Weekend Reading: Investing Is Not Speculating Edition
Every time markets get shaky I get some version of the same message.
“Hey, are we getting nervous about VEQT? Anything we should be doing differently, or just let it ride?”
It’s a fair question. Market declines and a barrage of bad news can certainly make some investors uncomfortable.
But it also reveals something important. A lot of investors are still thinking about index investing the same way they’d think about picking individual stocks.
Buying and holding VEQT is not the same thing as picking individual securities, so we need to change our mindset about how we think about investing.
When buying an individual security, we’d analyze the company’s fundamentals, make sure to buy at a reasonable valuation given its future earnings prospects, and set specific price targets for both the buy and the sell. This requires patience, discipline, some knowledge of how to read corporate earnings reports, and a constant flow of new ideas to reinvest the profits from today’s winners into tomorrow’s winners.
There’s a huge skewness of returns in individual stocks. Roughly 70% of individual stocks either beat or trail the market index by 10% or more. That means your picks need to be good (and lucky) to outperform the market average.
Index investors are humble enough to admit that it’s incredibly difficult to consistently pick the winners and avoid the losers. And they’re smart enough to know that the market, in aggregate, delivers exceptional returns over time. Yes, holding both the losers and the winners still results in positive expected returns.
It also doesn’t require a constant flow of new ideas. We’re already invested in the global market. We don’t pick a new index after seeing 20%, 50%, or even 200% returns. We don’t go to cash. We don’t hunt for the next opportunity.
It’s not a game with a specific end date. We’re investors for life.
Related: Is Stay The Course Helpful Advice?
That’s why it’s not really surprising when I get that message from a client or reader after a period of market decline. Tariffs last spring. Conflict in Iran today. Pick your geopolitical event of the moment.
The answer is the same as it’s always been: nothing changes.
We shouldn’t change our investing strategy based on current market conditions. Investing in index funds isn’t a casino game where you were on a hot streak and are now “due” for a run of bad luck. Market declines happen, but unlike a casino game the global stock market doesn’t go to zero.
You don’t take your chips off the table and go home. Long-term investors stay in the game.
Besides, what’s the alternative? Cash? Bonds? GICs? Alternatives? Something else? All come with their own risks.
I understand the inclination to try and sidestep trouble in the face of uncertainty. Nobody enjoys watching their portfolio decline (though here's an idea, stop watching).
But to pull that off you need to be right twice. Once to get out ahead of a deeper market decline, and once again to get back in on the way up. It’s the second decision that causes the most trouble for investors. It’s easy to sell. It’s much harder to get back in. There’s no green light or “all clear” sign.
Besides, bad market returns tend to be followed by good market returns. Sometimes very quickly. Some of the worst trading days are followed by some of the best. Missing those good days can be far more damaging to long-term wealth.
We’ll get through these uncertain times, just like we’ve gotten through every other uncertain time before. It’s hard to be living on the far right edge of the chart, but zooming out gives you perspective.
We’ve been here before. We’ll be okay.
This Week's Recap:
Last month I explained how investors conflate past performance (markets fell this month) with the present or future (markets are falling). All we know is what happened in the past.
I also continued my retiring planning series with a look at a plan for a single woman in her fifties. Open to ideas for other scenarios in this series.
Many thanks to Erica Alini of The Globe & Mail for interviewing me about that retirement planning series and featuring that in her “On Money” column.
Promo of the Week:
Wealthsimple is still going strong with its Unreal Deal (3% match). You have until March 31st to register for the promotion, and then 30 days after that to initiate the transfer(s).
Here’s the straightforward version of the offer:
- New customers open a new Wealthsimple account (here, use my referral link and get an extra $25).
- New and existing customers: Register for the Unreal Deal promo before March 31st.
- Transfer $25,000 or more from another financial institution.
- Choose your match:
– 1% paid over 1 year
– 2% paid over 3 years
– 3% paid over 5 years - The bonus is paid monthly into your Wealthsimple chequing account.
Another promo caught my eye and this one is for my favourite hidden gem pair of credit cards – the Bonvoy American Express Card, and the Bonvoy Business American Express Card.
I'll focus on the personal card, which has a very strong offer right now:
- Earn 80,000 points when you spend $6,000 in the first 6 months. Plus, earn 30,000 points when you make a purchase in your 15th month of Cardmembership.
Long time readers know that I have held these cards for years and happily pay the annual fee each year because of the annual free night certificate.
Apply for the Bonvoy American Express Card before April 7th to claim this enhanced offer (double the typical welcome bonus).
Weekend Reading:
U.S. stocks are expensive today and that's why Fred Vettese thinks returns will be lower in the future. I agree.
A Wealth of Common Sense blogger Ben Carlson argues (in a positive way) for a mid life spending crisis.
In a vacuum, contributing to an RRSP or a TFSA can lead to the same outcome if your tax bracket remains constant throughout your lifetime, but as Aaron Hector explains there are so many more cool planning opportunities for RRSPs.
Mark McGrath shares why all of those ‘secrets of the wealthy' claims are often just insurance sales pitches in disguise.
Lisa Jackson asks, should you trust financial advice from AI? Who did she ask? Me, of course!
“Treat the answer like you would a Wikipedia article: good enough to point you in the right direction, but you might be missing important details, subtleties and nuance,” said Engen. “Always check the date and context because financial rules, tax limits and product details change all the time. Use multiple sources to verify what you read.”
Andrea Thompson shares the hidden cost of the passive income dream – or why she's selling her rental property.
Speaking of renting, PWL Capital's Ben Felix looks at the final reckoning in his ongoing buy vs. rent debate:
Here's an excellent look at whether it makes sense for a small business owner to incorporate.
Vikki Brown shares a cross border guide for moving your U.S. assets to Canada.
Finally, leaving your family home to the kids is impractical. Anita Bruinsma shares another way for parents to help.
Have a great weekend, everyone!
A much needed reminder for many in these days of turmoil.
If someone has a properly built plan with an adequately funded cash wedge / war chest, Bogle’s advice to “Don’t do something, just stand there” should take on even more importance as the way to ride out the market turbulence.
Very timely. You have already convinced me that VEQT is a wise long term investment. Before I read this article I just bought a couple hundred more shares of VEQT earlier today. Not sure if the market will go down further, or maybe even go up. It doesn’t matter. Thanks Robb.
Hi Robb. Thanks for the post!
I’m still invested majorly with VXC and minor XEQT positions – moved out from VEQT about a year ago due to their large CAN exposure. I think returns wise y-o-y VXC has fared slightly lower than VEQT/XEQT.
As for Corp investments, all with VXC too but having second thoughts on Horizon HEQT given the tax implication – no distributions, only CG at time of sale which is much better tax treated. Thoughts?
As with the new WS 3%/over 5Y offer, we had moved out all our holdings into Questrade back in Feb-2025 so we’re about 11/24 months into their 1.5% CB promo.
Might this be an opportune time to go back to WS leveraging the higher 3% CB?
Rick
“having second thoughts on Horizon HEQT given the tax implication – no distributions, only CG at time of sale which is much better tax treated.”
HEQT pays monthly distributions. See globalX website: https://www.globalx.ca/product/heqt#
You’re right but believe those distributions are treated Return of Capital which basically is much tax effective
Not ROC, regular capital gains and investment income (CDN eligible dividends and foreign dividends).
For 2023, it was mostly capital gains and no ROC: https://www.globalx.ca/wp-content/uploads/2024/05/2023_Distribution_Summary.pdf
For 2024, mostly capital gains and a little foreign income and no ROC: https://www.globalx.ca/wp-content/uploads/2025/04/2024_Distributions_Summary-EN.pdf
2025 should be similar. There isn’t ROC because these aren’t covered call ETFs. A bit more efficient than a lot for foreign income form dividends.
Interesting and thank you for the deep dive, appreciate it.
Probably best to stay put with VXC and not trigger CGs in the Corp by selling/buying again (did so last year with VEQT).
Rick, as Filo said, HEQT is not the way to go. You could still do with what you wanted by looking into the geographical % holdings of VXC and mapping them to the corresponding Horizon (now Global X) ETFs. They have:
– HXS or HULC for US market
– HXDM for International Developed
– HXEM for Emerging
The easy way to find the cap gains-only (swap) ETFs on their site is to look for “Corporate” in the ETF name:
https://www.globalx.ca/products
This discussion is timely for another reason. I recall your post a year or so ago, Robb, where a study seemed to confirm going almost entirely with ETFs like VEQT, specifically since they weigh offshore more than domestic. But VEQT is 44% USA – so isn’t that an argument to reduce the US portion by temporarily replacing VEQT with its four components (VUN, VCN, VIU & VEE) and reducing the VUN portion? Yes, it means manually rebalancing manually until things quiet down. But it also fits for those of us wanting to temporarily avoid supporting the US for political reasons. (Yeah I know, that’s a whole other emotional ballgame.)
Hi Terry, that study showed that an investor should hold a portfolio of 1/3 domestic stocks and 2/3 international stocks throughout their lifetime, which lines up (roughly) with VEQT’s allocation.
The US market makes up over 60% of the global market cap right now so VEQT’s allocation of 44% significantly underweights the US and overweights Canada.
I hear what you’re saying but I think it’s best to avoid tinkering with our investments based on current market or geopolitical conditions.
Maybe my misunderstanding is in thinking that it was a US study? If so, 44% was way more than the 33% recommended. Sorry, my error.
Hi Terry, that was the cool part of the study was that it looked at the experience of a domestic investor in 38 different countries.
I know, I know, patience is rewarded over time, but when you see your investments fall by 10’s of not a 100K with these market machinations it still gives one pause, but I tell myself ‘this too shall pass’. They always have.
If this time ‘truly is different’, well, we will have a host of other issues that will make a large decline in investments seem trivial.
It’s times like this where we should try our best to stop checking on our portfolio multiple times a day. It serves no purpose other than to make you anxious and stressed.
I recall similar fears last year at this time during the liberation day tariffs. If we would have all taken a month long sabbatical from checking our portfolios it would have been like nothing happened.
Started a position in VUD.TO for our grandaughters RESP
The Questrade offer that just ended was a better offer. 4% and 2% for only a 2 year hold. Moved 1 account out of Wealthsimple to meet the requirements. $17,000 Bonus over 2 years for only moving $610,000 in assets.
Hi Doug, the Questrade offer of 4% was only for non-reg accounts and had some caveats. A simple calculation says that 3% of $610,000 is $18,300.
Rob I had done the math at the time i initiated the transfer and was using those numbers for my estimated Bonus. When the transfers settled the amounts had changed slightly. The email I received this week from Questrade shows it will be $17938.86. One account was a LIF, one was a margin and I opened a new cash account with $10,000. This amount is paid over 2 years not 3 like the Wealthsimple offer.
The WS offer is 5 years hold to get the full 3% payout, not 3. That makes the case for Questrade in your case even stronger because the amounts are being paid in future dollars. The WS payments have 3 more years of inflation to get to the full amount, while you’re getting larger monthly payments and can keep the full amount invested for those 3 years.
Yes, the Questrade offer is more restricted in some ways and it is skewed towards non-reg accounts, but it is better for some people. Looks like you’re one of those, Doug. Congrats!
TD also has a Good Deal going until the end of March. 2% Bonus with only a 1 year hold. Maximum cashback is $10,000
Makes sense!
Oops that should have been VDU.TO
Robb,
Any idea how the money that Wealthsimple transfers each month on the Unreal Deal is taxed/treated? Income? Interest? Other?
Thanks
Jeff
I had the same question in 2024 and got this by email from WS (customer service):
“I’d be more than happy to help clarify the situation regarding the Summer Match 2024 bonus promotion. To answer your question directly, the cash bonuses associated with this promotion are not considered taxable income. These types of bonuses are not classified as taxable, as they are part of the promotional offer, unlike cash dividends or other taxable payouts.”
Unless they changed their treatment since then – and I haven’t seen any indication of that – the full bonus is tax-free.
This is very kind of you, Peta. Really appreciate it. Hopefully this is still the case in terms of how this money is treated tax-wise. Thanks again for taking time out of your weekend to share this information. Ideally it’s helpful to others as well.
No worries, Jeff, glad I could help
I would be extremely cautious about this response. Particularly so that WS terms say something very different:
“ There may be tax implications to bonuses or rewards paid in connection with this promotion. Wealthsimple will not issue clients a tax slip for bonuses paid to a non-registered account. Clients are solely responsible for any required tax reporting.“
Yes, there is that. That fine print blurb in the offer was actually the reason why I contacted them by email to clarify.
Nothing is 100% certain. I’m basing my decision on the direct response that WS gave me about this vs. the generic legalese in the offer that there “may be tax implications”.
The other option would mean going ahead and paying the income tax on the payouts, ignoring the WS email advice. Not my choice at this point, but everybody should make their own decision.
To me, the decision is purely risk-based. The likelihood of CRA going after these payments is low (based on precedent) but non-zero. The chances go up though as the amounts involved keep going up. Legal position is untested but the case for “tax-free income” looks weak (just an opinion).
I would discount agent’s response when weighing arguments for and against. WS would be very unlikely to compensate people in the event CRA does go after these payments. And I have seen agents providing completely different responses on this issue.
I have a TD bonus coming due at the end of the month from a TFSA Trasfer last year. I called this week as I have no TFSA room and wondered how they are going to pay. They told me it will go into the TFSA as a cash adjustment so will not count as a contribution. They have done a similar cash adjustment before in my trading account when I had a market sell before open and the trade got delayed. They just put seven hundred and something cash in my account after they agreed it was there fault.
I participated in the 2025 WS Winter Bonus event with 2% cash payback, evenly split over 24 months, and they have not issued my any tax slips to date for close to $15K received… Beauty.
Greg, just a word of caution. Not getting a tax slip wouldn’t mean the payouts are tax-free. That ‘s one reason why I asked WS directly about this.
For example, WS hasn’t given me a 2025 T5 slip for the interest in my USD chequing account held there. I still have to declare that on my upcoming return under “any income not on T slips”.
Also, what tax slip could they actually issue for these payouts? I only get T3, T5, and T5008 and maybe T4RIF, T4RSP from brokerages. None of those fit this case.
.
Wealthsimple does the T5 report different than my other Brokers. The U.S. Interest is on the same slip as the Canadian interest. Look at Box 15 and that is the Canadian Conversion of your U.S. dollar Interest. I know because I was waiting for another T5 also.
Thanks Doug. I know this can be the case and did check for it already. The total in my T5 is just for the Canadian interest.
How do you look at exchange rates- as these can also be volatile.
With exchange rates you are playing two games for the price of one.