Today, we’re focussing on the October 2022 monthly review for the portfolio. These monthly reviews are really important to make sure you keep your attention on what’s really important when it comes to your financial health. It’s important to be aware how your investment portfolio will allow you to move through each of the stages of your financial lives.
Below is the break down of what I focus on 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?
I’ve also included a list of prior month end summaries for ease of reference:
On that note, let’s get started with the October 2022 review.
The b&d portfolio allocations
Since the last monthly update, no changes have been made to the B&D portfolio and it continues to be have a 70/30 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
Looking at this current month, my own B&D portfolio has risen from being in the dead last position to now being 11th out of 15.
I will highlight that most of the other portfolios are 60/40 versus my own B&D being 70/30. As a result, when the markets turn negative, the impact is felt more by my own B&D however the same is true when markets turn positive.
Overall, I’m still feeling good about things and not feeling a need to change anything at this time.
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 -13.36%, there’s still some work required for the B&D to get to a 7.50% annual return.
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 to cover my living expenses starting in 2023. The dividend yield on my portfolio is a very important component of my SWR and while I want as high of a dividend yield as possible, I want to ensure it’s made up of quality investments.
Consistent, reliable and growing dividends are key to having consistent, reliable and growing cashflow. Why do you think so many companies love recurring revenue models (like Netflix or Apple)? We should all love that kind of cashflow within our B&D portfolios. I definitely do.
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.
Regardless of market gyrations affecting the capital portion of our B&Ds, the dividend payout has been consistent month over month. The dividend yield may change as the portfolio balance fluctuates but the actual dividend cashflow is pretty stable and will continue to grow as companies announce increases on their dividend payouts. Here’s a summary spreadsheet from my own portfolio that visually explains my thoughts.
Note that I only actually started recording this level of detail from June 30, 2022 onward.
So, when people talk about sequence of return risk, that for me only represents the deficit between my annual dividend and 4% SWR indicated above. Is $17,897.63 for October 31, 2022 really a risk though? I guess that depends who you ask. For me, I can’t say it is at this time.
Two further caveats I’ve mentioned in prior monthly reviews and still relevant.
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? Let me know.
About the picture: Wat Sri Suphan (the Silver Temple) in Chiang Mai, Thailand. There are apparently many temples in Thailand. More than 30,000 active temples. Are they by chance competing for the number of 7 Eleven’s located through Thailand? I’ll say that this one was very impressive and by far my favourite even though it’s not the largest nor the most popular. The only reason that it even came to my attention was that I was out enjoying the Saturday night market and heard the chanting from the monks coming from the temple.