Weekend Reading: Million Dollar Portfolio Edition
Our net worth crossed the million-dollar mark at the end of 2020, but that included about $300,000 in home equity. This week I noticed the total amount we had invested across our RRSPs, corporate account, RESPs, and my LIRA had surpassed the $1M threshold for the first time. We’re managing a million dollar portfolio!
- RRSP – $331,400
- LIRA – $219,900
- RESP – $112,000
- Corporate – $372,000
- Total = $1,035,300
I started my DIY investing journey back in 2009 with about $25,000 from a group RRSP at a former employer. I bought a handful of dividend stocks and thought I was pretty, pretty, pretty good at this whole investing thing.
Little did I know that a rising tide lifts all boats and my stocks just happened to be soaring because the entire market was on fire coming out of the depths of the global financial crisis.
While it was cool to see a 30%+ return on my investments that year, the growth meant little due to the tiny size of my portfolio. In fact, my own savings contributions added more to my portfolio balance than market returns did that year.
Indeed, in the beginning your savings rate matters the most. Contributing $10,000 to a $25,000 portfolio makes a bigger impact than earning a 10% return on that same investment ($2,500).
Fast forward 15 years and more than $1M later, and market movements have a much larger effect on our portfolio balance. Now, a 10% gain on our investments means growth of $100,000 (although the reverse is true as well).
The stakes are much higher now, and there’s more room for error. That’s why I’ve largely removed my own judgement and decision making from our investment management.
No more picking individual stocks or trying to guess which sector, country, or region will outperform. Just buy the entire global market for as cheap as possible and move on with my life.
Related: How I Invest My Own Money
The beauty is that it’s a strategy you can embrace whether your portfolio is worth $25,000 or $2,500,000.
This Week’s Recap:
In the last edition of Weekend Reading I explained the federal government’s proposed changes to the capital gains inclusion rate, which will move from 50% to 66.67% inside of corporations and trusts, while remaining at 50% for the first $250,000 of personal capital gains and then moving to 66.67% of the gains in excess of $250,000.
From the archives: Here are eight overlooked ways to save taxes in retirement.
Our mortgage renewal at Pine Mortgage is almost complete and should be in place this week. So far, so good with Pine – so if anyone’s in the market for a new mortgage just let me know and I can pass along our contact.
Promo of the Week:
With all of my credit card wheelings and dealings (and with us in the market for a new mortgage lender) I tend to keep a close eye on my credit score.
I’ve seen it dip below 700 after a credit card sign-up spree (13 cards in one year), and reach as high as 820 thanks to diligent bill paying, low credit utilization, a long history, and no new inquiries.
My credit score was 804 when I last checked before switching mortgage lenders. It dropped 30 points after that hard inquiry and one new credit card sign-up (I couldn’t help myself!).
Your credit score can vary widely depending on when you check, and with whom.
I get my Equifax credit score for free from Borrowell. It won’t affect your credit score and Borrowell uses bank-level encryption to ensure your information stays safe. Get your free credit score here.
Weekend Reading:
Preet Banerjee’s latest Globe and Mail column argues that biases around house-rich cash-poor homeowners are impacting financial planning for retirement. What is your home equity release strategy?
On Kiplinger, here are five ways to make retirement a little less scary:
The most important thing about retiring “to” something is that you know who you are. Remember: “Retired” says only what you don’t do. Make sure you know what you do do.
Happy 71st birthday! You now must convert your RRSP into a RRIF. Here’s what you need to know.
Like me, Jonathan Clements is forever an optimist and not scared of bears (bear markets, that is). But the future isn’t limited to two alternatives, either continued economic growth or economic apocalypse.
Investors in ARKK have experienced dramatic ups and downs, with an emphasis on downs for most investors. The question anyone still holding these funds must be asking – or should be asking – is whether it will recover:
I like this idea from Michael Kitces about reframing retirement risk away from Monte Carlo style success/failure and towards over-or-under-spending:
The Monte Carlo success/failure framing, in essence, focuses only on minimizing the risk of overspending, hiding a bias towards underspending by calling it a “success”. Or, put another way, a 100% probability of success is exactly a 100% probability of underspending.
Tomas Pueyo shares why he doesn’t invest in real estate and explains why real estate won’t continue to go up forever.
A Wealth of Common Sense blogger Ben Carlson explains why convenience is a form of wealth.
Finally, a loyalty points lesson on why credit card reward charts rarely provide good value for economy class flights to Europe.
Enjoy the rest of your weekend, everyone!
Hi Rob,
Good for you on reaching a million dollar portfolio! I am curious what you and your wife’s goal is with regards to saving for retirement. I have recently seen lots of advertising saying that couples now need $2 million for a comfortable retirement. This seems high to me. Assuming a couple wants to stop work at about age 65, go on a couple of trips per year, maybe eat out once per week, and not have a huge amount left when they die, is $2 million the right number?
Hi Jen, thanks a lot!
I hesitate to put a dollar amount to retirement savings. Your desired spending is ultimately what matters. Plenty of couples are happy to spend $50,000 per year throughout retirement and can get by without a seven figure portfolio when factoring in CPP and OAS.
Couples with one or two defined benefit pensions also won’t need as large of a retirement portfolio.
Conversely, if you want to spend $100k+ per year and don’t have a pension, then maybe $2M is the right number. Again, it’s tough to say without knowing a lot more information about your goals and desired lifestyle.
Start with the spending number in mind and you can get a better idea of your retirement date and the savings you’ll require.
Hi Robb,
Thanks for allowing me in. I do intend to hire you to set my wife and my investments once we finish dealing with moving our money to wealthsimple.
What is a lira and how is that advantageous to you for retirement purposes?
Thanks for all.
Phil
Hi Phil, a LIRA is a locked-in retirement account. It’s similar to an RRSP, although it’s governed under pension legislation. My LIRA is from a pension plan to which I contributed in a former career.
I can’t contribute to it, or withdraw from it until at least age 55.
Hi Robb, congrats on $1M! I enjoyed the article.
Given your experience, I was wondering about your thoughts on applying the diverse portfolio approach to employment. It seems that owning your own business can have a lot of the same risk as choosing an individual stock/rental property in a specific industry or geography, compared to being an employee where you could take your skills to any other company should you lose your job.
I ask because I’ve been reading about a growing number of small business owners who will be retiring and not enough younger people to buy them out. Owning a business seems to mirror the individual stock’s risk/reward relationship rather than the global ETF model. I’m very interested in the idea of buying a smaller business, but at this point in our life (3 kids, one income) I really value the stability of being an employee at a big company with DB pension.
Take care!
Hi Ben, if I understand you right – the idea is that an entrepreneur has risky employment and so their investments should be more conservative.
Similar thinking would be that a tech worker should diversify their investments away from tech, or an oil & gas worker should diversify their investments away from energy.
Something like that? I think it makes good sense, generally.
Hi Robb,
Congrats on reaching $1M!
Just a little note that my Tangerine Bank Account, besides great to to bank with, low/non-existent fees and great GIC rates… also gives me access to my TransUnion Credit rating/report data without triggering an ‘inquiry’.
Cheers,
Max
Hi Max – thanks! That’s good to know about Tangerine. I think a lot of banks now give you access to a credit score of some kind.
Hi Robb. Congrats on your 1M. I met with an advisor of Wealthsimple this week and he questioned why I had all my investments in the VEQT and said a managed portfolio would be a better option and higher return. What would your response be to him if he told you that? Thanks, Rob
Hi Rob, thanks!
If I remember correctly, even Wealthsimple’s risk level 10 portfolios have some fixed income (they use bonds, cash, and gold) so the comparison to a 100% global equity portfolio like VEQT won’t be perfectly apples to apples.
I’d say that, in general, the lower fee portfolio will outperform. VEQT costs just 0.24%, while the WS robo portfolio will cost between 0.55% and 0.65%, depending on how much you have invested.
Vanguard also does not tinker with its underlying holdings the way WS has tinkered in the past (adding long term bonds, gold, low volatility ETFs, etc.). I think that’s a better approach.
I hit 1M in investments this year as well. I have a bit of money tucked aside for revenue canada but between my RRSP, TFSA and my non-registered investments I am over the 1M mark for sure. Freedom 55 becons.
Way to go, Pam – that’s awesome!