Weekend Reading – All-Weather Portfolio edition
Welcome to a new Weekend Reading edition: my All-Weather Portfolio edition.
Before that deeper dive, here are some other recent editions and past popular articles below:
I’ve suggested more stock market volatility is on the way for a few reasons – and what you can do about it….
“Tax season” is officially here so I’m offering a TurboTax Canada giveaway AND a juicy 15% discount on TurboTax Canada tax preparation software this year:
and….don’t forget about my interview and review of Balance, with speaker and author Andrew Hallam. I will be drawing the winning names for that book giveaway soon!
Have a great weekend and enjoy!
All-Weather Portfolio reading – is this approach right for you?
I’ve actually considered this portfolio model over the years but haven’t gravitated to it yet for a few reasons that I’ll get to.
First, a primer and some links related to this subject:
On Jon Chevreau’s Financial Independence Hub, he underscored investors’ need for “super diversification” including consideration for the All-Weather Portfolio.
Reference and further reading: http://www.lazyportfolioetf.com/
The idea behind the All-Weather Portfolio is interesting and seems sound: it is designed for all changing market conditions. The concept was popularized by Ray Dalio, a billionaire investor and founder of Bridgewater Associates, I believe still one of the largest hedge funds in the world.
Specifically, this portfolio strategy is designed to help investors ride out four specific types of events:
- Inflationary periods marked by rising prices
- Deflationary periods marked by falling prices
- Bull market periods when the economy is growing
- Bear market periods when economic growth begins to slow down
Does it work? What would I do?
You’ll need to read those links above for more details, including All-Weather Portfolio performance, but I think in short while this approach is sound I’m like Jon Chevreau and prefer simplicity for investors “when in doubt”. From Jon’s article:
“Historically, I’ve always respected the classic pension fund and retail balanced fund mix of 60% stocks to 40% bonds. These days, a big chunk of global diversification of stocks and bonds can be implemented through Asset Allocation ETFs like VBAL, XBAL and ZBAL.”
In theory and in practice, the stock portion of this All-Weather Portfolio has done well in historical bull markets when stock prices are rising. In a bull market that’s characterized by rising inflation (as in now), investors would be bolstered by their intermediate-term bond and commodities holdings. Equities and bonds not liked to inflation can also be a winner for investors during periods of falling prices.
That, and owning energy and commodity stocks for inflation. In fact, I just got a 28% raise from Canadian Natural Resources (CNQ) this week!
At the end of the day, all investors (myself included) need to consider “it depends” in their answers to any financial questions.
It depends on an investors’ tolerance for risk. It depends on their need to take on investing risk for any potential reward.
It depends on your income goals or wealth preservation goals.
It depends on your investment timeline.
What do you make of the All-Weather Portfolio? Do you think those results may continue going forward? Why or why not?
Other Weekend Reading…
MapleMoney shared how anyone can start investing.
As always, a gem of a shareholder letter from Warren Buffett. Don’t mind the website designed from 1985. It is legit from Berkshire!
Buffett on what to own in bulk...infrastructure:
“Many people perceive Berkshire as a large and somewhat strange collection of financial assets. In truth,
Berkshire owns and operates more U.S.-based “infrastructure” assets – classified on our balance sheet as
property, plant and equipment – than are owned and operated by any other American corporation. That
supremacy has never been our goal. It has, however, become a fact.”
Buffett on cash and why to hold it….regardless….to be financially impregnable:
“Berkshire’s balance sheet includes $144 billion of cash and cash equivalents (excluding the holdings of
BNSF and BHE). Of this sum, $120 billion is held in U.S. Treasury bills, all maturing in less than a year. That stake leaves Berkshire financing about 1⁄2 of 1% of the publicly-held national debt. Charlie and I have pledged that Berkshire (along with our subsidiaries other than BNSF and BHE) will always hold more than $30 billion of cash and equivalents. We want your company to be financially impregnable and never dependent on the kindness of strangers (or even that of friends). Both of us like to sleep soundly, and we want our creditors, insurance claimants and you to do so as well.”
“As for February income, I received $877.05 in dividend income between my TFSA and RRSP accounts. This represents a 229.3% increase in income from February 2021!”
I hope to report my latest dividend income soon…
On Dividend Strategy, stock prices have dropped of late. So, now what?
Dale Roberts highlighted the energy plays to be considered for your portfolio in his last Sunday Reads article. Some good stuff there.
Congrats to Rommel and maxing out his TFSA for juicy income.
“This brings to a combined projected annual TFSA dividend income of $10,321.34 (at the time of this update). That’s about $860.11 monthly or $28.27 a day of passive income while we sleep from our TFSA accounts alone.”
That sounds about right if you have x2 TFSAs maxed out. Well done!!
Finally, last but not least, check out the deep dive on Early Retirement Now (ERN) associated with managing your retirement during higher-inflation.
Also, I can’t wait to get back to the rink to watch some Ottawa 67s hockey next weekend…see you soon!
More income and retirement content
From the retirement files:
Looking for free calculators, tools, or even my support? Check out my Helpful Sites page here.
Have a great weekend!