Balanced Passive Investing

This is the active part of passive investing, balancing (or actually re-balancing) your investments, to fit your investment goals after a period of time.

Suppose you decide that you are getting older and you want to set up a conservative investment plan for your RRSP, so you decide the following investment goal splits:

  • 40% of the RRSP will be in Bonds, GIC’s or the like (slow growth, but loss less likely)
  • 60% in equities, which you then split into
    • 25% in Canadian Equities  (Canadian Wonder ETF)
    • 25% in U.S. Equities  (U.S. Super ETF)
    • 10% in International Equities  (Worldwide Amazing ETF)

Remember this is an example, you can set your passive investing plan up however you wish. You would then decide which index funds, ETFs or the like that you want to act in your passive investment plan, take the money you have available and buy the equities you have identified to act as your category investments. (I have included wacky fictitious names to help out with the example).


After a period of time you will wish to make sure that your investment goals are relatively the same percentage wise, and that period of time is your decision, you could choose:

  • Never, simply leave the purchases as is, and walk away (now that is really passive investing), and take out the funds when you need them (I am not espousing this theory simply pointing it out).
  • Every Quarter, if you are really into making sure you aren’t caught out by any market adjustments.
  • When you have more funds to invest in the RRSP, which is usually when I do the re-balance.

I don’t feel good selling one equity to buy another in this methodology (unless something heinous is going on in the markets which dictates that might be the most prudent thing to do (e.g. ETF CEO ran off with all the funds, etc.,)), to ensure the correct balances, so when I have more money to invest, I simply see where I need to put my money to get my investment goal percentages back to where I planned, and hopefully that will put things back into balance.

An example would be that Worldwide Amazing ETF has dropped to actually being 6% of your RRSP (due to your other investments doing so well, let’s say), so you need to buy more of this ETF with your extra funds to get your portfolio back into balance, it’s really that simple (if you look at the Sleeply Mini Portfolio with the Canadian Capitalist he even gives you a nifty little spreadsheet that you can adapt for these types of calculations).


Over time, more likely your investment goals for where the money should be will change (hopefully becoming more conservative), so you can change your goals when you have more money to invest, or you can sell your equities to change the balance as well.

This is not an original idea by me, I borrowed it from the Canadian Capitalist and I have seen it around in a few investment books as well, but it is one way to manage your investments, if you don’t want to be an Active investor (or hyperactive).

I also have the dividends in my funds reinvest themselves which helps out too (i.e. I use the DRiP capabilities of the ETFs and Index funds that I hold).


Drip, drip, drip…

I have written before about how I am a passive-leaning (if not down right lazy) investor. Here I write about being a Drip.

A while ago, I checked over my investment accounts to see what had transpired in the past month or so. I saw that some of the few stocks I own in one or two of my investment vehicles had paid dividends. I had not (however) signed up for the Dividend ReInvestment Plan (DRIP) for these stocks so I received the dividends in cash.

Dividend Reinvesment Plans
No not that kind of Drip, Dividend ReInvestment Plans

Getting cash is OK, but I prefer to have dividends reinvested, since it causes me to buy more of the stocks I own for free (i.e. no service or trading charge). The DRIP program I have is with my investment firm (TD Waterhouse) and not the actual DRIP set up by the Company who’s stock I own (there is a big difference, I have been told). The DRIP with TD Waterhouse is simply them taking the dividend and buying as many whole shares of that stock, without charging me a transaction fee.

An example would be if I had 500 shares of Magic Bank and they declared a dividend of 61 cents a share for the period, I would then receive $305 cash into my account, however, since Magic Bank’s share price on the day of declaration was $65, the TD DRIP would have purchased 4 shares for me (at $260) and left me $45 cash, and $0 transaction fee.

I do not know how actual DRIPs work with specific companies, I believe they allow for the purchase of partial shares (anyone care to comment on this, please feel free).

This methodology allows for more laziness in investing on my part, which is what I strive for. I called TD Waterhouse and had DRIPs turned on all investing accounts that I have, for all stocks that are supported, so now any time dividends are declared, more stock will roll into my account instead of more cash.

When I call myself Passive, I do not hold many Stocks directly, I mostly hold them through index funds, thus the passive-leaning label, but I do own a few stocks directly.


Random Thoughts: Spring Ahead

Remember this weekend is the Spring Ahead weekend, and your clocks go ahead by an hour on Sunday morning. In Ottawa that means it is very dark in the mornings again, but the days seem to be much longer with the sun being up at 7:00 PM in March, which is always a nice feeling (however, 20 cm snowstorms and freezing rain are both very likely as well).

How are your Lenten challenges going? Still living on cash, or cutting down on your discretionary spending in some fashion? Remember a slip for one day is simply a slip, and no reason to abandon your plan, keep at it!

Springing Forward Financially

  • Remember that next week is National Procrastination Week, so plan not to plan anything or to put off whatever you have planned, because it’ll get done some time (March 9-15, if you can get around to it).
  • Michael James writes about Warren Buffett’s Solution for Mortgage Abuses, which sounds simple, but may be too simple, since as Mr. J. points out no politician wants to be known as the Person who stopped folks from being able to buy their dream house.
  • Preet at Where Does All My Money Go posts a very interesting graph showing the Distribution of Stock Market return from 1825 to today. A descriptive graphical help, with the disappointing point that this year is starting at the far left of the distributions.
  • Larry MacDonald encourages his readers to Tough it Out in the investment world, with some suggestions on how to deal with the current Financial Apocalypse.
  • Gail Vaz Oxlade talks about Setting Expectations for kids’ allowances, which is a topic near and dear to my heart. Do you control how your kids spend their allowance?

Have a great weekend all!


Holiday Hang Over ?

Holiday Hang Over

How goes your holiday hang over? Did you make too merry over the holidays and need to lose some weight? Worse, did you overspend and now have some large credit card bills to pay? Now might be the time to figure out what went right and what might have gone wrong in your Christmas shopping and spending pursuits and maybe devise a plan not to repeat the same behavior this year (and a plan on how to dig out from under any debt issues you may have created from making so merry).

A plan for next year could start with a simple calculation like:

Amount Spent for last Christmas / 11 months  =  How much you should save for this year?

Simply buy savings bonds or GICs to save the money and you are ready, for next holidays.


Stock Market Bottom Today

My regular readers will remember last week I asked, “What is the Bottom in Stocks” and I pointed out we just will not know what the bottom is until six months afterwards, and I was proven right again yesterday, when I (eternal pessimist) thought there was no way things could drop any lower, yet they did. Canadian financial stocks (banks and financial folks) took a hell of a pounding again, and now I am not even sure why, but TD and BMO both took hits again. 

TD’s drop actually had a minuscule basis in fact as their Ameritrade division announced some fairly neutral numbers, but the whole TSX went “Financial Apocalypse” for the last 45 minutes of trading and a great deal of losses were incurred in that sure time frame (stock value losses I mean).

I keep wondering is this the bottom, but as I have said, we will only know in six months time.

Financial Impact on Me

My RRSP’s continue to drop in value (I haven’t looked really, but am glad it is Dividend time since my DRIPs (Dividend Reinvestment Plan) on most of my stocks will be kicking in and I will be buying some very cheap stock with it). I also continue to collect up old investment vehicles into a single set of investment devices, which are now fairly heavy in cash, which is a good thing, now the only question is when and what to buy, and I continue to “waffle” on what that decision might be.

E.I. Not For You

Got a call yesterday from a lady at the Employment Insurance office asking me a bunch of questions about my severance package and how it had been implemented. She was new on her job, so she and I fumbled around a few questions and I think it has been straightened out for now, but this did bring up an interesting point, which is that you MUST apply for E.I. when you are laid off, not when you think you need it. If you don’t apply right away, you may be disallowed your claim for taking too long to fill in the correct documentation.

At the end of the conversation the nice lady mentioned that I will not be eligible to get E.I. for about a year (the length of my severance package in their calculations). This didn’t surprise me, but I know for sure now that someone at the E.I. office has said it to me out loud.

Weather Bomb

Evidently Ottawa will be the victim of a Weather Bomb in the next day or so. Before you start thinking that the folks at Environment Canada have created a Weapon of Mass Destruction that will cause huge storms, that is not what the term means, it is a real Weather Forecaster term to describe a quick and large drop in the Barometric Pressure which is usually part of a severe storm system.

What does this have to do with Personal Finance? Everything!

  • With 15-30 centimeters of snow coming Do You Have Your Snow Tires On? I don’t! If you live in Quebec, remember you need to have them on, it is the law now.
  • Do you have enough food at home in case it is hard to get out in the next day or so?
  • Is your furnace in good working order?
  • What if the power goes off, have any wood in for your fireplace?
  • Does your snow-blower work? Does it have any gas?

All of those points either cost money, or are going to cost you money if they aren’t dealt with, so keep this in mind, with the coming of “Old Man Winter”.


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