such as booking accommodations and flights over many months and enjoy deep discounts as a result.
Two further caveats though.
First, I wouldn’t pull any money out of my TFSA. Therefore, the dividends deposited in my TFSA will be reinvested. I would either sell additional securities from my RRSP or my non-registered account to make up for that. Taxation would be the deciding factor between the RRSP and the non-registered account.
Second, I can’t actually pull any funds out of the LIRA until I turn 55 years old. So, same as the TFSA, either I’ll compensate by pulling funds from the RRSP or the non-registered account, whichever is more tax efficient.
Overall, what’s important is that the dividends continue to be paid out and negative market conditions have had no impact on that.
In reviewing everything above, my thoughts continue to be the following:
Steady as it goes for now.
What do you think? Are you feeling pretty relaxed or have you taken your portfolio to cash (buy high and sell low)? Let me know.