Optimism #35 - November 16, 2021

Dear clients and friends,

This might be the most interesting, or maybe relevant article I have shared.

The Sustainability of (Global) Withdrawal Strategies | Financial Planning Association

Its about how much our portfolios can sustain, in terms of withdrawals over a thirty-year period.

I like to start with a 4% + inflation assumption/discussion and then adjust it to your situation.

The study is based on the original 1994, ‘4% rule research’, known as the Bengen Paper. https://www.financialplanningassociation.org/sites/default/files/2020-10/OCT94%20Bengen.pdf,

looking at every 30-year period of investment returns over a 120 year history in 22 countries.

The key messages:

  1. Review annually as returns change dramatically from year to year.
  1. Withdrawals may have to be adjusted down, at least temporarily, if returns are consistently lower than we assume.
  1. The country in which you invest most of your money is key.  Italy has a very bad history, mostly due to hyperinflation after WW1, whereas Canada has a very good one.
  1. The study assumes a 60% stock, 40% bond asset mix, but makes it very clear that a higher stock mix performed better over 30 years.  Its not a good time to change your mix, but it is a good time to start such discussions with your Portfolio Manager so that when the opportunity presents itself to sell bonds high and buy stocks low, that there is no hesitation.
Tax loss selling.  If you have any capital gains that don’t want to pay tax on, you might be able to artificially sell a position in your portfolio at a loss to offset the gain.  There are a few key details so please get advice.  This only applies to assets outside of registered accounts such as RRSPs & TFSAs.  Losses incurred long ago could qualify if you have the paperwork to substantiate the details.  Ask your tax pro.

The new LOTR rules – if you live in BC and own any property withing a corporation, there are new disclosure rules.

Deadline is end of November 2021.  Get professional advice.

Not overly optimistic, but super article about family disputes over money gifted to kids, in this case for home purchases.  Be careful to document it well.

Family disputes over gifted down payments on the rise: Law firm - BNN Bloomberg

Dividend increases from all of the energy companies, Great West Life insurance, Canadian Tire, banks soon.

Insiders buying at Suncor:  always good news.

Suncor insiders keep buying - The Globe and Mail

Good article from Rob Carrick at the globe about how dividend growth stocks outpace inflation. I am not suggesting you buy the ETF, but just that these stocks do well in inflationary environments like today.


I know, totally unrelated, but great article from the Washington Post about how to carve a turkey.


Have a super week.