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Discussion Starter #1
I work for the federal government and should have a good, solid pension after 30 years on the job. Regardless I still max out my RRSP and TFSA each year. In a short while I'll be rebalancing my portfolio to include some US ETFs. Basically I consider my TFSA and RRSP to be one portfolio. I plan to hold about 45% in XIC (in my TFSA and the remainder in my RRSP), 20% in VTI (RRSP), 20% in VEA (RRSP), and 15% in VWO (RRSP). I'm all right with the risk of holding a 100% equity portfolio. Having said that, would you consider it prudent to still hold a portion of my portfolio in a bond ETF?

Thoughts?
 

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Congratulations on an enviable financial standing!
In your state, tax planning would be a bigger concern than whether to hold bonds or not.
With a fully-indexed, gold-plated Federal pension and maxed out RRSPs, you are looking at almost no reduction in income after retirement.
In fact your post retirement income may be higher than present income.
 

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I would.

If a buying opportunity comes around, what would you if you had no cash or bonds?
That's a good idea and kind of the direction I was thinking as well. I figure I might hold about 20% in XBB to start (split between TFSA and RRSP), then reduce the other holding by that amount.
 

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Your pension is your "bond" allocation. It provides a steady, pre-determined income in retirement, much like an annuity. Considering that bond ETFs are yielding something like 4.5%, they do provide acceptable returns if they are tax-sheltered inside a TFSA or RRSP. But if you wish to keep money around to seize opportunities, cash is probably better. Bonds will likely take a hit when interest rates start to rise, so you may have to sell at a loss to get the cash you need for investment purposes. However, TFSA and RRSP funds should have a low turnover rate... each new annual contribution is channelled towards the preferred ETF, and that's it. I'm not sure keeping a lot of cash is a good idea.

As a public service employee, I am 100% allocated to stocks in my personal investments. If you have spare money to throw around, it wouldn't be a bad idea to work on a non-registered portfolio as well, to supplement your pension income.
 

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I would adjust the thinking slightly. Instead of asset-allocating 100% to common stocks, why not NOT asset-allocate and simply put your money where you think it will earn the highest return. Personally I am not at all convinced that NA equity indexes have any price appreciation left. And I demand a lot more return than some dividend percent.

Your downside is protected so you definitely don't need debt. You probably also own your own home.
 

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put your money where you think it will earn the highest return. Personally I am not at all convinced that NA equity indexes have any price appreciation left. And I demand a lot more return than some dividend percent. Your downside is protected so you definitely don't need debt.
Does that essentially leave only emerging markets?
And maybe direct real estate investment?
 

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Discussion Starter #8
I would adjust the thinking slightly. Instead of asset-allocating 100% to common stocks, why not NOT asset-allocate and simply put your money where you think it will earn the highest return. Personally I am not at all convinced that NA equity indexes have any price appreciation left. And I demand a lot more return than some dividend percent.

Your downside is protected so you definitely don't need debt. You probably also own your own home.
It seems like a simple solution, but where do I think my money will earn the highest return? I haven't a freaking clue! Regarding Harold's ideas of emerging markets and direct real estate: my emerging markets ETF (my entire RRSP contribution from last year) has risen about 60% in nine months, and my house (yes, owned) has appreciated tens of thousands of dollars in the three and a half years since we bought it. How much higher can they rise? My next step, I suppose, will have to be learning how to properly pick individual stocks.
 

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I am in the exact boat as you. Gold plated pension that I don't deserve and I max out the TFSA and RSP.

My pension is my "bond" component and I am 100% equity.

If I were an indexer I would simply DCA monthly into each account, maybe a 3 way split between CDN/US/Global etf or index fund.

Personally I am dividend growth investing and keep cash only if I feel there is nothing on sale or at least fairly priced. I do not keep cash at hand to satisfy an asset allocation model.

Sure we would all like to put our money where it will get the best available return but where is that?

But anyway I see nothing wrong with all equity unless you absolutely cannot tolerate swings in value.
 

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Obviously, if you chose to NOT asset allocate and put your money where you think it will make the best return, you must first decide where that is. If you don't have the skills or inclination to make that top-line decision then you cannot use the the strategy. It is certainly simpler than making individual company choices within asset catagories.
 

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I'm just looking at your RSP allocation and it appears you are 55% in Vanguard ETFs that are in US%. Don't you think that's a little risky taking on currency risk? If the US dollar gets weak, any gains you see in the US could possibly be erased.

I would pull some money back into Canada or put it into an emerging market ETF (XEM)

If you want to reduce US currency risk, might I suggest in picking up a Canadian ETF that specializes in resources or energy? I would pick XMA. I would do this because as the US$ weakens, the prices of commodities will increase (and vice versa). That should help resource company stock prices--most of the time. So this would be a simpleton way to hedge out a little bit of the currency risk. A weak US$ would hurt your US investments, but it would help your Canadian resource stocks.

I would agree with some of the other posters. I don't think you need too much in bonds. Although I always pick dividend paying stocks over bonds for a lot of reasons. So I would suggest XDV instead of bond funds.
 
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