Diversification important as ever

[thriftyc]

Fellow Canadian's, how have you've changed your portfolio (if any) in response to the threat of tariffs?

In my case I was 100% equity (mostly VEQT) up until a couple of months back.  I've won the money game in terms of hitting my number and then some and recently changed to 60/40 allocation. I have XBAL everywhere except for some VAB in RRSP to balance out some old Mawer CAN/US equity in non-registered.  My decision was not Trump based per se, but rather a change in risk tolerance after I took a test on Vanguard's site.  I'm feeling good about this decision, lowering interest rates tend to favour bonds, and bonds are a ballast during turmoil. Canadian equity makes up of 16% of XBAL.  The yield alone of XBAL covers my base fixed expenses 100%.  Likely XBAL for life moving forward.

[sixwings]

Right now I've been focused a bit more than usual on liquidity and keeping some cash on hand. My investment horizon is much longer than Trump but over the last month I have become much less bullish on america and american tech so I have to rethink it a bit now. I'm going to wait and see. I hold about 60% in VEQT, 10% in VFV, and 30% in VGT/TEC.TO. I don't particularly like that VEQT is 20% canadian equity as I am very pessimistic about canada's economy over the next 10 years, and that was before tariffs. For now I'm going to keep holding this and see. I think american tech has some juice left in it with Trump as his admin is a giant smash and grab and tech seems to have positioned themselves as the largest grabbers. But long term... I dunno, maybe just straight up VEQT might be good.

[aloevera1]

Agreed, for us diversification is really really important.

A while back I changed my asset allocation statement to have less % in Canadian equities. Other than that I am not planning to change anything. Tariffs come and go, companies come and go but market stays.

[Kmp2]

I rebalanced, my equities have outperformed so I sold some (namely US ETFs - likely a lot of currency gains there), and bought some bond ETFs. I'm 20% Canadian Equity, 20% US Equity, 15% International Equity, and 25% Bonds/GICs, the remaining 20% VRE and a handful of dividend stocks. As we're getting older, and closer to RE I'm considering upping that bond % to 35 and lowering both the equities to 15% each. Now is as good a time as any I guess.

[Stasher]

I'm staying the course as I don't hold US directly like most in VUN but rather globally via XAW. I have been putting all dividends back into ZAG though in the last year to build up ZAG more and have a tad more bonds which is currently around 12% of my total portfolio. 10% in VCN and the rest in XAW. That being said I think I will put my next dividend disbursement into VCN to invest in Canadian countries, the whole Trump distribution is pissing me off as a Canadian. As for going towards 30-40% bonds, I don't think that will happen as I look at my future CPP and OAS as my bond diversification.

[techwiz]

No changes made...

[AFrugalGuy]

No changes made. 25% Canadian, 37.5% US, 37.5% global, 20% FI. Overall, 80% equity, 20% FI.

[GuitarStv]

No changes.  20 CDN, 20 US, 20 International, and 40 bonds.

[Rockies]

I'm sitting at 62% US equities, 17% international equities, 8% bonds, 9% Canadian equities, 3% gold and 2% bitcoin.  Not sure if I am doing the right thing, but I am happy to be fairly diversified, though I am a bit equity heavy (~88%) so I have to be okay with potential drawdowns.

Recent changes for me was a bit of a reduction in my Canadian holdings and an increase in international developed markets and US. I moved the 5% into gold and bitcoin for diversification and to act as an 'opportunity fund' - I will move this stuff back into stocks if we reach a prolonged bear market and if my income holds up through that period. If my income doesn't hold up in a bear market I will use this 5% as part of an emergency fund.

Honestly I don't know what will come out of all of this. On one hand I think the US will continue to dominate, though all countries will be a bit weaker in 5 years. On the other hand, Vanguard has predicted US under performance compared to other equities after a long period of outperformance. I guess we will see what happens on the other side.

[c-kat]

Honestly I don't know what will come out of all of this. On one hand I think the US will continue to dominate, though all countries will be a bit weaker in 5 years. On the other hand, Vanguard has predicted US under performance compared to other equities after a long period of outperformance. I guess we will see what happens on the other side.

Too many unknowns to guess, but I don't think the US will do as well as trump thinks.  We just cancelled our netflix, spotify and facebook accounts. We cancelled our upcoming US travel and replaced it with a Canadian destination. We won't be buying anything from the US. A lot of people are doing the same, and if we go into a recession people won't be able to afford to buy stuff anyway, so a lot of US companies will suffer.  I feel very badly for the small Canadian businesses as many won't weather this storm, but in the long run we can create new partnerships outside the US and start relying on ourselves more.

[Heckler]

hold the line Canada!

and diversify.

No change in our investment policy statement, and nary a change in our balance.  Top was in on Friday last week, and now we've plummeted all the way down to Wednesdays balance, even after the orange hot air balloon spewed some gas.

[thriftyc]

No changes.  20 CDN, 20 US, 20 International, and 40 bonds.

Nice allocation, couch potato style.

[GuitarStv]

No changes.  20 CDN, 20 US, 20 International, and 40 bonds.

Nice allocation, couch potato style.

Yep.  CCP is how I got into investing.

[Heckler]

No changes.  20 CDN, 20 US, 20 International, and 40 bonds.

Nice allocation, couch potato style.

Yep.  CCP is how I got into investing.

I also made a similar plan, stuck to it when VXC came out, stuck to it when VGRO came out.

Still sticking to it now, just added cash to the mix as we get closer to FU day.

[Stasher]

Nice allocation, couch potato style.

Yep.  CCP is how I got into investing.

Likewise for my allocation, I'm still in the CCP 3 fund model portfolio when he changed it in I think 2015? Haven't changed once since then with an 90/10 split with 20% Canadian. 80 XAW 10 VCN 10 ZAG

[thriftyc]

Nice allocation, couch potato style.

Yep.  CCP is how I got into investing.

Likewise for my allocation, I'm still in the CCP 3 fund model portfolio when he changed it in I think 2015? Haven't changed once since then with an 90/10 split with 20% Canadian. 80 XAW 10 VCN 10 ZAG

Those are all great etfs. Was similiar for years before I settled on an all-in-one solution.

[rocketpj]

I set up my ccp-based portfolio back in 2014ish when it was slightly more complex.  Recent events made me realize that it's been awhile since I rebalanced.  I realized that I was heavily overweighted to the US (VUN), largely because it's been on a tear for quite a few years and I was lazy about rebalancing.

In my rebalancing I ended up selling quite a bit of VUN (>$200,000) and moving that money over to Canadian (VCN) and global ETFs (XEC, XEF).  It was a rebalancing, but current events also had me quite happy to reduce my exposure to the US.  I still have a 20% position in VUN, because the possibility always exists that I am very wrong.

That country is currently in a state of chaos and turmoil, and it feels like a stock market shock or even crash is baked in at this point.  That country starting a STUPID trade war with its closest allies is also not going to serve it well - 3 more weeks until the next STUPID deadline for tariffs (i.e. bluster and bullying).

[GuitarStv]

But if you reduce your US exposure you'll miss out on all the stock market gains when the US takes over Gaza and makes it into a resort.

[rocketpj]

But if you reduce your US exposure you'll miss out on all the stock market gains when the US takes over Gaza and makes it into a resort.

Inasmuch as possible while owning index funds, I would really like to not profit from war crimes.  Sadly we are all culpable when we own indexes, but I lack the bandwidth to pick individual stocks.

Given how quickly and destructively the US is autoeuthanizing itself as a functioning country, I am at a loss how to proceed in any real way.  To invest at all we have to assume at least some possibility of an optimistic future, or its gold bars and guns (useless and counterproductive respectively).

[GuitarStv]

But if you reduce your US exposure you'll miss out on all the stock market gains when the US takes over Gaza and makes it into a resort.

Inasmuch as possible while owning index funds, I would really like to not profit from war crimes.  Sadly we are all culpable when we own indexes, but I lack the bandwidth to pick individual stocks.

Given how quickly and destructively the US is autoeuthanizing itself as a functioning country, I am at a loss how to proceed in any real way.  To invest at all we have to assume at least some possibility of an optimistic future, or its gold bars and guns (useless and counterproductive respectively).

. . . and bitcoin!  :\

[Stasher]

I have been still looking at my current index fund mix of ZAG XAW and VCN. With the Canadian bias chat and my desire to increase it for supporting our country right now, reduce my US exposure (out of spite) and then increase my bond AA to 20% from 10% it looks like a great solution to keep it simple and actually increase my diversity is to sell all 3 and move into VGRO.

It has an MER of 0.22 and a 1.97% dividend quarterly ~ annualized 1yr return was 23.39%

Key is that it drops me all the way to 40% United States exposure whereas currently I have 80% of my index funds in XAW which it is 65% US. It bumps my total invested Canadian to a 35% mix of equities/bonds which currently is about 20% between ZAG & VCN.

Lastly, zero rebalancing at all to do. I checked in over at Canadian Couch Potato website this week and they no longer recommend a mix of funds but rather all in one funds such as 80/20 in VGRO or 100% equities like VEQT.

[erp]

@Stasher I've been on the VGRO train for a while now - it's treated me pretty well!

[Stasher]

Cheers Erp, thanks for the quick personal experience thumbs up. The volatility continues to increase with Trump having the US seeing an inflation 1 month spike and not seen in a few months contrary to his election promises and his now "doubling" of tariffs on tariffs and also the Fed saying they won't be dropping bank rates.

[AJDZee]

After back-to-back blockbuster years for my all-equity portfolio, at the end of last year I rebalanced.
Sold a bunch of VTI/SCHG to bring US back down to 35% and bought GLD.
My portfolio is now 10% GLD and I'm holding 5% cash, as a defensive play I'm speculating is there's going to a lot of volatility in the next few years, so i'll keep that 15% ready to throw back into equities at some point. also added ~10% bonds via some VGRO.

(side note - yes half my portfolio is in USD :|  if CAD keeps dropping I'll consider converting back to CAD)

[Retire-Canada]

Fellow Canadian's, how have you've changed your portfolio (if any) in response to the threat of tariffs?

No change. My portfolio AA is setup to last decades. I am not responding to each new crisis with any changes. I'm around 95% stocks/5% Cash/Bonds these days moving towards ~100% stocks as I spend my Cash/Bond allocation in retirement.

[Stasher]

Fellow Canadian's, how have you've changed your portfolio (if any) in response to the threat of tariffs?

My questions on diversity and responses in this thread have nothing to do with tariffs to clarify, but rather everything to do with a continual attack on Canada's sovereignty and frankly being very pissed off and feeling supporting Canada & EU is best aligned. Also a little less in the US helps me not fund the US Gaza destruction war machine as much, which is another brutal Trump endeavour. In the world right now money is the most powerful political weapon until capitalism fails completely.

[thriftyc]

I have been still looking at my current index fund mix of ZAG XAW and VCN. With the Canadian bias chat and my desire to increase it for supporting our country right now, reduce my US exposure (out of spite) and then increase my bond AA to 20% from 10% it looks like a great solution to keep it simple and actually increase my diversity is to sell all 3 and move into VGRO.

It has an MER of 0.22 and a 1.97% dividend quarterly ~ annualized 1yr return was 23.39%

Key is that it drops me all the way to 40% United States exposure whereas currently I have 80% of my index funds in XAW which it is 65% US. It bumps my total invested Canadian to a 35% mix of equities/bonds which currently is about 20% between ZAG & VCN.

Lastly, zero rebalancing at all to do. I checked in over at Canadian Couch Potato website this week and they no longer recommend a mix of funds but rather all in one funds such as 80/20 in VGRO or 100% equities like VEQT.

Great choice. I love these all in one funds, you can take a total hands off approach while staying highly diversified.

[AFrugalGuy]

Fellow Canadian's, how have you've changed your portfolio (if any) in response to the threat of tariffs?

My questions on diversity and responses in this thread have nothing to do with tariffs to clarify, but rather everything to do with a continual attack on Canada's sovereignty and frankly being very pissed off and feeling supporting Canada & EU is best aligned. Also a little less in the US helps me not fund the US Gaza destruction war machine as much, which is another brutal Trump endeavour. In the world right now money is the most powerful political weapon until capitalism fails completely.

Agreed. I am not divesting, but I am also not adding any US holdings. Additional capital will be directed to Canadian and EU index ETF's.

[Stasher]

Ok, first off, I'm pretty damn set on moving to a 70/30 and going 100% EX-United States.
Seeing what just happened yesterday to Zelenskyy has pushed me over the edge, I can't support the US Brown Shirt Administration and their continued path which unfortunately means divesting my funds in that country, especially the MAG7 who are behind him fully, Musk in the office, Zuck letting loose with chaos on social media and Bezos manipulating his control over media (see NYT)

Thus I need some help on which index funds will help me achieve that.
I have VCN and ZAG and I think I will add XEF.

Are these 3 good enough or am I missing something?
If just these index funds, what % AA would you suggest with ZAG at 30%?

[Heckler]

If you can handle increased volatility and risk, I put 3% XEC/VEE next to 17% XEF and 23% VCN.  There’s no way the cheap Chinese labour will get moved into USA without immigration. 

Although I’m sticking to my 27% US, as much as I agree with your sentiment, Trump is not the market.

As a datapoint for Emerging Markets going bust or removed from the index, having Russia delisted from VEE was but a blip long term.  A pretty big blip August 2022, but we’re back baby!

[Heckler]

XEF is +8% YTD, I don’t think you’re  the only one doing this.

[Stasher]

XEF is +8% YTD, I don’t think you’re  the only one doing this.

Thanks for the feedback on XEF and your AA % into it currently. @Experimental_FIRE let me know about it as a good option yesterday. I've probably seen it before but never thought about it as XAW was/is a great index fund.

[Heckler]

The catch is to buy XEF and XEC when the loonie is strong, as they bloom when the beaver drowns.

[Heckler]

https://canadiancouchpotato.com/2015/01/09/couch-potato-portfolio-returns-for-2014/

My AA was based on customized 11 year old recommendations, it’s evolved slightly but stayed the course quite well.

30% VAB dropped significantly with interest rates rise, and AA turned into 25% VAB/5% cash as the portfolio aged.   All dividends get sent to VAB to try to build it back up.

[Heckler]

Justin Bender has some very detailed takes on international indexing and tax / currency implications.  Search the Blog tab in the hamburger top right.

https://canadianportfoliomanagerblog.com/investing-in-international-equity-etfs/

[Heckler]

In addition to VCN AllCap, I also like the Capped Composite funds like ZCN and XIC.   They prevent overweighting a single company like Nortel or the MAGs (if we had billionaires).

https://canadianportfoliomanagerblog.com/investing-in-canadian-equity-etfs/

[Stasher]

That link of Justin's you shared was awesome, VIU looks like the much better option for a greater diversity and more stocks than XEF.

Thanks for the old link from CCP, I was in the 3 fund model back in the day with just VAB VUN VCN and the only tweak I did was change to ZAG and XAW from VUN/VAB as that is what the suggested change was before they finally now just suggest the all in one portfolios.

Also, in those portfolios I like the look of XRB for the fed/prov bonds. I think with all the tariffs and global instability we are going to see a huge upswing on large stimulus projects and we also have an unprecedented amount of failing infrastructure that needs to be replaced. Government bonds will be needed to make this all happen and Canada has some of the best credit ratings in the world.

https://www.blackrock.com/ca/investors/en/products/239490/ishares-canadian-real-return-bond-index-etf

[Heckler]

if you do dabble into emerging markets, keep VIU and VEE together, or XEF and XEC.    I missed out on Korea (Samsung, Hyundia, Kia etc) by going with XEF and VEE in the early days

[thriftyc]

Another option (if one wants to avoid American fund companies) would be BMO -  ZEA/ZEM for international. BMO also does all in one options, like ZGRO.

[Stasher]

Another option (if one wants to avoid American fund companies) would be BMO -  ZEA/ZEM for international. BMO also does all in one options, like ZGRO.

Thanks Thriftyc , my bond index is ZAG which is a BMO etf , good point on Blackrock and Vanguard being US companies themselves.
Cheers :)

[Heckler]

ZEA's top holding... 

wait for it....


iShares Core MSCI EAFE ETF 
5.93%

[Heckler]

https://www.vanguard.ca/en/fund-compare-tool/fund-comparison/home  This is a great tool for this kind of stuff.

[thriftyc]

ZEA's top holding... 

wait for it....


iShares Core MSCI EAFE ETF 
5.93%

True - They do manage most of the other holdings directly it appears. Therefore, at least a good portion of the total MER gets directed towards BMO's P&L. May be important to a Canadian investor if "buy Canadian" is a factor in their decision.

[Heckler]

With ZEAs 721 holdings, compared to XEFs 2583 (both hold IEFA, the NYSE version, but BMO uses almost 3x as much), I could see US withholding tax, exchange rates & performance differences. In fact, it seems ZEAs recent annual averages are 1% higher, according to the Vanguard comparator, even beating VIU by 2%.

Since VIU does not seem (it has a MCSI EAFE Future?) to show a USD holding in its top 10, I have to assume the increased presence of USD within ZEA resulted in recent over-performance, due solely to the USD-CAD Fx impact.   Which leads me to think VIU, then XEF are a better buy today.

ZEA is also missing small caps.  To me, the little guys are an important diversifier.

I’ve nothing against BMO.  I just like to over analyze.

[Heckler]

Attached from https://www.vanguard.ca/en/fund-compare-tool/fund-comparison/home

[Heckler]

@Stasher also be aware XEF does distributions every 6 months, if that matters to you.  It’ll be painful to wait for when you need to spend it.  I don’t know about the other two.

[Stasher]

@Stasher also be aware XEF does distributions every 6 months, if that matters to you.  It’ll be painful to wait for when you need to spend it.  I don’t know about the other two.

All good, I've had XAW for years and that is how it pays out as well, makes dividend day more exciting ;)

[Stasher]

Thanks for the links and information, I made the trades this morning and divested all of my XAW etf holdings. I bumped my bonds to 30% so bought a bunch more ZAG, I left my VCN alone as buying bonds upped my Canadian home bias to 40% of my totall AA. Then I used the rest of the remaining cash to buy up as much VIU as possible.
I only did the trades in my account for now and left DW's alone which gives me the following asset allocation breakdown;
30% ZAG
10% VCN
40% VIU
20% XAW
Then I did the math on the % of US Holdings within XAW which is roughly 65% which means my total expsoure and investment into the United States right now is 13%. I can live with that for the time being and when we rebalance the DW's account after the next dividend disbursement we will decide if we totally divest from XAW at that time and switch her holdings to VIU as well.

That being said I could change all her XAW to VGRO which helps diversify her holdings and in that ETF the US is only 39% so that would drop our total portfolio down to 8% in the US market.

[Heckler]

awesome!

[thriftyc]

Out of interest. Returns in USD YTD as of market close tonight.

Europe via etf IEV +15.96%
Gold via etf IAU +9.92%
Emerging Market via etf EEM +6.51%
Japan via etf EWJ +2.71%
US Aggregate Bonds via etf BND +1.67%
Global aggregate bond index via etf AGGG +0.96%
Canada index via etf EWC +0.94%
US total stock Index via etf VTI –0.66%

And for reference, Canadian Aggregate Bond Index via etf ZAG.TO +1.22%