Well, 2020 was a wild year for investors! Markets will continue to bounce around but I hope the 2021 ride is not quite so bumpy. Alas, as always, we must expect the unexpected.
In both January 2019 and January 2020, my Top Picks were "all-in-one" ETFs of the type offered by Vanguard , RBC iShares and BMO. Every investment has risk but if you want a low cost, automatically balanced, globally diversified investment portfolio with one holding, these ETFs are hard to beat! For instance, if your desired stock/bond split is 60/40, you could buy VBAL.
Despite the crazy rollercoaster ride, these all-in-one ETFs delivered solid returns in 2020. For example, here are the Vanguard 2020 total returns:
VEQT (100% stocks): 11.29%
VGRO (80% stocks): 10.89%
VBAL (60% stocks): 10.24%
VCNS (40% stocks): 9.41%
VCIP (20% stocks): 8.43%
All-in-one ETFs continue to be great choices, especially for investor with portfolios under $500k who are fleeing ridiculously expensive "balanced" mutual funds. But I don't want to be too boring so I won't pick them three years running.
My Top Picks for 2021 represent one way to help address a difficult dilemma facing most investors: extremely low yields on bonds, GICs and "High" Interest Savings Accounts ("HISAs"). By the way, I propose that HISAs be renamed "LISAs" but I don't think the banks will play ball. (The "L" in LISA stands for…….. Low, Lousy and Lamentable).
Short of buying junk bonds, the only way to have a shot at earning a decent return is to own stocks and all stocks are volatile. But, for those investors with a long-term time frame who can handle some increased volatility, modestly increasing stock allocation through diversified, high quality, dividend paying, "blue-chip" stocks may be worth considering. Why? Because, over the long run, owning profit generating companies with a history of earnings and dividend growth gives you a better shot at earning a return than bonds that yield 1%. And, in theory anyway, these stocks tend to be less volatile that the broader stock market. If this is of interest, consider these ETFs which hold blue-chip, dividend paying stocks:
Canadian Dividend Stock ETFs
VDY XEI ZDV
USA Dividend Stock ETFs
Non-NA Dividend Stock ETFs
Before making a decision regarding any of these ETFs, take a close look and make sure you are comfortable with the composition, the fit with your overall portfolio and remember all stock ETFs are volatile. Also, note the Canadian stock ETFs are more concentrated given our much smaller market.
For a refresher on asset mix, I suggest a quick re-read of Chapter 9: "Mindset".
I will be hosting another "Ask Me Anything" webinar session later in January. Details on this and future webinars to follow.
New Investor Advisory Service
I remain committed to helping all Canadians learn about lower cost DIY, AIY and Robo investing through my book, emails, webinars, speaking engagements, etc.
But, as announced a couple of months ago, I have been personally advising a small number of clients for a year now based on the principles described in Beat the Bank. This service is best suited to investors with portfolios in excess of $1 million. All of my clients are benefitting from very substantial fee savings. If this service might potentially be of interest to you, just reply to this email and we can discuss.
Lastly, a special thanks to all of you who have recommended my book to family and friends. Because of you, thousands more Canadians are learning to Beat the Bank!
If you have any questions, just email me at email@example.com.
Wishing you all a better, brighter 2021!
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