VBAL now? Or what?
VBAL now? Or what?
Hi,
I am retiring and was advised to sell my mutual funds and move into VBAL for all my accounts in my discount brokerage (TD). I started with TFSA and cash account late 2020, but then I put a chunk of VBAL in my RSP account this year which I unfortunately bought VBAL at a higher prices than the other accounts. I know the markets are volatile, but the RSP account is oozing losses in thousands these days. I am also wondering if the 60/40 allocation of VBAL is still recommended in this market? I can tolerate 'some' downside but I don't want to play much with my money that I am counting on down the road. I do have a decent cash cushion in HISAs however to cover the next few years. I still have TD mutual funds while TD wealth advisor wants to rebalance and believes he can do better than VBAL even with higher fees, and RB conservative mutual fund I am considering moving over to my self directed account as well.
Whaddya think?
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Re: VBAL now? Or what?
Postby Bylo Selhi »
You sound like an ideal candidate for VBAL.
if the 60/40 allocation of VBAL is still recommended in this market?
You say you also have "a decent cash cushion in HISAs however to cover the next few years." So in effect you have less than 60% in equities as well as a buffer against volatility or even a down market. What's the concern?
I still have TD mutual funds while TD wealth advisor wants to rebalance and believes he can do better than VBAL even with higher fees
Some adviser's self-interest-conflicted "belief" isn't a guarantee of anything. Getting market return less the 25bp MER is a guarantee that you'll beat the vast majority of investors who "believe" they know better.
[In the interests of full disclosure, I have a large investment in VBAL and am transitioning to a mostly-VBAL portfolio.]
P.S. I assume you've reviewed similar threads, e.g.
A Simple Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
VBAL Everywhere
Vanguard Retirement Income ETF Portfolio (VRIF)
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Re: VBAL now? Or what?
Bylo Selhi wrote: ↑19 Mar 2021 09:13You sound like an ideal candidate for VBAL.
[In the interests of full disclosure, I have a large investment in VBAL and am transitioning to a mostly-VBAL portfolio.]
I would be interested to know if I may, in your transitioning process, do you put a limit on the VBAL price you will pay or wait until the price is low enough? I ask because I think I paid at a high for my RSP Vbal account and that has really affected my returns (more like losses).
Thanks for your input. As I am fairly new to self-directed, this makes me feel better Guess nobody is feeling great with the current volatility anyways and looking for a safe way to keep and grow hard earned money. Cheers.
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Re: VBAL now? Or what?
Postby OnlyMyOpinion »
Jackoby wrote: ↑19 Mar 2021 08:54Hi,
I am retiring and was advised to sell my mutual funds and move into VBAL for all my accounts in my discount brokerage (TD). I started with TFSA and cash account late 2020, but then I put a chunk of VBAL in my RSP account this year which I unfortunately bought VBAL at a higher prices than the other accounts. I know the markets are volatile, but the RSP account is oozing losses in thousands these days. I am also wondering if the 60/40 allocation of VBAL is still recommended in this market? I can tolerate 'some' downside but I don't want to play much with my money that I am counting on down the road. I do have a decent cash cushion in HISAs however to cover the next few years. I still have TD mutual funds while TD wealth advisor wants to rebalance and believes he can do better than VBAL even with higher fees, and RB conservative mutual fund I am considering moving over to my self directed account as well.
Whaddya think?
I suspect if you looked at whatever you were invested in prior to buying VBAL, you would find it also had volatility. You might not have noticed it if it was a mutual fund because many people only look at monthly statements (if that). Even a GIC would have volatility if you were buying one at different times (based on changes in interest rates) - you just don't notice it in a product like a GIC.
I'm sure someone can point to stocks and sectors (even mutual funds) that have outperformed recently compared to VBAL, but they are non-diverse sector bets, etc. that can are even more volatile (up or down). In buying VBAL you are stepping away from that to invest in a diverse, balanced product that doesn't make bets (investment decisions) that need to be right to match the average performance of the market.
I can understand 'buyer's regret' when a purchase drops in value shortly after buying it because we've all been there. But VBAL is a solid product and it will recover and grow in value in the future. Meanwhile, it pays you around 1.8% - better than a GIC these days (which has no upside).
Try not to worry about short term price fluctuations. Have and be confident of your long term financial/investment plan. Even retirement is long term.
FWIW, I see VBAL was down 4 cents first thing this morning. The math would say our own accs were down well over a thousand dollars. Now I see its up 2 cents and we've 'made a good day's wage'. But that's all just noise in the overall plan.
Added: Try this - add up the cost of VBAL in all of your accounts, and divide by the total number of units in all of your accs, to get an overall average cost/unit. Unless the VBAL purchase in your RRSP is disproportionately large, it sounds like you are probably already ahead of cost.
Last edited by OnlyMyOpinion on 19 Mar 2021 11:25, edited 1 time in total.
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Re: VBAL now? Or what?
Postby Bylo Selhi »
Jackoby wrote: ↑19 Mar 2021 10:48I would be interested to know if I may, in your transitioning process, do you put a limit on the VBAL price you will pay or wait until the price is low enough?
I don't market time. I just buy when I have the money, e.g. when a GIC matures.
I usually place a limit of 1¢ over ask, but that's only in case the market spikes. Note that in the grand scheme of things 1¢ or 2¢ makes no significant difference. It's $1 or $2 per 100 shares (~$2,900.) More importantly, ETFs have far more liquidity than the number of lots shown in a quote might suggest. The creation unit mechanism and market makers ensure that there's as much supply as you need. You can place a buy order for even $1M with a limit of 1¢ over ask and it will generally get filled quickly.
I ask because I think I paid at a high for my RSP Vbal account and that has really affected my returns (more like losses).
If you're investing for the long run then it won't matter. Ignore the "noise" of recent volatility. Or if you can't, compare VBAL's volatility to all-equity or all-bonds funds.
Guess nobody is feeling great with the current volatility anyways and looking for a safe way to keep and grow hard earned money.
A year ago VBAL was trading at $22. Now it's grown steadily to $29. If(when!) the market corrects it will affect all funds and ETFs. But because VBAL (et al balanced ETFs) is balanced, i.e. hold a diverse portfolio of securities from around the world, it should be affected less than all-equity funds. Likewise in recent days all-bond funds have declined due to rising interest rates. That's affected VBAL too, but to a much smaller extent. In other words, VBAL is behaving exactly as it's supposed to.
P.S. I echo what OnlyMyOpinion posted above.
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Re: VBAL now? Or what?
Ask your TD wealth advisor to put it in writing that he believes he can do better than VBAL and for TD to make up the difference if he cannot do so. As Bylo said, it is in the self-interest of an advisor to promote superior skills and keep clients and remuneration.
Any portfolio that contains stocks and bonds will have some volatility to it whether it is VCIP (20/80), VCNS (40/60), VBAL (60/40), VGRO (80/20) or VEQT (100/0). If you plot their performance using stock charts over the limited life span, you can see how volatility varies. Those with higher equity allocation will have more volatility but also higher overall growth over time.
The VPW table in this link will give you an idea of safe withdrawal factors at varying ratios of equities and bonds. Clearly one can expect more performance out of VBAL (60/40) than you can out of VCNS (40/60) over time. It is a matter of what tradeoff (balance) you are willing to settle on.
There are many "balanced" funds on the market with a 60/40 equity/bond ratio. For most people most of the time, it strikes the right balance of volatilty versus reward. While that is no guarantee about what the future brings, there is no reason to discount it either.
Because the likes of VBAL have not been around for a long time, for a longer term profile of a 60/40 global fund that is not unlike VBAL, take a look at the 10 year history of MAW104 as a proxy. There are bumps along the way. There always will be.
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Re: VBAL now? Or what?
If you're going to go it alone, I would suggest doing some reading to increase your comfort factor and better understand the ins and outs of DIY. Check out the recommended reading list and other information on the Finiki:
A Random Walk Down Wall Street really helped me when I made the switch from active management to index investing.
Added:
And there's this to consider:
Last edited by big easy on 19 Mar 2021 12:02, edited 1 time in total.
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Re: VBAL now? Or what?
Jackoby wrote: ↑19 Mar 2021 08:54I still have TD mutual funds while TD wealth advisor wants to rebalance and believes he can do better than VBAL
Don't they all believe that?
As the latest SPIVA® reports mentioned in this post demonstrate, reality is very far different. Maybe sent them to the advisor for comment and ask why he's so special.
Better still. Ask to see a recommended client portfolio from 3 years ago and also 5 years ago. Check the performance against suitable benchmarks. I'm betting they won't be willing to provide it.
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Re: VBAL now? Or what?
I tried to market time my VGRO purchases over the last three years. I failed miserably. I believed that since CAPE was high that I would be better dollar cost averaging it.
I even threw a large tranche in during the COVID downturn. I could have just invested the whole lot in one buy in 2018. Instead I bought 50 times and still ended up with the average price in 2018.
I don’t bother market timing anymore. I threw the last third of my stash in Jan 2021. I’m sure it was all at a very high price.
I am buying VGRO to hold for a long time. I have gotten quite used to buying it any price now.
Stocks and bonds are volatile assets. I have learn to enjoy the ride.
VGRO, VEQT, HISA
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Re: VBAL now? Or what?
Peculiar_Investor wrote: ↑19 Mar 2021 11:49
Jackoby wrote: ↑19 Mar 2021 08:54I still have TD mutual funds while TD wealth advisor wants to rebalance and believes he can do better than VBAL
Don't they all believe that?
As the latest SPIVA® reports mentioned in this post demonstrate, reality is very far different. Maybe sent them to the advisor for comment and ask why he's so special.
Better still. Ask to see a recommended client portfolio from 3 years ago and also 5 years ago. Check the performance against suitable benchmarks. I'm betting they won't be willing to provide it.
Even better still. Just ask TDDI to transfer your assets away from him without talking to him and never think of him again.
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Re: VBAL now? Or what?
Ditto all upthread comments. I agree with all of them.
I'd be interested to know when you bought that you are currently down. I can only assume that you bought on Feb 12 this year. That's pretty much the ONLY time VBAL has been higher than today. Look at the chart for the past 6 months, or a year, or 3, or 5. Up up up. Other than March 2020, of course.
So much to say. Where to start? Ditch the advisor is a good start.
I would be interested to know if I may, in your transitioning process, do you put a limit on the VBAL price you will pay or wait until the price is low enough?
That's called "trying to time the market". Don't do it. When do I buy? When I have money to invest.
Disclosure: I am in the process of transitioning my entire portfolio to VBAL except for where selling incurs a large taxable capital gain and the thing I'm selling is one of VBAL's holdings anyway.
Ken
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Re: VBAL now? Or what?
Ken wrote: ↑19 Mar 2021 18:56I'd be interested to know when you bought that you are currently down. I can only assume that you bought on Feb 12 this year. That's pretty much the ONLY time VBAL has been higher than today. Look at the chart for the past 6 months, or a year, or 3, or 5. Up up up. Other than March 2020, of course.
Ha-you're right. I bought on 10 Feb and it was settled 12 Feb. My luck lol.
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Re: VBAL now? Or what?
Spudd wrote: ↑19 Mar 2021 13:11
Even better still. Just ask TDDI to transfer your assets away from him without talking to him and never think of him again.
Thank you - I did not think I could do that! I do feel that I owe him more than that though, I know he is just trying to do his job and since I started with him in 2019 I have not been unhappy with returns.
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Re: VBAL now? Or what?
emsie wrote: ↑19 Mar 2021 12:30
I don’t bother market timing anymore. I threw the last third of my stash in Jan 2021. I’m sure it was all at a very high price.I am buying VGRO to hold for a long time. I have gotten quite used to buying it any price now.
Stocks and bonds are volatile assets. I have learn to enjoy the ride.
Thanks for sharing your experience. And I have to learn not to check the my portfolio numbers every day!!
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Re: VBAL now? Or what?
big easy wrote: ↑19 Mar 2021 11:36If you're going to go it alone, I would suggest doing some reading to increase your comfort factor and better understand the ins and outs of DIY. Check out the recommended reading list and other information on the Finiki:
Thank you, much appreciated. I have been trying to self-educate but nowhere near the level of knowledge people on this forum possess so I am grateful for all your replies.
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Re: VBAL now? Or what?
AltaRed wrote: ↑19 Mar 2021 11:21Ask your TD wealth advisor to put it in writing that he believes he can do better than VBAL and for TD to make up the difference if he cannot do so. As Bylo said, it is in the self-interest of an advisor to promote superior skills and keep clients and remuneration.
Sigh, I know you are right. He has suggested letting him adjust portfolio to the 60/40 allocation (like VBAL) and he would show value add after a year.
AltaRed wrote: ↑19 Mar 2021 11:21There are bumps along the way. There always will be.
Working on getting better shock absorbers
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Re: VBAL now? Or what?
OnlyMyOpinion wrote: ↑19 Mar 2021 11:00
Try not to worry about short term price fluctuations. Have and be confident of your long term financial/investment plan. Even retirement is long term.FWIW, I see VBAL was down 4 cents first thing this morning. The math would say our own accs were down well over a thousand dollars. Now I see its up 2 cents and we've 'made a good day's wage'. But that's all just noise in the overall plan.
Added: Try this - add up the cost of VBAL in all of your accounts, and divide by the total number of units in all of your accs, to get an overall average cost/unit. Unless the VBAL purchase in your RRSP is disproportionately large, it sounds like you are probably already ahead of cost.
Thanks for your comments. Yes, hopefully retirement is long term! As Ken pointed out, the highest price of VBAL was on Feb 10, which is when my RSP was transferred and I bought around 5000 units. While I haven't done the math on all purchases, that was my biggest, hence why I think I am not ahead. Down since purchase in that account over $ 2,000.
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Re: VBAL now? Or what?
OnlyMyOpinion wrote: ↑19 Mar 2021 11:00Try this - add up the cost of VBAL in all of your accounts, and divide by the total number of units in all of your accs, to get an overall average cost/unit.
Jackoby wrote: ↑20 Mar 2021 09:32I have to learn not to check the my portfolio numbers every day!!
Down since purchase in that account over $ 2,000.
Not looking at it every day is a challenge. Especially if you suddenly have a much larger portfolio, which is my case as well since I sold multiple rental houses last year. It definitely takes some mental adjustment when the daily ups and downs are 5 figures. I suspect that you will continue looking at it every day but you'll allow yourself to get used to the ups and downs.
OnlyMyOpinion is right. Just look at the total value of your entire portfolio. Not even just all VBAL in all accounts but everything. You are not all in VBAL yet and in fact you may never be. So the important number to look at is the grand total. That's why you are diversified; so if one thing is down, hopefully another is up.
Ken
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Re: VBAL now? Or what?
Postby Bylo Selhi »
Jackoby wrote: ↑20 Mar 2021 09:32I have to learn not to check the my portfolio numbers every day!!
Down since purchase in that account over $ 2,000.
Not looking at it every day is a challenge. Especially if you suddenly have a much larger portfolio, which is my case as well since I sold multiple rental houses last year. It definitely takes some mental adjustment when the daily ups and downs are 5 figures. I suspect that you will continue looking at it every day but you'll allow yourself to get used to the ups and downs.
OnlyMyOpinion is right. Just look at the total value of your entire portfolio. Not even just all VBAL in all accounts but everything. You are not all in VBAL yet and in fact you may never be. So the important number to look at is the grand total. That's why you are diversified; so if one thing is down, hopefully another is up.
A purchase of 5,000 units at $29 is about $145k so a $2k drop is barely 1%. A market correction is considered to be a drop of 10% and a market crash is 20%+. So this is just noise.
More importantly, time has a way of smoothing the curves. Here's a chart of the S&P 500 going back 20 years. The 2000 Internet bubble now looks like a small dip. It certainly didn't feel that way when I experienced it. Even the 2008 financial bubble now looks rather tame. Again, that's not how it felt at the time. Even last year's mini-crash doesn't look that bad in retrospect.
And this is for an all-equity index. VBAL is designed to provide a much smoother ride than this chart shows.
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Re: VBAL now? Or what?
Ken wrote: ↑20 Mar 2021 10:30
OnlyMyOpinion is right. Just look at the total value of your entire portfolio. Not even just all VBAL in all accounts but everything. You are not all in VBAL yet and in fact you may never be. So the important number to look at is the grand total. That's why you are diversified; so if one thing is down, hopefully another is up.
Thanks Ken. Sadly, from what I have in the markets with VBAL and mutual funds, I am down 0.51% so far in 2021. Might not be a lot for some, but as a single female on cusp of retirement, every little bit helps (or hurts)!
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Re: VBAL now? Or what?
Jackoby wrote: ↑20 Mar 2021 10:48I am down 0.51% so far in 2021.
One half of one percent is less than what a daily fluctuation can be. It's just noise. You know it, I know it. But your heart does not know it. Bottom line is that you don't trust the market. You're a nervous investor. After all, you're retirement income depends on this stuff. Being nervous is not a bad thing or a good thing, it's just the way it is. Recognize it and realize that it will take time to become comfortable. All that said, I think VBAL is perfect for you. In VBAL you own 12,000 stocks from all around the globe plus lots of fixed income. You can't get better diversified than that. If VBAL is down, everyone is down.
Ken
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Re: VBAL now? Or what?
Bylo Selhi wrote: ↑20 Mar 2021 10:43
More importantly, time has a way of smoothing the curves. Here's a chart of the S&P 500 going back 20 years. The 2000 Internet bubble now looks like a small dip. It certainly didn't feel that way when I experienced it. Even the 2008 financial bubble now looks rather tame. Again, that's not how it felt at the time. Even last year's mini-crash doesn't look that bad in retrospect.And this is for an all-equity index. VBAL is designed to provide a much smoother ride than this chart shows.
Ah, perspective! Just never paid much attention to the ups and downs before until the realities of retirement and peace of mind LOL. Thanks for that.
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Re: VBAL now? Or what?
These threads were mentioned before but they bear repeating. Study them and bookmark them for future reference. They just might help you stay on course and learn to ignore the noise.
Growth of VBAL and its components
A simple retirement using VBAL and VPW
There are 2 key messages here. In the first thread, you will see how the individual components of VBAL are quite volatile but how VBAL tends to be much less volatile, and over time, trends to the northeast. All of us in retirement learn to not be reactive to market noise. Think of market noise like the weather. It is unpredictable on any day or week or month, but there are seasons and annual averages which make it all quite 'predictable' on a macro scale.
The second thread is a good example of how to draw from VBAL every year to fund your retirement, by taking out a year's worth of VBAL from your portfolio using the VPW table and keeping that year's portion in a HISA account from which you draw from over the course of a year. There are a number of ways to manage that, but the key is not to exceed the withdrawal factors in the VPW table to avoid premature depletion of the portfolio and keeping a HISA cash reserve big enough to provide a cushion for your annual cash flow needs.
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Re: VBAL now? Or what?
AltaRed wrote: ↑20 Mar 2021 11:29These threads were mentioned before but they bear repeating. Study them and bookmark them for future reference. They just might help you stay on course and learn to ignore the noise.
Growth of VBAL and its components
A simple retirement using VBAL and VPWThere are 2 key messages here. In the first thread, you will see how the individual components of VBAL are quite volatile but how VBAL tends to be much less volatile, and over time, trends to the northeast. All of us in retirement learn to not be reactive to market noise. Think of market noise like the weather. It is unpredictable on any day or week or month, but there are seasons and annual averages which make it all quite 'predictable' on a macro scale.
The second thread is a good example of how to draw from VBAL every year to fund your retirement, by taking out a year's worth of VBAL from your portfolio using the VPW table and keeping that year's portion in a HISA account from which you draw from over the course of a year. There are a number of ways to manage that, but the key is not to exceed the withdrawal factors in the VPW table to avoid premature depletion of the portfolio and keeping a HISA cash reserve big enough to provide a cushion for your annual cash flow needs.
Thanks very much. Read and bookmarked. I will also have a go at the VPW worksheet. You and everyone are such a wealth of information!
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Re: VBAL now? Or what?
Jackoby wrote: ↑20 Mar 2021 10:48I am down 0.51% so far in 2021.
One half of one percent is less than what a daily fluctuation can be. It's just noise. You know it, I know it. But your heart does not know it. Bottom line is that you don't trust the market. You're a nervous investor. After all, you're retirement income depends on this stuff. Being nervous is not a bad thing or a good thing, it's just the way it is. Recognize it and realize that it will take time to become comfortable. All that said, I think VBAL is perfect for you. In VBAL you own 12,000 stocks from all around the globe plus lots of fixed income. You can't get better diversified than that. If VBAL is down, everyone is down.
Yes, I think you nailed my profile ! Lol. Glad to know I'm going in the right direction though. Cheers.
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