Our 2023 Portfolio

Wanderer
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What a year 2023 has been!

We started the year off with every economist out there predicting a terrible, horrible, no-good recession hitting the US as a result of all the interest rate hikes the Central Banks were doing. And then we got the Silicon Valley Bank collapse, followed by Signature Bank, followed by First Republic. The total value of assets that were lost in these mid-level bank failures was actually higher than the Lehman Brothers collapse that kicked off the Great Financial Crisis of 2008.

And then, oh yeah, war broke out in Israel in October. Super. That’s all we need right now, more fighting.

So how did world markets react? Well, isn’t it obvious?

They…went up!

Dramatically.

This is why I don’t trade off of the news. The last time I was 100% certain that stock markets would drop like a rock was 2016, right when Trump got elected. I was completely convinced that the economy would crater, yet I continued to invest anyway as part of our Investment Workshop, and to my great surprise, everything went up instead!

The reason for this is that the investment community pays attention to a different set of news that the rest of us do. While the war in Israel is a humanitarian disaster, Wall Street saw the conflict as unlikely to affect the world economy, so they mostly ignored it. Instead, the two big news stories investors cared about were the coming AI revolution’s effect on the tech sector in the first half of the year, and the Federal Reserve’s decision to stop interest rates increases in Q4.

So let’s put it all together and see how our investments did in 2023.

Our Portfolio

When interest rates started to increase in mid-2022, we decided to swap out the bond component of our portfolio for preferred shares tracked by the BMO Laddered Preferred Share Index ETF (TSE:ZPR). Was this a bit of a judgment call on my part? Maybe. But when interest rates increase, I wanted exposure to something that would benefit from that rise, and preferred shares fit the bill since their dividend yields reset to prevailing rates. Plus they were paying a nice and juicy 6% dividend when everything else on the bond market was paying in the 3% or less range.

So this is the portfolio we held in 2023.

Now, I have to reiterate that just because our portfolio looks like this doesn’t necessarily mean you should do it too, because this thing is really volatile. Preferred shares don’t have the balancing effect that bonds do, so this thing behaves more similarly to a 100% equity portfolio than a 75% equity/25% bond split. FIRECracker and I are more comfortable with volatility at this point in our investing careers since we’ve been through two world-changing recessions now without panic-selling.

We’ve also reached a point in our FIRE journey that we don’t have to care about volatility anymore. Now that we’ve entered our 10th year of retirement, we are well past the sequence-of-return risk that existed during the first 5 years of retirement. Our living expenses also now comfortably fit inside the yield of the portfolio, meaning that we have achieved the status of Dividend-FIRE. When stock markets go down, we can simply collect our dividends and interest and leave everything untouched, and when stock markets go up, we can harvest capital gains and use it to buy more yield-producing assets, effectively giving us a lifestyle raise. It creates a situation where we win no matter what the stock market does, which makes things so much easier and stress-free.

So first, let’s see how our dividends did this year.

Our Dividends

At the beginning of the year, this is what we projected our dividend income would be.

AssetWeightingYield
Canadian Preferred Shares25.00%6.00%
Canadian Index25.00%3.19%
US Index25.00%1.52%
EAFE Index25.00%3.00%
Total100%3.43%

On January 1, 2023, these are the yields each fund was reporting. By weighting each asset’s yeild with its portfolio weighting, we can calculate a total portfolio yield of 3.43%. Then to turn that into cold, hard cash, we take both of our portfolio’s starting value and multiply it with its yield like so.

PortfolioStarting ValueYieldProjected Income
Portfolio A$1,277,787.003.43%$43,828.09
Portfolio B$485,178.003.43%$16,641.61
Total$1,762,9653.43%$60,469.70

To recap, Portfolio A is the initial $1M portfolio we retired on. Portfolio B contains all the money we earned from post-retirement side hustles, such as writing this blog. Both portfolios are invested using the same target allocations, so we can use the same yield value for both.

So at the start of the year, we were projecting dividend income just about $60k. Now that we’re at the end of 2023, how did we do?

Yowza. Almost $63k in dividend income! So what happened?

Basically, the US total index and the EAFE index fund both increased their dividends in Q4 unexpectedly. Our US total stock market index ETF paid $1.0017 per share, compared to the same payout last year of $0.9305, representing a 7.7% increase. Not too shabby, if I do say so myself. But the EAFE index, of which the majority is in Europe, massively increased their dividends in a way I wasn’t expecting. Last year, the December dividend on the EAFE fund was $0.334573 per share. This year, it went up to a massive $0.967811 per share. That’s nearly a 3x increase!

The reason for that increase is that last year, European companies were crapping their pants about the war that had erupted on their eastern front in Ukraine, and as a result, they hoarded cash. This year, it seems that those fears had mostly subsided, and now they believe that whatever the eventual outcome of that war, it wasn’t likely to lead to an invasion of Europe and World War 3. I sincerely hope that they’re right.

Also, this year I am so grateful that our retirement is built off of ETFs that provide truly passive income, because this year our energy and attention was completely sapped by life changing events. Since returning back to Canada in May, we’ve been focused on caring for my dad as his condition deteriorated, then arrangements for the funeral, and then FIRECracker giving birth and caring for a newborn, all one after the other. If our retirement was built off of rental income, we would have been screwed because we wouldn’t have been able to deal with leaky faucets and mold infestations on top of everything else. Doing this with passive income meant my portfolio was diligently producing that income with zero input from me, and that really saved our butts this year.

Don’t let real estate people trick you into thinking that rental income is passive. It’s not. Only dividends are.

Total Returns

OK so now that we’ve talked about dividends, how did the rest of our portfolio do? Well, let’s see…

AssetCapital GainDividendsTotal Return
Canadian Preferred Shares1.00%5.98%6.98%
Canadian Index7.65%3.54%11.19%
US Index22.41%1.79%24.20%
EAFE Index12.57%3.63%16.21%
Total10.91%3.73%14.64%

I’ve said it before and I’ll say it again: Yowza.

Every single asset class went up in 2023. And in some cases, it went up a lot. Preferred shares clocked in (after dividends) at a 7% gain, while the US index roared into a stunning gain of 24%! Bonds (not shown) did OK as well, clocking in around 5%, so my judgement call of moving to preferred shares ended up being the right one, but to be honest it didn’t make a huge difference. If you stuck with a bond index this year, you did just fine too. The biggest determining factor in your portfolio’s performance was how much equity exposure you had.

Put it all together, and we get a total portfolio gain of 14.64%!

2023 was an absolute banger of a year! This is what that did to our portfolios.

PortfolioStarting ValueWithdrawalEnding Value% Change
Portfolio A$1,277,787.00$47,000$1,410,466.0014.60%
Portfolio B$485,178.00$0$560,642.0015.55%
Total$1,762,965.00$47,000$1,971,108.0014.87%

If you’re wondering why Portfolio B’s return is a little bit higher, it’s because as usual, we added some money that we earned into the account throughout the year, which pollutes the performance number a bit, but Portfolio A’s performance is pure since the only money that got added or removed was when we harvested our dividends out in January.

So from our 2023 total starting value of a $1.76M, we ended the year at $1.97M, meaning we made $210,000 in investment gains. We are now also within striking distance of $2M, which we are expecting to hit sometime this year just from collecting dividends.

This was a very strange year. If you were to ask the average person on the street how this year felt to them financially, they would probably tell you how stressed out they are. Everything costs more, they would grumble, life seems more difficult, and they feel like they’re just barely getting by. But at the same time, the stock market has been on fire, unemployment is still near record lows, and inflation has been more or less successfully wrestled back into the 1-3% range. Central banks in both the US and Canada seem to have pulled off the mythical soft landing, so why aren’t people partying in the streets?

The answer is real estate. If the majority of your net worth was stuck in real estate, and you held a large mortgage, you didn’t have a good time. Interest rate increases caused property prices to drop, and people in the US holding adjustable rate mortgages as well as every Canadian mortgage holder saw their payments increase, in many cases by as much as 50%.

People holding financial assets, on the other hand, couldn’t help but make money. Every index went up, and the more money you invested, the better you did. Even dividend payouts increased, so people like me depending on dividends to live got a raise this year.

Looking Forward

OK so enough gloating. Where do we think our investments are going in 2024, and are we planning on changing anything in our portfolio as a result?

2023 was a lesson in not listening to predictions. Every major economist was predicting a recession in 2023, and not only were they wrong, stock markets advanced at a rate I haven’t seen in a long time. If you were to look at only the stock market and ignore the news, you would think that we’re in a Roaring 20’s period of an unbridled economic boom.

So what’s everyone predicting now? Interest rate cuts, of course. In fact, check out the current US bond yield curve.

That is a deeply inverted yield curve, and indicates that many institutional investors are betting hard on interest rate cuts. In Canada, it’s even more inverted.

In Canada, the yield on a 30 year bond is 3.2%, compared to a risk-free money market rate of 5.2%! That doesn’t make any sense to hold, unless interest rate cuts cause the long end of the yield curve to go up in value.

Honestly, there probably will be interest rate cuts this year. Not only is it good politics (We’re helping homeowners!), but both the US and Canadian governments are up to their armpits in debt. Lowering interest rates would help their own budgets by lowering borrowing costs. So when politics and financial interests line up, things tend to happen pretty quickly.

So how should we invest in 2024 under this economic backdrop? In terms of our equity holdings, nothing changes. Our risk tolerance hasn’t changed, so we’re comfortable holding a fairly aggressive equity position, split evenly between Canada, the US, and the EAFE Indices. Plus, lower interest rates will benefit equity prices since borrowing costs will become lower for companies as well.

But what to do about our 25% fixed income allocation? Do we stick with our preferred share positions, or do we go somewhere else?

OK so here’s what I’m thinking. Traditional financial advice would say that when interest rates are likely to drop, we should put our money into long-duration bonds because those go up the most as rates go down.

Here’s my issue with that. Lots of other investors have already crowded into that position, which is why the yield curve is so deeply inverted. Long bonds have gotten too expensive, and at a current yield of only 3.2%, we’d be taking a pretty significant pay cut if we were to join them. And not only that, the bond market has priced in 5 to 6 quarter-point rate cuts, while the Federal Reserve themselves has broadcast their intention of doing only 2 to 3. So I’d be giving up income in the hopes that rates drop more than 1.5% in order for this trade to make sense.

I don’t like those odds. Anything can happen! Right now there’s fighting going in the Red Sea related to the war in Israel, and if that translates into a shipping blockade, inflation could easily spike up, which would mean that the cuts that everyone’s 100% sure is going to happen may not happen.

Money market also doesn’t make too much sense, since these would go down if interest rates decrease.

Preferred shares, on the other hand, I think still have some upside left to go. Preferred shares, specifically rate-reset preferreds, are typically issued in 5 year terms with an interest rate that’s pegged to the bond market. Once that 5 year term is up, their rate resets (hence the name) based on whatever the prevailing interest rate is at the time, so in a way they kind of act like Canadian fixed-rate mortgages, which also reset their interest rate every 5 years.

So that means that in 2024, preferred share that were originally issued in 2019 will reset to the current interest rate environment, and even if interest rates drop, interest rate were so low back then that they’ll still reset at a higher rate. This is similar to how mortgages that are renewing in 2024 will still see a monthly payment increase even if interest rates drop because their rate back in 2019 was so low. So the same effect that hurts homeowners should help preferred shares.

So I think I’m going to keep my 25% allocation on preferred shares this year. Not only do I get to keep my sweet 6% dividend yield, there’s a good chance there’s capital appreciation to be had even if interest rates drop. And these things aren’t nearly as overbought as bonds right now.

Conclusion

What a year 2023 was. Wars, natural disasters, and an increasingly volatile political environment in the US wasn’t enough to derail a massively expansionary year on the stock market. 2024 promises to ratchet up the uncertainty even more with 2 wars still raging and a US presidential election that will be like no other in history. The news is going to look scary, but always remember: bad things happening in the news doesn’t necessarily mean that bad things will happen to your investments. So stay invested and tune out the chatter.

How did your investments do in 2023? And what do you think 2024 will have in store? Let’s hear it in the comments below!


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96 thoughts on “Our 2023 Portfolio”

  1. Wow… what a year indeed. Those investment returns are phenomenal. Especially since they are quite passive.

    I’m curious to see what this year, 2024, is going to bring. The hammer must come down at some point right? All the people that are having a hard time financially must reduce their spending at some point right, decreasing the earnings of companies, making them less valuable…. but then the Fed might drop interest rates in return and the stock market has another reason to party. I must admit I no longer really get it, but I’m just along for the ride anyway 🙂

    1. You’d think, but that reduction in spending has already happened. Inflation went from 9% down 3%. And still, equities went up!

      If the Fed starts dropping interest rates (as they’ve telegraphed), the real party will start. Just you wait, we might be in the Roaring 20’s yet…

    2. Hi Geert, I just started reading your book and what a coincidence that I saw you commenting here!

      Your books is very enlightening. I’m taking my time reading it to fully absorb the content. Thank you!!!

  2. [very new to investing, so sorry if this is a dumb question]

    Would you be willing to do a blog post/explain more about dividend fire? Are dividends only worth considering after achieving FI? What about CEFs?

    1. There are no dumb questions. Never hesitate to ask if you don’t know something.

      FIRE is based on the 4% rule, where your retirement income is derived from withdrawing 4% of your starting portfolio in your first year of retirement, and then adjust for inflation each year afterwards. This strategy will work 95% of the time, but that still leaves a 5% chance of retirement failure if you have particularly bad timing, like retiring in 2008 or 2020.

      Dividend FIRE is a term I made up, where you design your portfolio to have a certain dividend yield which matches your living expenses. Dividend FIRE has a 100% success rate, because you never need to sell anything to fund your living expenses. You simply harvest the dividends every year.

      And finally, CEFs? No idea what that acronym is. Please be more specific.

  3. I surprised that at least a quarter of your investments aren’t invested in high yielding etf’s, there are so many high yielding etf’s out there including a closed end fund that been around for over 20 years and has always paid in the 9-10% range EIT-UN.

      1. I’m not sure where your seeing the broken links, but see below the fund has returned of over 960% since inception till end of the year 12/29/2023 with $10,000 CAD investment this would now be worth $106,408
        (I’m not sure if that includes the dividends but I believe it does, as it specifies total return)

        Total Returns Performance

        964.08%
        Last Price

        $13.15 CAD
        as of market close 12/29/2023

        Value of $10,000 Investment

        $106,408.00 CAD

        Also note top 40% holdings are made up of quality assets,

        Top Holdings (%) image as of 12/31/2023
        American Express Co 4.8
        ARC Resources Ltd 4.6
        Restaurant Brands International Inc 4.5
        Elevance Health Inc 4.5
        Union Pacific Corp 4.5
        Tourmaline Oil Corp 4.4
        Philip Morris International Inc 4.4
        Wells Fargo & Co 4.3
        UnitedHealth Group Inc 4.0
        Royal Bank of Canada 3.7
        Total 43.7

        Equity Sector Allocation (%) imageas of 12/31/2023
        Financials 24.7
        Industrials 18.0
        Energy 16.8
        Health Care 11.2
        Consumer Discretionary 10.2
        Consumer Staples 8.8
        Materials 8.5
        Information Technology 1.8

  4. Really enjoyed this pieced. We invest differently, but I learn a lot from your perspective. Also, I respect that you tilt your portfolio towards income (thought I don’t do this myself).

  5. 2023 went great for us! We both hit the RE part of the path after realizing we were already FI a couple years ago. Even though we didn’t have income from working for 11 months for one of us and 5 for the other, wealth increased by more than in 2022 due to portfolio performance. Looking forward to travel in 2024 and managing the portfolio going forward to keep taxes minimized and performance covering expenses.

      1. And we’ve got you two to thank for helping us get there! We were on a good path but QLAM crystallized what we needed to do to get over the finish line and helped with the math shit up part.

  6. Perhaps a better way for you to calculate your actual returns are to do use money-weighted rate of return. This allows you to account for money that is deposited and withdrawn from your accounts and won’t be “polluted” by these changes in accounts.

  7. Interested in you going over your updated expenses again since you had to stay put for a while and could not use geo-arbitrage. As a US-er, we’re stuck longing for a house as a stable way to keep housing costs low, but priced out of the market for sure.

    Living on $60 seems less and less doable with housing costs soaring and adult parents starting to need our help.

    1. what? if you don’t live in NY or CA, you can live on much less. I live in Atlanta on 36k a year with wife two kids. My 2BR apt rent is $1200 and two old cars. There’s certainly ways of living on much less than that and still enjoy 2 trips a year like we do….
      I think people in the US need to learn how to live w/ less and a big financial crises or war might soon require you learn that kill

    2. Genuinely curious (maybe I have missed something):

      How is a house a way to keep housing costs low? Rent is cheaper than just the mortgage payment (PITI) in the areas I have looked at. Then as a homeowner you would have to pay WSG, and also maintenance… Have you adequately accounted for these expenses?
      This brings me to the other issue with your statement.

      How is the money you pay on housing STABLE? Taxes go up with inflation (likely going to happen in a big way since housing has appreciated so much recently). Insurance goes up (could raise in a big way in many areas due to climate exposure). Water payment goes up. Sewer goes up (or pumping the septic system). Garbage goes up. Maintenance goes up (perhaps the most as wages rise increasing your cost to hire out the labor). Maintenance is also an unpredictable expense (thus making it less stable). Sometimes you don’t spend anything, sometimes you’re replacing the heat pump ($3500) or roof ($10,000). You can only ATTEMPT to make these unpredictable expenses stable by setting aside money on a monthly basis to cover them. Generally maintenance and repairs account for 1-4% of the home price on an annual basis depending on age and condition of the home.

      Could you show me a realistic example of your market when using a reliable calculator to account for all the costs. One of the most complete ones I have seen is found here (no affiliate): https://www.calculator.net/rent-vs-buy-calculator.html

      1. Everyone’s mileage varies, but when I paid off my mortgage my housing costs dropped dramatically. Yes property taxes and utilities increased annually (but rents would have increased to cover those as well). I learned to do as much of the maintenance and repairs by myself as I could which helps keep the cost down considerably. Also, by staying on top of the maintenance, I avoided a lot of expensive repair bills and/or had a good handle on when key items (e.g. roof) was at the end of its lifespan so that it was a planned replacement item instead of a (surprise!) repair item in my budget. Bottom line: for me owning a house was financially cheaper but took up more of my time.

    3. > As a US-er, we’re stuck longing for a house as a stable way to keep housing costs low, but priced out of the market for sure.

      Why are you fixated on owning a home? It can frequently make problems worse and cost a LOT more than renting. Take this WSJ article with some data points: “It is now 52% more expensive to buy a home rather than rent one”.

      https://www.wsj.com/economy/housing/theres-never-been-a-worse-time-to-buy-instead-of-rent-bd3e80d9

      > less and less doable with housing costs soaring and adult parents starting to need our help.

      Are these factors? yes. Are they limiting beliefs? Absolutely. I would challenge you to consider a “what are creative solutions here?” mindset. Most people critical of Financial Independence use these things as excuses for simply not facing the reality that they *can* make changes, and just don’t want to.

      1. Long-term renter here by choice. As soon as I let go of the fixation with owning a home, I was able to better optimize not only my portfolio but also my lifestyle. YMMV but the point is one is not better than the other. Open yourself to possibilities and decide which one is best for you after doing the math.

  8. I am still new to the investing in Indexes and love these posts. In the U.S. I’ve looked for some equivalent to your Preferred Shares Index (TSE:ZPR) and was comparing holders.

    Your Canadian choice includes more management style companies while PGX for instance is 100% in the Financial Services. Does anybody know of a better matched index? Maybe I will just invest in TSE:ZPR and deal with the difference in currencies. Thoughts?

  9. I tracked your VCN, VUN, XEF, ZPR portfolio and the return showed as 14.22%. How did you get calculate 14.64%?

    I used the closing price of 2022 for each ETF as the starting value and the closing price for 2023 as the end value. Also, counted dividends/interest payments that were deposited into the portfolio during 2023.

    Again, would be nice to know how you mathed that shit up.

  10. This is where I want to get…when my ETF portfolio yield covers all my expenses and I don’t need to sell any shares to live off of.
    This strategy gets a very bad rep here in the US (just ask Frank from Risk parity radio that burns you guys at every episode) due to the disadvantage tax rates on dividends when compared with capital gains, but I wouldn’t want to let the tax tail wag the income
    dog and i would sleep much better at night
    Thoughts?

    1. Dividends and LT capital gains are taxed in the same way in the US, which is 0% for up to the first $90k for a married couple.

      And I could care less about who’s burning us on some random radio show.

  11. nicely done

    to increase my portfolio yield i have approx 15% in covered call etfs . (mer’s are quite low, despite the active involvment). Im okay with capping the capital appreciation with the increased yield , again on 15% of my portfolio

    also i choose reits over preferred shares. The latter historically returns HORRIBLY, better off with either reits/CC etf(s)

    if one is looking a PT job, selling covered calls yourself will yield better returns then any CC etf. It does involve passion in the field, and understanding basic technical analysis

    1. Ehhhhh….sure. I admire your passion, but covered calls is like picking up nickels in front of a steamroller. Everything works out fine until the steamroller snags your arm, and then…

  12. I’m struggling with the income portion of my portfolio as well. Right now it’s all in Vanguard money market VMRXX which is paying 5.5% but I know this isn’t going to last. So the question is Bonds, Preferred or Dividend Stock? I see your point on Bonds, but why Preferred vs Dividend stock funds?

  13. Great return on the year!

    I’m new to FIRE and was wondering if you are still in accumation phase, do you use margin account for your taxed brokerage account or use cash account to invest into etf and indexes?

    1. Most fire people will tell you that they never use margin when investing since we are mostly super risk-averse. I only use a cash account to invest.

  14. Thanks Wanderer for sharing, and congrats on almost hitting 2 Million, it’s going to happen soon!

    I have a few small questions/comments that I’m hoping you can clarify:

    1. The IEFA 2023 dividend does seem like a big increase compared to 2022, but if you go back a few years it looks like the fund paid an even bigger dividend in 2021 than in 2023:
    2023: $2.25
    2022: $1.67
    2021: $2.48
    2020: $1.31
    2019: $2.08

    If you are purely living off the dividends then it’s probably a good idea to build into your plan that dividends can fluctuate throughout the years. Maybe preferred shares give you more of a guarantee against dividend fluctuation?

    2. Your chart says that you didn’t withdraw from Portfolio B, but in Firecracker’s 2023 expense update she mentioned you guys withdrew $5,752 from Portfolio B to cover some fun luxury expenses, which took your total spend to $52,766. Still well within your $62,809 yield from both portfolios combined, but would appreciate clarification if you withdrew this extra 5.7k from Portfolio B’s yield, or just from income that you hadn’t had a chance to invest, so technically not a withdrawal?

    3. Also, just wondering if you hold VTI and IEFA in USDs, and if you receive the dividends in USDs as well? If so do you pay FX fees to convert them to $CAD for spending or do you do Norbert’s gambit to avoid FX fees?

    Thanks a “million”! 🙂

    1. You’re right, IEFA’s dividend is annoyingly volatile, so I try to be conservative in my yield projections for that particular fund. That being said, all the other ETFs that track the EAFE index are also like this, so it’s not the fund itself but the asset class. All the other ones are pretty steady though, so it doesn’t hurt me too badly.

      When FIRECracker says “Portfolio B withdrawal”, she means she spends the cash before it gets invested. When I call something a withdrawal, I mean a literal withdrawal from the account.

      And finally, I own VTI and IEFA directly in USD. It does add some complexity to my life, but it makes sense for me because this blog (and our book) pays us in USD, so that’s why it makes sense for me. I use Norbert’s Gambit to translate money back and forth to avoid FX fees.

      Hope that helps!

  15. I made an overall 10% gain on my portfolio last year. so I cant be sad! It’s been a while since I checked in though, are you no longer holding emerging markets? After seeing your article today im debating about selling my canadian bonds to invest in preferred shares like you did, albeit at a small loss. my bonds have always dragged.

    1. Hey, 10% ain’t too shabby! Congrats!

      I am no longer holding emerging markets, correct. FIRECracker wanted us to get out because it had too much exposure to China.

      And if you want to invest in preferreds, remember that it’s a LOT more volatile than bonds, so you’re going to have to be comfortable with that.

  16. Great article — appreciate how you break things down. Very helpful.

    You mention that you “harvested our dividends out in January” — was that for the whole year? How do you harvest at the beginning of the year when dividends are distributed throughout the year? I have read in your investment series about the bucket system and you fill your living expenses bucket at the beginning of the year, but I guess I don’t understand how you do that from dividends that will be earned through the year. Thanks!

    1. As dividends get paid over the year, I gather them up into a money market fund such as CMR (CAD) or SHV (USD) so it earns interest. Then in January, I sell these 2 funds off and withdraw them into a checking account which I then spend down until next year.

  17. Thank you for year end summary guys.
    I am up as well..finally crossed 1M last week after 7 years of DCA (700k original savings).
    I mimicked your portfolio (VAB/VCN/VUN/XEC/XEF) with 80E20B but later decided to stop buying VAB and started buying all in one XEQT as rebalancing is kind of difficult for me as i kept drifting the allocations and can stomach the risk tolerance due to 100k cash cushion kept aside to weather any future storms.

    Now my son who recently started his registered accounts and going 100% (XEQT) but after reading you book, he is asking me about preferred shares.

    Are you guys still suggesting ZPR even for new investors as my son is interested in 100% equity who is currently 19yrs old and ready to fill his FHSA and TFSA.

    I have not made up mind yet but after reading this article i am still confused whether to sell my 20% VAB and buy ZPR or leave the VAB and buy ZPR with the new money or keep buying XEQT.
    My retirement time frame will be next 2 to 3 years.

    Appreciate your inputs.

    1. Hi Mak

      Quick question, where did you find a link to their portfolio
      And break down. Could you please share! Thanks!

      1. Here you go David,
        https://www.millennial-revolution.com/invest/workshop-invest/investment-workshop-3-picking-etfs/
        I was following their workshop since 2017 but when they changed slightly in 2021, i also altered but instead i stopped 5 fund ETFs to all in one ETF (XEQT).

        I have to learn how to swap and sell those 5 funds when i retire and start converting them into XEQT for simplicity.

        So far i dont have any plans of keeping any bonds as i have enough cash cushion which can weather out any storms for 2 to 3 years but this ZPR is kind of tempting me to buy due to the 5% dividends.
        Will wait for their suggestion..before i sell the VAB and buy the ZPR or simply use new money to buy ZPR

    2. Hey, congrats on hitting 1M! That’s is a massive achievement, you should feel very proud of yourself!

      To answer your question, I wouldn’t suggest ZPR for a 19 year old investor, his time frame is so long that I would go 100% equity as well.

      For you, ZPR may be more appropriate since you’re going to need income. Just be aware that it’s more volatile than bonds. However, how exactly you adjust your allocation is your decision.

      1. Thanks Wanderer.
        All the credit goes to your blog, if i would have not read this, i would have not build the 1M portfolio. Now my son got inspired and determined to reach his FIRE portfolio by 30yrs. ofcourse i am going to help him by giving half of my portfolio when i hit 65 where my CPP/OAS kicks in and we wont be needing full 4% yield from the portfolio anyways.

        I will inform him to stay course with XEQT where as i will start buying ZPR going forward but the decision of selling VAB now and buying ZPR with that money is kind of puzzle for me. like i am not familiar about the tax implications and other hidden stuff while doing this conversion which is worth or not.
        appreciate any more insights on ZPR .

        1. Aww thanks! Stories like yours makes writing this blog worth it 🙂

          The only tax implications involved in selling VAB and replacing it with ZPR would be the capital gains/loss that you would realize when you sell. If you’re using Questrade, look for the P/L column in IQ Edge to see what that number would be. And of course, only sells inside a taxable account would incur capital gains. Selling holdings in an RRSP or TFSA are tax-free.

          1. Thanks Wanderer for quick response.
            Oh boy, that P/L column showed significant losses for both VAB and XEC which you seems to be got rid of them in time.
            I should have watched your articles more closely when you are tuning the portfolio 🙂
            Well, if i understand correctly, preferred shares (CPD/ZPR) are not needed unless i need the dividends to support my income or retire immediately.
            Currently across all my accounts VAB averaged around -12%. I am still confused to replace them with ZPR right now or leave them as is, as i still have few more years to retire

            Another question regarding XEC, i still have them across all my account which are in -11% and it looks like even XEQT is having 4.6% weight. Do you think i should get rid of them or leave them as is ?

            Basically, i wanted to avoid active management of the portfolio for myself and my son unless it makes significant impact in long run.

            Thank you once again in advance for you suggestion.

  18. Wow how can I invest in these Canadiam preferred shares from the US? These are awesome for those wanting to live off of income!!

    1. You guys have your own preferred share ETFs. Check out PFF which is paying even higher right now. 6.7%!

      Note that the preferred shares in that fund are mostly fixed-rate preferreds, meaning this fund should go up in value if interest rates go down, and vice versa.

  19. Sorry, I am still learning investing. Are these Canadian dollars or US dollars, and how do you protect from Canadian dollar devaluation when investing in US ETFs.

    1. I own Preferreds and TSX in CAD, and the US and EAFE indices in USD.

      And I don’t protect against one currency devaluing against the other. When I spend on living expenses, I simply spend the currency that’s gone up in value.

      1. Ok thank you. But is your $2 mil portfolio is 2 mil Canadian $ or US $? If day your US ETF goes up 20 percent but Canadian $ depreciates vs US $, how does your portfolio change?

        1. It’s 2M CAD. And if CAD depreciates against the USD, that means USD is appreciating against CAD. By holding half my holdings in CAD and the other half in USD, when one goes down the other goes up.

          1. But some things look a bit off? If you only look at portfolio A (your original retirement portfolio), it’s $1.4M CAD/$1M USD today, it was $1M CAD/$1M USD 10 years ago. So in USD terms, your ROI is 0%. If you hadn’t earned any income after retirement, would you still be comfortable living off portfolio A?

            1. No. 😀
              Especially considering how strong of a bull market the last decade has been.
              But with hard work and active income portfolio B certainly provides reassurance.

  20. 25% preferred shares is ridiculous , it seems you are desperately looking to increase yield?

    preferred shares are positively correlated with equities, so no buffer in volatility of the portfolio. They are debt issues. However, they eat into returns-one of the worst asset classes by far. And the major reason you underperformed any basic balanced etf.

    here ya go:

    10 yr average (INCLUDES THE YIELD!!!!!!!!)

    cpd (preferred shares) – 1.25% !!! (current yield 5.88%)

    you are chasing yield. there are better options.

    specifically:

    xre (reit)- 5.50%!! (current yield -4.50%)

    zwc (Covered call etf on Cdn large cap equities) – 6.05% (5 yr average,no 10 yr yet) current yield 7.63%

    1. Preferreds are not a long term holding, I held them specifically during 2023’s period of rapidly rising interest rates. This would negatively affect REITs (as it did for all real estate), which is why XRE was -5% last year.

      And as for covered calls, I don’t mess around with options. Everything works out fine until there’s a period of heightened volatility, and then those funds get crushed because the options get exercised all at once.

  21. ah k, regarding cpd . Its are a wealth killer !!

    ‘ Everything works out fine until there’s a period of heightened volatility, and then those funds get crushed because the options get exercised all at once.’

    No..no…no. See 2022 results fromm below link , You need to do some research.SELLING calls caps the gains/decreases cost basis OR the most appropriate for a retiree: increases yield

    https://www.morningstar.ca/ca/report/etf/performance.aspx?t=0P0000W9HH&lang=en-CA

    1 decade’s worth of proof.

    Look at its yield, no need to ever sell the ETF. Passive income . The mandate isnt max capital gains. And as i said, notice what it did in 2022? 🙂 why did it outperform the SPY? easy– cause you are selling calls. It outperforms in a sideways /decreasing market

    an excellent tool to increase yield in a portfolio , far far better than cpd. The data tells the story 🙂

    1. And in 2020, a period of extreme volatility, it way underperformed the S&P 500 index. The chart on that page shows it massively underperforming the index over the long term.

      If you’re trying to sell me on this fund, you’re not doing a great job.

      Not. Interested.

  22. portfolio overwriting is also an excellent tool to increase yield of a portfolio

    here is a specific example:

    i own zeb (Cdn banks), an etf on the TSX. Yields just over 5% . Last yr i sold far OTM calls on it over the calender year (4 times) effectively increasing the yield to just north of 8.5%.

    🙂

    selling covered calls is an excellent , safe, conservative method to increase yield of a portfolio. its allowed within non-registered accounts. Unfortunately , many will jump to premature conclusions once they hear the word -‘options’ …Education is a powerful tool 🙂

  23. Could it be that because you are quoting your portfolio value in CAD it looks like it’s increased quite a bit? My portfolio in CAD term has also performed well but once I convert it USD, it’s done not so well.

      1. What I meant to say is that you retired 10 years ago and at that time CAD to USD was 1.1 and you had 1 million. Today, CAD to USD is 0.74. So in USD terms, your portfolio has grown from 1 million USD to 1.46m USD (1.9m CAD x 0.74) in 10 years or a 3.86% annual return. I’m just thinking that if CAD continues to depreciate (who knows?) then although you have buffer your portfolio with USD holdings, most of your holdings will still depreciate in USD terms. Are you expecting most of your future expenses to be in CAD and so you aren’t so worried or have I missed something?

        1. Their starting portfolio in 2015 was one million CAD, and now it is 1.4 million CAD, plus the additional income they have made from their book and blog which has now grown to 500k CAD, which makes their total net worth 1.9 million CAD.

          1. So portfolio A has the same value in $ (despite inflation) as in 2015.
            I think vanilla 4% rule is too optimistic for long term FIRE with no additional income. Hence, the need to sell books and blogs to create portfolio B.
            But they are honest and transparent about it. This is great!.
            But be mindful prescribing this solution to everybody else 🙂

  24. Wanderer, i notice you don’ t like the Nasdaq? I have QQQ and a Science and tech fund, and it has done very well, better than S&P, and the DOW. But, it was the first fund to get rebalanced into Bonds. (wish I had read this before making my moves) I have kept all my Canadian Dividends intact, and in fact if we have an economic down turn, will buy more.

    But now you’ve got me thinking about Preferred Stocks, especially Canadian Preffered. What is the ETF you use for preffered shares?

  25. Hi Wanderer!
    Do you still recommend those of us who are still working towards FIRE to invest in XEF (22%) and XEC (11%) or are there better options out there for international ETFs? Thanks in advance for your insight 🙂

  26. Hey Wanderer!

    If the dividends had not been enough to cover your expenses, would you have taken money from your Non Reg account or TFSA? or a combination of both?

    I am trying to figure out the best strategy (tax-wise and growth-wise) when it comes to withdrawing money from Non Reg and TFSA accounts.

  27. Congrats for your performance in 2023. Very well done !

    Personally, I got a 13.24% return in 2023. I have almost 100% equity, except for a small cash portion (treasury bills). My return on equity only (excluding cash) was 14.91%.

    I consider my performance for the year as a bad one. This is mainly due to my equities being more defensive (Procter & Gamble, Pepsi, and the like) and also a large portion (around 18%) was invested in oil (Suncor, Couche-Tard), both of which sectors did very poorly in 2023.

    I hope 2024 will be a better one for me.

    I expect inflation will make a come back in 2024, particularly if rates go down. I think the pain for regular people is not over. The rich get richer, the poor get poorer… That story should continue going forward. At least, that’s what I expect for 2024.

    I hope it doesn’t get too bad, but it is certainly worrying to see all the problems getting worse and worse : the housing crisis, the rise in homelessness, the hatred between different groups of people.

    On the other side, I am encouraged to see some “common sense” coming back in canadian politics. I think the policies of the last 10 years were unsustainable and they are doing more harm than good. So, hopefully, we will see some change on that front going forward.

    However, like yourself, I can’t complain too much, because I’ve done very well financially during the last couple of years. It’s just that I don’t want to live in a society where people are fighing for their life and struggling to make ends meet.

    Anyways.. with all that said, I wish you the best for 2024 !! 🙂

  28. I retired early recently … I have invested (2022-2023) in a Canadian index fund, a S&P Index, a lot of GICs instead of cash/bonds, almost a mill in a house mortgage free , a car and am gambling almost a mill on the wildly up and down TESLA stock … which should be good by 2025-6 … my wife is not retired yet and our kid is still in high school … but your portfolio seems less stressful … thanks for your sharing – it is useful and good. Thanks!

  29. $485,178.00 ….Curious to know how long did it took you guys to accumulate this extra money from side hustles ? Seems like you really not FIRED if you are doing side hustles.

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