When it comes to the financial health and well being of an investment portfolio, I find it’s good to be able to sit down and review if it’s doing everything that I expect it do to. For me, that’s monthly. After all, I want to ensure that it’s going to be there to support me for the long term. 2022 is the transition year where my severance package came to an end and any income derived from any external sources outside of my B&D portfolio comes to an end as well. From 2023 and on, my current expectation is that all my income will be coming directly from my B&D portfolio. Ultimately, it doesn’t get more real than that.
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?
On that note, I’m going to 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
Let’s review the portfolio target allocation versus the actual allocation. 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
The last time I provided this summary was based on June 3, 2022 was here. As much as the overall YTD return on my portfolio has dropped a bit since June 3, 2022, I still hold the number two position against 15 comparables.
When it comes to the average, mean, worst and best comparable, the difference between my own B&D portfolio and the comparables has tightened however I’m still doing pretty well. A big part of that is that my own portfolio is a 65/35 portfolio (65% equities/35% fixed income) 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. Regardless, continuing to hold the number two position overall tells me that my portfolio construction has been holding up well in these uncertain times.
You may have noticed that I now show 14 comparables versus the previous 13. I’ve added a new comparable portfolio (Portfolio 14) as I came across the Ryan Lewenza investment portfolio here for October 2021 from Turner Investments. I never shy away from comparing against real life professional portfolio managers and this is no exception. The timeline has been set in the same way as the other comparable portfolios.
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 -11.69%, I’m off by quite a bit.
On a positive note, the return for 2021 was 21.70% and for 2020 was 11.14%. Negative years occur and as was seen with the comparables above, my portfolio is 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.
Why?
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 June 30, 2022, my B&D portfolio dividend yield is 3.4805%. Two 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.
What’s important to note as well is that even though the 2022 mid-year return on the B&D portfolio is negative at -11.69%, the dividend payments are not similarly impacted as they continue paying out regardless.
In conclusIon
In reviewing everything above, my thoughts currently sit with the following:
Steady as it goes for now.
What do you think? There’s a lot of volatility going on out there. Talks of recession as well. How does that make everyone feel?
I’m still under 8% and I’m staring at early retirement in 6 months. Also want my own property but prices here are still nuts, despite them coming down 10%. I can either afford retirement or property but not both.
Sucks to be me. In the meantime the beer is still good, and I raise a glass to everyone’s health!
Life is good. It will only get better. You’re retiring early soon. That’s fantastic. 👍
Nice blog Peter, i really like it – keep it up please. We’re all waiting for the next series 🙂 I really like how you explain all the ETF’s and what they are / do.b Well written and informative. I plan on setting up a portfolio using the ETf’s listed within your blog. TY
Thank you, Reddy! Much appreciated! Definitely will be posting the rest of the portfolio asset allocation series in short order. Happy Friday!