How to Create and Optimize Your Investment Portfolio (Pre and Post Retirement)

How to Create and Optimize Your Investment Portfolio Pre and Post Retirement

Our guest today is Jason Heath, CFP who has been providing fee-only, advice-only financial planning since 2001 and is one of Canada’s best-known fee-only financial planners.

He is currently a personal finance columnist for the Financial Post, MoneySense and is also a regular contributor to RetireHappy.ca.

I’ve been reading his insightful financial planning articles on MoneySense for years, so I thought it would be great to have him on the show to discuss how we Canadians can optimize our investment portfolios. 

We cover both phases: Before retirement when you’re in the growth phase trying to retire early, and after retirement, once you’ve hit your number and want to make sure you don’t run out of money. 

Resources from the Episode:

Free tickets to the Canadian Financial Summit:

I’ll be speaking again at the Canadian Financial Summit and I have free tickets for you. The entire event is online so you can watch it from anywhere, and it’s Canada’s largest personal finance conference.

I’ll be there together with over 25 Canadian personal finance experts, and in my talk I’ll be speaking about how we optimized our investment portfolio before we retired, and after we retired. This way no matter where you are on your financial independence journey, it’ll at the very least give you some insights on ways that you can optimize your own investment portfolio so that you can retire early, or at least hit your financial independence number quicker.

To get your free tickets for a limited time, go to:
https://kornel–canadianfinancialsummit.thrivecart.com/2019-all-access-pass/

Top Tools and Resources for Financial Independence (for Canadians): All the top tools and sites that I’ve personally used to help us achieve financial independence in our early 30s. They’re also what we use now to optimize and manage our finances, and ensure that we’re paying the lowest fees while getting solid returns on our investments. 

Canada’s Top ETFs Guide & Top High-Interest Savings Account: In the guide, I go over what I personally invest in, why I invest in it. The investments that I talk about ​are literally where we have almost our entire net worth (apart from our house), and is what we are primarily living off right now in our early retirement. At the very least you’ll learn about some great ETFs to consider for your portfolio, and if you are new to ETFs, it’ll give you a nice list of some top ETFs to consider from the thousands that are out there. 

The guide is available for free to any listeners that use my link to sign up for a free savings account with the bank that I personally use, EQ bank

The reason that I personally use EQ bank, is that they have one of the highest interest savings rates in Canada (they are currently offering 2.3% which is more than double what the major banks are offering).

It’s also free to sign up and keep an account with them, so you’re not paying a monthly fee like you do with many of the other banks out there. You also get unlimited transactions, unlimited Interac e-transfers, and can take out your money at any time if you need it, and there are no minimum balances.

Because of those reasons, I’ve been with them ever since they launched in Canada years ago, and it’s where I keep my entire emergency fund and spending money. 

To get the free high-interest account and the free guide on the top ETFs in Canada, just go to buildwealthcanada.ca/eq, open the free account, and once you’re done, forward any email that you get from EQ to bonus@buildwealthcanada.ca and I’ll send you the full comprehensive guide for free. 

Jason’s Site and Financial Planning Practice: https://objectivefinancialpartners.com/

Jason’s Articles on MoneySense:
https://www.moneysense.ca/author/jason-heath/

Vanguard’s Asset Allocation Tool/Questionnaire:
https://www.vanguardcanada.ca/individual/questionnaire.htm

Vanguard’s Asset Allocation ETFs:
https://www.vanguardcanada.ca/individual/indv/en/product.html#/productType=etf&assetClass=balanced

Questions Covered:

  1. What do you think is the best way for do-it-yourself investors to determine their asset allocation in terms of what percentage of stocks vs fixed income to hold in their portfolio?

    Does the answer change depending on whether someone is working towards an early retirement vs already being retired?

    I find asset allocation questionnaires are far from perfect, as people’s emotions and feelings about the answers can really change depending on when you ask them and how much they already know about investing.

    For somebody that is in or approaching an early retirement or traditional retirement, do you also base the percentage of their fixed income on some spending related rule? For example: That common advice to hold five years of living expenses as fixed income as that should ride out most recessions.
  2. When you’re working with clients and strategizing on what should be in the fixed income/safe portion of their portfolio, how do you determine how much they should put into bonds vs a high interest savings account vs GICs? Are there certain rules or processes that you like to follow to determine this?
  3. For those that are retired, what are some of your favourite ways to manage the cashflow in retirement so that the retiree doesn’t run out of money. For example, do you use some sort of bucket strategy? ex. Having equity, bonds, GICs and cash buckets then rebalancing and refilling those accordingly?
  4. I find that many investors who are new to investing, or are switching to do-it-yourself investing to save on fees, sometimes they get intimidated by now having to rebalance their investments.

    For anybody new to this, can you define what rebalancing is and what rule or rules do you have for yourself (and your practice) that determines when you rebalance?
  5. What are your thoughts about the increasingly popular Asset Allocation ETFs where the rebalancing is done for you?
  6. Are there any negatives about Asset Allocation ETFs that you think should be considered?
  7. What accounts are they best suited for?
  8. For somebody that is already retired and needs to use their investments for living expenses, how do you determine whether to sell off equities vs sell bonds or use cash or GICs?
  9. Do you have some sort of rule/process like if X happens in the markets then I’m selling off equities to generate cash to live from. If Y happens then I use a cash cushion or the bond portion?
  10. What are your thoughts on the 4% rule and are there any variable spending strategies that you like instead of using the 4% rule?
  11. If you could go back to when you first started investing, what advice would you give yourself?

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