Quotations by Russell Wild

In general, building an entire portfolio out of ETFs usually makes sense starting in the ballpark of $50,000. Anything less than that, and you're most likely better off with mutual funds or a mix of mutual funds and ETFs. The exception is if you're buying ETFs using Scotia iTrade or Qtrade, where many ETFs can be traded for free. In that case, the ETF portfolio may make sense for even the smallest of accounts. [2013] - Russell Wild

Most variable annuities are way overpriced, carry nasty penalties for early withdrawal, and prove to be lousy investments. The same is true for many life insurance products other than simple term life. As a rule, it's best to keep your investment products apart from your insurance products. And never buy an annuity unless you are absolutely sure you know what you are buying. [2013] - Russell Wild

Modern Portfolio Theory says that the volatility/risk of a portfolio may differ dramatically from the volatility/risk of the portfolio's components. In other words, you can have two assets with both high standard deviations and high potential returns, but when combined they give you a portfolio with modest standard deviation but the same high potential return. The key to whipping up such pleasant combinations is to find two or more holdings that do not move in synch: One tends to go up while the other goes down (although both holding, in the long run, will see an upward trajectory). The lower the correlation, the better. [2013] - Russell Wild

As a rough rule, if you have $50,000 to invest, consider something in the ballpark of a 5-10 ETF portfolio, and if you have $250,000 or more, perhaps look at a 15-25 ETF portfolio. Having may more ETFs than this won't enhance the benefits of diversification but will entail additional trading costs every time you rebalance your holdings. The Nonwealthy investor can build a pretty well-diversified portfolio with just four ETFs: one small value, one small growth, one large value, and one large growth. We hold a similar philosophy when it comes to global investing: U.S., Europe, Asia, emerging markets....  [2013] - Russell Wild

Stocks of large companies - value and growth combined - should make up 50-70% of your total domestic stock portfolio. The higher your risk tolerance, the closer you'll want to be to the lower end of that range. Whatever your allocation to domestic large cap stocks, we recommend that you invest 40-50% of that amount in large growth. Take a tilt toward value, if you wish, but don't tilt so far that you risk tipping over. [2013] - Russell Wild

If you have a portfolio of $10,000 or less, you should either be thinking mutual funds (not ETFs) or be seeking to invest at a brokerage that won't charge you for trading ETFs. Otherwise, the trading costs could eat you alive. If, however, you're unlikely to do any trading in the next several years, an ETF portfolio may make sense. In that case, consider a simple and all-encompassing "everything" (total ball of wax) ETF for your domestic stock holdings. [2013] - Russell Wild

Owning both a large cap and small cap ETF will give you an average return very similar to mid caps but with considerably less volatility because large and small cap stocks tend to move up and down at different times. Generally, small caps do well in good times and market recoveries because people are less afraid to jump into growth stocks. Large caps tend to outperform in periods of uncertainty, when stability and brand name familiarity are key. [2013] - Russell Wild

Many financial experts say 50% of your stock holdings should be international, with 25% of that in the U.S. We think that percentage works fine, but some experts are now saying that we may want to reduce our domestic exposure, which is often correlated to oil prices, by a bit. Consider putting 50-60% in international stocks. [2013] - Russell Wild

For most portfolios, a reasonable split of foreign stock holdings would be something like the neighbourhood of 40/40/20, with 40% going to Europe (England, France, Germany, Switzerland); 40% to the developed Pacific region (mostly Japan, with a smattering of Australia, New Zealand and Singapore); and 20% to the emerging market nations (Brazil, Russia, Turkey, South Africa, Mexico, and a host of countries where the entire value of all outstanding stock may be less than that of any S&P 500 company). [2013] - Russell Wild

In today's low interest rate environment, short duration bonds are better buy because their prices will fall less than long bonds when rates rise. In other words, short-term bonds are a less volatile form of fixed income. Of course, because you're taking on less risk, yields will be lower.  [2013] - Russell Wild

Come up with a rough number of how much you're going to need to take from your nest egg each year. Whatever the number, multiply by 10. That amount, ideally, is what we'd like to see you have in your bond portfolio, at a minimum, on the day you retire. In other words, if you think you'll need to pull $30,000 a year from your portfolio, we'd like to see you have at least $30,000 in cash and about $300,000 in bonds. That's regardless of how much you have in stocks - and you should have at least an equal amount in stocks. Most people (who aren't rich) should have roughly one year's income in cash and the rest in a 50/50 (stock/bond) portfolio on retirement day. [2013] - Russell Wild

We suggest that most investors devote 10-15% of the equity side of their portfolios to REITs. If your portfolio is 50% stock and 50% bonds, we suggest that 5-7.5% of your entire portfolio be devoted to REITs. If your home represents a big chunk of your net worth, and especially if you are approaching a stage in life when you may consider downsizing, you may want to invest less in REITs than would, say, a renter of similar means. Or you may forget about Canadian REITs (VRE, XRE, ZRE) altogether and invest only in foreign REITs. [2013] - Russell Wild

No more than 5% of your portfolio should be allocated to precious metals. The iShares Silver Trust (SLV) operates much the same as the iShares Gold Trust (IAU). One simple approach to previous-metals investing is worth considering: the ETFS Physical Precious Metals Basket Shares (GLTR). In one fund, you get a basket of four precious metals - gold, silver, platinum, and palladium - each in proportion to its economic footprint. Shares are backed up by the physical metals held in vaults. The fund's cost is 0.60% a year. [2013] - Russell Wild

For older people especially, and almost definitely for those with no heirs, an annuity - either fixed or variable - can make enormous sense. With an annuity, you give up your principal, and in return you enjoy a yield typically far greater than you would likely get with any other fixed-income option. Many horrible annuities are out there. Most of the really bad ones are variable annuities. If you are interested in an annuity, contact the different insurance companies. It's a good idea to compare rates of return and product offerings. For more information on annuities, visit the Canadian Life and Health Insurance Association website at www.clhia.ca. [2013] - Russell Wild

The 20x Rule: You need at least 20 times (or better yet, 25 times) whatever amount you expect to withdraw each year from your portfolio, assuming you want that portfolio to have a good chance of surviving at least 20-25 years. That is, if you need $30,000 a year - in addition to Canada Pension Plan and Old Age Security payments and any other income - to live on, you should ideally have $600,000 in your portfolio when you retire, assuming you retire in your mid-60s. The rationale behind the 20x Rule is this: It allows you to withdraw 5% from your portfolio the first year, and then adjust that amount upward each year to keep up with inflation. [2013] - Russell Wild

In general, interest-paying ETFs (REIT ETFs, bond ETFs) are best kept in tax-advantaged accounts. [2013] - Russell Wild

Never pay more than one-half of 1% to make a trade for rebalancing purposes. If a trade of $8,000 will cost you $10, you are forking out only 0.125% to make the trade... so, by all means, make the trade. If, however, to get your portfolio in perfect balance, you were faced with making a $1,000 trade that would cost you $10 (1% of the amount you're trading), we don't think we'd opt to spend the $10. Another way to approach rebalancing is to seek to address any allocations that are off by more than 5 or 10%, and don't sweat anything that's off by less. If you are living off your savings, you may wan to rebalance every 6 months instead of 12. [2013] - Russell Wild

Tactical Asset Allocation: If, all things being equal, you determine that you should have a portfolio of 60% stocks, and if the adjusted P/E falls to the low teens, consider adding 2-3% points to your stock allocation, and that's all. If the market P/E falls to 10, then maybe, provided you can stomach the volatility, consider adding yet another percentage point or two, or even three, to your "neutral" allocation. If the adjusted P/E rises to 30 or so, you may want to lighten up on stocks by a few points. Please, keep to these parameters. Tilting more than a few percentage points - particularly on the up side (more stocks than before) - increases your risks beyond the value of any potential gain. [2013] - Russell Wild

House investments with the greatest potential for growth in your TFSA - TFSA money won't ever be taxed (presuming there are no changes in the law). Foreign ETFs should be held in your RRSP - The reason is that foreign dividends are subject to withholding tax, usually about 15%. You can get that money back on U.S. investments, but not on stocks based in other countries. The withholding tax doesn't apply on investments held inside an RRSP. [2013] - Russell Wild

For a retired or soon-to-be-retired client, we might suggest a 60/40 (stocks/bonds) portfolio only if that portfolio is very, very well-diversified with different kinds of stocks and bonds, and the client has at least two years of living expenses in cash and near-cash (short-term GICs, high-quality and very short-term bonds). But in most cases, we'd prefer to see a 50/50 portfolio. [2013] - Russell Wild