Retire Happy

In the mutual fund industry, there are funds called balanced funds or asset allocation funds or portfolio funds that try to make investing easy and simple. For Do-it-yourself investors (DIY), building, managing and rebalancing a portfolio with lower cost Exchange Traded Funds (ETFs) instead of mutual funds are great alternatives. These Robo-Advisors claim to do everything the mutual fund industry is doing but instead of building portfolios with expensive mutual funds, they use passive index ETFs which can lower fees by a lot. For example, if you put 50% into the Conservative category and then 50% into the Balanced category, your resulting mix or allocation would be 50% equities and 50% fixed income

In 2019, bonds gave investors a pretty healthy 6.9% return which was a big jump up from the previous year’s return (2018) of 1.4%. You could probably use that word to describe the stock market in any given year but 2020 was special because of the impact of COVID (or more the perceived impact of COVID). The TSX started the year just like any other year but in March, when Canada and other parts of the world started to impose restrictions, the markets reacted and we saw a 17.38% decrease in the single month. One of the reasons to look at the returns of the markets for the past year is not necessarily to help look into the future but rather to give you an idea if your portfolio is producing a reasonable return compared to benchmarks.

’s sake, they diversify into 4 different asset classes: Cash, Global Equities, Canadian Equities, and Bonds. Let’s further assume that they take an unsophisticated approach to diversification and simply divide the portfolio by 4 and invest $25,000 into each of the 4 asset classes. Each year, I compared Garry and Vivian’s portfolios with Garry’s portfolio being passively managed and Vivian’s is actively rebalanced every year. Specifically, in the second year, Jake invests the $10,000 as follows: Essentially, his rebalancing strategy is to buy more of the asset classes that performed poorly and buy less of the asset classes that performed well.

For the purpose of retirement planning and wealth planning, I would argue that you should not consider the TV as part of your financial net worth. In my mind, your financial net worth is slightly different than your total net worth because you only want to consider assets that may be used as a retirement asset or truly relevant to your financial wealth. If you want to have a benchmark for wealth, retirement or financial fitness, make sure your starting point is your net worth. If you want to have a benchmark for wealth, retirement or financial fitness, make sure your starting point is your net worth.