Too Conservative Portfolio

in Investments

At my yearly visit to my bank to redeem RESP Money, the TD Mutual Fund Guy I was with, commented I had created a too conservative portfolio. I smiled, didn’t say much and moved on, but he did add that it was a good idea for my daughter’s RESP as I was drawing money from it, so I shouldn’t be too aggressive now.

too conservative portfolio

Investing is a Jigsaw puzzle isn’t it ?
(photo courtesy jscreationzs FreeDigitalPhotos.net)

What was this conservative portfolio? A simple exact duplicate of the Canadian Capitalist’s sleepy mini-portfolio:

TDB909 – Canadian Bonds – 25%
TDB900 – Canadian Equities – 25%
TDB902 – US Equities – 25%
TDB911 – International Equities – 25%

How this is a too conservative portfolio I am unsure, as it is 75% in equities, and 25% in bonds. I suppose for folks like Michael James this is Conservative (MJ on Money has specific views on bonds and equities for investments), but for me, it seems fairly aggressive, in that you are 75% in equities, and there are no GICs or Money Markets in this model at all.

I could make it more conservative and go with 15% Bonds and 10% GICs (or Money Market Funds), but I am happy with this mix for a few of my investing portfolios. If I was going to be more aggressive (which I am not going to be) I suppose I could take the percentages and then invest in individual company stock, but I don’t really see the need to do that.

Another way to morph this, was that if you wanted a more aggressive Sleepy Portfolio you could go:

Canadian Dividend ETF 25%
Canadian Equity ETF 25%
US Equity ETF 25%
International ETF 25%

But I would really only use that kind of model in a non-tax sheltered portfolio, so that your “income” from the portfolio would be dividend based and thus taxed at a lower rate.

Question: I am willing to say I am conservative, but are these investment choices too conservative?

Questrade Democratic Pricing - 1 cent per share, $4.95 min / $9.95 max

{ 21 comments }

{ 21 comments… add one }
  • Edward September 24, 2014, 1:13 PM

    That is definitely not a “too conservative” portfolio. The standard Couch Potato allocation is supposed to be 40% bonds. The only reason they call it conservative is because equity markets have been on a rally. 6 years ago they would said this was “too aggressive”. This is a classic case of recency bias.

    Reply
    • bigcajunman September 24, 2014, 2:12 PM

      That is what I thought, didn’t know I was a “Wild Eyed Radical” in terms of investing.

      Reply
  • skelly423 September 3, 2014, 4:19 PM

    I think this adviser (like so many others) has confused “low fees” for “low risk.” If you’re not paying an active manager big money, you can’t earn big money. Taking “smaller”, safer returns means you’re conservative in the eyes of the financial industry.

    Reply
  • Robert_M September 3, 2014, 1:34 PM

    If that is a conservative portfolio, I would hate to see an overly aggressive one. Perhaps it is 100% commodities?

    From the benchmarks that I am used to seeing, it would be classed moderate aggressive. Myself, I use a 60% equities, 40% fixed income blend that is considered moderate conservative and I am considering going down to a 50/50 mix which I feel would be a conservarive portfolio.

    Honestly, where do they get these definitions, and are they actually hearing what they are saying? If an advisor had said that to me, I would definitely be asking a lot of questions,

    Cheers,

    Rob…

    Reply
    • bigcajunman September 3, 2014, 2:28 PM

      I really didn’t want to “engage” in discussions about Index investing, etc., etc., with this gentleman, so I let it slide.

      Reply
    • Bernie September 3, 2014, 2:59 PM

      Everyone has an opinion on asset mix. I focus on income growth in my dividend growth portfolio & consider my CPP & company pension to be the main component of the fixed income category. Rob seems overly conservative but that’s his “baby”. Mine is 98% equity 2% fixed income in my RRSP. “What’s in your wallet” is whatever you’re comfortable with!

      Reply
  • Bernie September 3, 2014, 12:34 PM

    The long term average return for the 75% equity 25% bond mix you show is between 10% to 11% but it has been between 7% to 8% in the past 10 years.

    Reply
    • bigcajunman September 3, 2014, 12:38 PM

      Interesting… wonder what the 20 year on it is. Given the past 10 years include the 2008 melt down and then the hyper explosion upwards that occurred from 2009 to now, hmmm…

      Reply
      • Bernie September 3, 2014, 2:50 PM

        I would think it to be just marginally higher than the 10 year figures.

        Reply
  • Robert Champion September 3, 2014, 11:35 AM

    I would agree that RESPs should be very conservative. I have much of mine in XSB – ISHARES CDN S/T BOND and TDB8150 – TD INV SAV ACCT which pays 1.25%. But investors should be aware that ETFs can expose the to risk too – see ETFs and risk

    Reply
  • Potato September 3, 2014, 10:49 AM

    I think they have a random portfolio critique tool in the branches. Years ago, with a similar portfolio the branch staff said it was too risky with that bond fund. They recommended an all-stock actively managed high-MER fund instead as being less risky.

    Reply
    • bigcajunman September 3, 2014, 10:55 AM

      “…They recommended an all-stock actively managed high-MER fund instead as being less risky….” 👊 BOOM!!! I like that comment!

      Reply
  • Phil September 3, 2014, 10:46 AM

    I am willing to say I am conservative, but are these investment choices too conservative? No, and by most standards I’m aware of, this portfolio would not be considered conservative. For me would this be conservative? Yes, as I am a little further along the risk vs. reward curve and a personal return goal of 8-10% annually after all is said and done. – Cheers.

    Reply
    • bigcajunman September 3, 2014, 10:50 AM

      How do you get 8-10% annually? It seems interesting that new books I receive seem to be returning to the “… you can expect or should strive to receive 6-8% growth annually…”, what investments do this over a 20 year period? 💰

      Reply
      • Phil September 3, 2014, 4:01 PM

        So in the past I was managing some pretty good returns from some mutual funds we owned – Bissett Cdn Equity Fund -F (TML232) +16.5%ytd and PH&N Dividend Income Fund -D (PHN150) +14.8%ytd. A couple of years back I also used to hold Sprott Canadian equity fund, but realized I needed to let it go in 2009… 2 years ago I took control of most everything except my wife’s RRSP with is 100% in the Bissett fund so +16.5%ytd. Now I hold a basket of stocks – In my unregistered account I hold 11 stocks, of which I will flip in and out of depending on how much they grow based on my set metrics +20.4%ytd (+54.3% since Jan 2013). In my wife and I’s TFSA we hold growth momentum stocks, which from time to time again I will buy and sell depending on what I have set my targets to be (+29.5%ytd, and one more conservative, which is my wife’s +1.7%. And for my RRSP, I am holding 16 stocks +15.9%. So I’ve been doing pretty good with my decisions… The extra bonus for driving 1 or 2% higher for a portfolio, is that I will time my buy in’s each year for market drops… I will most times hold out until a 2-5% market correction happens and then dump the year’s money in. this strategy has helped in years like 9/11 or other crisis. I have trained myself to diligently not follow the herd, and really follow what my numbers are telling me. If a stock rises more than I thought it would I sell some or all of it. same goes on the down side… I am my own active manager, and the rewards I get are based on the risk I’m willing to take with my knowledge. As too the comment of books… I don’t read books much… 15 years ago when I was getting started in this , sure, but now I spend more time researching companies and reviewing financial statements… Boring for most, but so far has been profitable for the most part for my family – Cheers.

        Reply
  • Jacqui583 September 3, 2014, 9:53 AM

    I run into the same thing. My TD advisor recommended that I NOT buy into bond funds now but I did anyway. I’m following the Basic couch potato plan. I’ve noticed that my “money guy” where I originally had all my investments (and now only have maybe 12% since getting on the couch potato bandwagon) still has me in 100% equity. FWIW I should be retiring within 8 years.

    Reply
    • bigcajunman September 3, 2014, 9:56 AM

      That seems to be the thinking these days, is to just stay in the market until you retire? Not sure I agree, but I am also paranoid. 😇

      Reply
      • Jacqui583 September 3, 2014, 11:01 AM

        I should also add that I do have a generous defined benefit pension plan. I guess I’m one of the last dinasaurs roaming the earth lol.

        Reply
        • bigcajunman September 3, 2014, 11:05 AM

          I have a pension as well, but whether it gets changed during my retirement we shall see.

        • Phil September 3, 2014, 5:10 PM

          Ummmm… a pension… I sure would have liked to have one. I guess this is the reason I’ve put a fair bit of effort into learning about investing… I do not have one. – Cheers.

        • bigcajunman September 3, 2014, 5:25 PM

          I am lucky to have a pension, since I worked at Nortel, built up a lot of equity in a defined benefit program and managed to transfer it to the Federal Government, so Blind luck is my savior once again!

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