Weekend Reading: Why We Don’t Sell Edition
I've been pretty much incognito for the past month after taking one of the longest breaks of my adult life. No laptop, no Zoom calls, no blogging, and no financial plans (sorry!).
One of the nice side effects of unplugging is the lack of daily news, specifically around investing and the stock market – which tends to dominate my news feed and inbox.
Daily market fluctuations get smoothed out over time. In other words, yesterday's news (or last month's news) is but a distant memory.
For instance, something happened to cause markets to fall roughly 2% on July 29th. I couldn't tell you what happened (I was catching a train from Strasbourg to Zermatt), but I can assure you that some investors panicked.
Three trading days later, while we caught our next train to Annecy, markets had already ripped higher by 4.5%. Nothing to see here.
This is why the old stock market adage, “sell in May and go away” never made much sense to me. If you're going to go on holiday for the summer, just go away. We don't sell.
Speaking of selling, it has now been 3.5 years since Michael Burry famously tweeted one word: Sell.
Talk about causing an uproar. While he walked back his fire drill comment a few months later, perennial bears like Burry are constantly calling for the next big crash.
Meanwhile, had you simply held onto your global equity investments for the past 42 months you would have been handsomely rewarded with a cumulative 87.4% return.
Here's how a $100,000 investment in VEQT would have performed from February 1st, 2023 to July 31st, 2026:
- Dec 31, 2023 – $110,093
- Dec 31, 2024 – $137,473
- Dec 31, 2025 – $165,561
- Jul 31, 2026 – $187,374
Of course, markets don't (and won't) grow in a straight line. We will absolutely suffer through another downturn at some point.
I hope, by now, followers of this blog know that it's futile to try and guess when that downturn will happen. We stay invested in a risk appropriate portfolio, regardless of market conditions. We do not sell long-term assets because of a tweet, an article, or a hunch.
That approach has proven to lead to more successful outcomes than the alternative of selling stocks and going to cash…waiting for the all-clear sign to get back into the market. Never going to happen.
Besides, this is a long-term game. Stop thinking of the stock market like a casino where you've hit a lucky streak and need to cash out before you lose it all. Investing in stocks has a positive expected return over time. Gambling at the casino does not.
This Week's Recap:
As I've said, it's been quiet on the writing front for me while we enjoyed our summer travels. My wife and I went to Scotland for a week in July, and then we took our family holiday to France and Switzerland.
Scotland was incredible, as always, even with just a short stay in Edinburgh and Glasgow. But we miss the Highlands and need to prioritize a trip there soon to get lost in the Caledonian forest.
In contrast, France was crowded and hot. We had more ambitious plans for the outdoors (a 42km bike ride around Lake Annecy, cycling the Alsace wine route from Colmar to Eguisheim, hiking in the alps), but we had to really temper expectations due to the extreme heat.
That's okay with me. We approach travel like sampling a buffet. Taste a little bit of this, try a little bit of that, and then go back to our favourites for a bigger bite (or longer stay) at another time.
Zermatt was the highlight for all of us. The weather cooled (slightly) and we enjoyed three days of hiking as well as the slower pace of the car free village. We also happened to be there for Swiss National Day and Zermatt held a big party to celebrate.
We're back home now after about a month off of work (a first for me). Please be patient as Lindsay and I get back to the many (hundreds) of emails over the next few weeks and get back into the swing of things at home before school starts up again.
Weekend Reading:
After a life of saving, spending money in retirement can be surprisingly hard. In my experience working with clients, it's not the spending money part that is hard, it's the withdrawals from their savings in order to spend that money that causes anxiety.
John Stapleton with a good piece on Canada's manufactured war between young and old:
“We are witnessing the creation of a generational scapegoat, where seniors are being blamed for youth’s challenges.”
Of Dollars and Data blogger Nick Maggiulli looks at a century of US stock returns.
There's a lot more to retirement planning than a high value portfolio. Here's why Christine Benz objects to hitting a number for retirement.
PWL Capital's Ben Felix explains nine of the biggest myths in personal finance to help you make better decisions and avoid costly mistakes:
Are you richer than you think? If so, it's time to think about who is going to get your money.
Finally, this absolutely wild tale of a cottage country mortgage broker who lost $101 million of his clients' money.
It's good to be back. Have a great weekend, everyone!
“For instance, something happened to cause markets to fall roughly 2% on July 29th. I couldn’t tell you what happened (I was catching a train from Strasbourg to Zermatt), but I can assure you that some investors panicked.
Three trading days later, while we caught our next train to Annecy, markets had already ripped higher by 4.5%. Nothing to see here.”
Probably another TACO.
Lol. Probably.
We all missed you Robb, but glad you took some time for yourself and your family!!! Welcome back!
One thing I would be curious about; perhaps some commentary/insight regarding travel/medical insurance costs/options for someone that has a pre-existing medical condition (…or just getting ‘older’). I’m seeing rates getting very expensive on this front so this is something that I’m sure a number of your older/retired readers could relate to as we enter the ‘golden years’.
Great suggestion – this would be awesome/timely!
Ditto…recently, after booking a holiday, the proverbial pop-up window asked whether I wanted travel insurance. There was also a disclaimer below it stating, “Not available for those over 65 years of age”…that hurt! lol!
Selling my house shortly and hoping dividend funds can pay my rental and still keep my investment going forward. Need 3 that you can recommend. Much appreciated.
Slainte .
Thanks Max. For sure, this is a good idea for a future post. There are some credit cards that offer coverage up to age 75 – National Bank World Elite MasterCard comes to mind. But I’m not sure about coverage for pre-existing conditions.
I’ve been so busy that I totally missed that you didn’t post anything for awhile, just spent 2 weeks in Mont Tremblant, OMG what a great place. Read the story about the shister in Muskoka, very sad, so glad I have a high bullshit detector.
Welcome back Robb. Your vacation sounds wonderful!
I saw a Utube only yesterday with Ben Felix, speaking about the Advantis Fund CIBC ETFs. Do you think there is an advantage to selling a modest amount of VEQT and /or VBAL in a non-registered account and buy the CIBC product (I didn’t catch the ticker) it is an ETF that contains Small Cap, Home bias stock?
My rudimentary understanding of the advantage to buy the small cap CIBC fund since very large funds, ie: VEQT for example, could be forced to buy shares of newly released “Space X” as an example, and the like!
Just curious! I am going to listen to the episode again as there was a lot of (in his words) Nerdy content! I may have misunderstood.
I think you may be talking about CAGE or possibly CASV. There are other similar funds by Avantis.
As for something like XEQT and spacex, it’s my understanding that XEQT has such rules (or the index itself does) that there is a delay (12 months?) before an ipo would enter the index.
Nor would I bail on an investment plan because of one stock. In a diversified asset allocation fund like XEQT it would be a small percentage of the fund.
My approach (in an RRSP) has been to move a bit of money from VBAL to CASV such that the global small cap value fund is about 10 percent of the equity side of the portfolio. I thought very hard about moving to full CAGE but there are pluses and minuses to doing so.
There are new ETFs coming on the market that end with “NE” – no Elon. They specifically exclude Tesla, SpaceX, etc. from their indices. Worth a google!
Thanks Geri! You’re talking about the new all-in-one ETF called CAGE. I answered a question about that a few months ago here: https://boomerandecho.com/money-bag-cage-cash-wedges-and-net-worth-calculations/
I still maintain that a regular global asset allocation ETF is the most sensible way for most people to invest. No need to tinker with something that works really well.
Hi Robb. I’m going to try to hunt for past articles but for me right now, trying to understand bucket management for investment withdrawals and managing sequence of returns is top of mind. In my situation I’m on CPP disability, I’m a few years away from 65 at which time I switch to CPP and then possibly GIS and I’m not clear about the timing of OAS. I don’t have a pension. Until I die, I have to live off of what I’ve got. And I don’t got a lot.
Hi Brad, this one comes readily to mind: https://boomerandecho.com/a-smarter-way-to-spend-without-stress-in-retirement/
Well, if I had as much money as Sarah does, I wouldn’t really be worried, haha 🙂 But thanks for the article.
Ha! Well, it’s not about how much you have. It’s about how much you spend. The cash wedge approach can be scaled to meet your desired spending needs.
Welcome back! Sounds like an absolutely wonderful break for your family. Love that you practice what you preach. Would be very interested in a breakdown on how you utilized travel points and loyalty programs to supplement the travel. Love seeing Canadians real life experiences. Thanks for considering!
Hi Magdalena, thanks!
We focus on four rewards programs (Aeroplan, WestJet, Amex Membership Rewards, and Marriott Bonvoy). Aeroplan because it is the most generous for flight redemptions, including for business class. WestJet because our home airport is Calgary and WestJet basically controls the skies, at least for direct flights. Marriott because we’re Gold Elite members and have access to four free nights a year (plus they have hotels everywhere). And Amex for the flexible Membership Rewards points, which can be transferred to Aeroplan, Bonvoy, or used in their own travel portal.
We flew business class from YYC->YUL->CDG on an Aeroplan redemption, which was nice. I think it cost us 112,000 points each for the one-way business class tickets.
We stayed four nights at the Maison Rouge Hotel & Spa in Strasbourg and used points for one of our two rooms. Plus we stayed overnight at the Calgary airport Marriott on a free night certificate, since we have to drive from Lethbridge so we prefer to stay in terminal and just roll out of bed and into international departures.
We flew home via Westjet (CDG->YYC direct) and I can’t recall if we used some points for those seats or not. If we did, it wasn’t much.
Love it! Thank you for the detailed breakdown! I’ve been learning more and more about travel redemptions and the loyalty point game here in Canada, over the past 2 years or so. Was able to utilize that knowledge for a trip to Europe with my son back in March, saved about $5k in flights and hotels, which was a really nice ‘perk’ for doing my everyday spending just using CC’s to optimize. I have almost exactly the same setup of cards, with exception of WestJet which I ended up cancelling, found for myself Aeroplane is of more value and aligns better with my travel bucket list 😊
That’s awesome – good for you!
Yeah, WestJet sucks but it is pretty much the only game in town for long haul direct flights out of Calgary. I’m tired of the milk run connections just to score a “good deal” on other airlines. Even our Calgary to Montreal to Paris flight made for a 14 hour travel day versus the 9 hour direct flight home on WestJet.
VERY true, it can work if you do an extended layover but that almost always seems to happen out of US based locations from what I see 😕 At least once in Europe you can move around fairly easily/cost effectively. For our trip I was able to use Aeroplane points Calgary direct to London, then we did the whizzair to Warsaw, trained over to Krakow and then flew Ryanair to Paris. Came home via WestJet on a combo of Avion points and a bit of cash to makeup the difference. It took some up front planning and was a whirlwind 2 weeks, wouldn’t hesitate to do it again! Worth chasing the points for the lifelong memories IMHO
Hi Robb
Is it time to take some profits on bank shares ??
No idea, Bill. I’m an indexer. I don’t know what the individual stocks or sectors are doing.
When the market dropped about 2% on July 29th, I figured it would bounce back the next day. Sure enough, stocks rallied, recovering most of the lost ground. It reminded me of a classic investing truth: the market’s best days are almost always clustered right next to its worst. The takeaway? Don’t try to time the market. To succeed, you have to be right twice—when to get out, and when to get back in—and the math is heavily stacked against you.
Hi Robb, curious about your thoughts on the debate currently playing out in various publications on Old Age Security and whether and how it should be reformed. I read John Stapleton’s piece and while I agree that seniors shouldn’t be blamed for the current struggles of young folks, I think he doesn’t really contend with the arguments being made about OAS and how it could be reformed.
For example, he fails to note (and many talking about OAS reform do note this) that the rate of seniors’ poverty is the lowest among all age cohorts, for example, those over 65 have a poverty rate of 5.4% while those 18-64 have one of 12.6%. See here: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1110013501
He also does not engage with a frequently suggested reform, to claw back OAS at higher rates for two income households with over $100k in household income. This would impact a fairly small percentage of all seniors. This is proposed hand in hand with increasing GIS, which would actually address those seniors most in need.
I do think it is worth considering what reforms OAS needs. Given its sizeable and growing percentage of our total spending and our changing demographics, and compared with other benefits (like the Canada Child Care Benefit which begins to be clawed back when family income is around $80k).
One final note, other countries have instituted very reasonable reforms for similar programs. In Denmark, equivalent benefits are ‘indexed’ to average lifespans, as people live longer, benefits kick in at an older age. The seniors today collecting OAS supported far fewer seniors when they were working, who lived shorter lives.
Hi Marc, considering a couple could have ~$187,000 in combined taxable income and still get full OAS I’d say the clawback threshold could certainly be revisited. Reform there might be more palatable than increasing the retirement age to 67 (tried before in 2015 and promptly got the federal conservative government punted from office).
If savings from lower clawback thresholds get redistributed into a stronger GIS I think that’s a fair argument but it also does not save the government any money.
We’d also then need to address the growing number of folks who are intentionally gaming GIS (living off of TFSAs and not touching CPP until 70 and RRSPs until 72).
Policy is complicated. I’m glad I’m not in politics!
Agreed with all of that, Robb. It’s a tricky area of policy and reforming OAS is politically toxic. I’m surprised to hear people would game the system for GIS but maybe I shouldn’t be!
It is very complicated. The clawback starts at $187K for a couple. If the clawback started at $100K it might be fine for a household but what is a household? People would play with that like other gov’t benefits (change addresses etc).
I have no problem with beginning clawback at $100K for a couple.
I have a problem with a promised benefit that evaporates when one gets to collect. Kinda like pulling Child benefits when your kids are 6 and 8.
I also have a problem with those who had the means to self fund retirement but didn’t and expect gov’t benefits to do the heavy lifting.
As previously mentioned there are those that can earn $20K in dividends, take funds from their TFSA, pay next to no tax overall and collect GIS.
Treat a household the same way the Child Care Credit is, if you’re married or common law and both collect OAS, you’re a household.
On one hand, I agree it’s not fair to change OAS when people have planned on certain assumptions about cuts offs staying the same, on the other, the policy purpose was always security in old age.
It’s clear to many that a person with $95k in income, not including TFSA funds, household assets like the home, is not a person in need of security or fearing for their security. The reality is that things now are harder, homes cost more, people pay more in taxes, and more of those taxes as a percentage go to supports like OAS than ever before. All that to say that what is fair or unfair isn’t simple and the ledger for adding up what should and shouldn’t be done in the name of fairness is long. Homes should be affordable for middle class people making median wages (3-4x household income). But they’re more like 7x median (or mean, I can’t remember) household income, or 9 or 11x.
OAS and GIS together don’t provide much to live off. Of course we should all do our best to save for retirement, but those, plus a meagre CPP, aren’t really providing much to live anything close to big life, especially with health issues. I say this knowing people exactly in that position.
“We are witnessing the creation of a generational scapegoat, where seniors are being blamed for youth’s challenges.”
I think many of us millennials and Gen Z would feel the system was more fair if the claw back for governments benefits that we use, like the Canada Child Benefit, was at the same income level as OAS. At $38k of salary CCB begins to be clawed back but OAS clawback only starts at $93K… that is a generational injustice that breeds a lot of frustration. Not to mention that younger generations are still paying rent or mortgages while trying to afford childcare while many seniors are living in paid off homes.
No one is saying OAS, CPP/QPP or GIS should disappear, but maybe seniors who have good incomes they can easily live off of shouldn’t get the full OAS payments when clawbacks come at much lower income thresholds for other government benefits that help younger generations to survive.