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I am trying to set up our portfolio for retirement and want our money in safe investments. I was looking at the ladder strategy, but I find GIC's pay so little in interest, bonds are better but only if you buy corporate, (not government, provincial or municipal), any suggestions as to how to do this and still make a reasonable amount of money on top of inflation? I am beginning to believe that if we want our money safe we may as well take it out in cash and keep it in our mattresses (just don't throw out the mattress). We are struggling to do this ourselves as we have lost faith in our financial adviser, and I think he is avoiding us. Help!
 

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The answers depend on your age, where you're starting from, how much risk you're willing to take on and how long until you retire.

You may want to start by taking some financial books out from the library. Perhaps "The Wealthy Barber" to get a rough idea and then "The Four Pillars of Investing" for more precise information. A good book from more of a savings and philosophy perspective (rather than investing) is "Your Money or Your Life".
 

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Sorry, my first time to post and I probably didn't make myself clear. We are wanting to retire in about 3 - 4 years and are trying to set up investments that will work for us. We are trying to keep a larger portion of our money in safe investments which will give us a return to help sustain us. The last couple of years did a fair bit of damage to our portfolio and we have to take responsibility for this as we left it in our advisers hands. We have learned a very important lesson with that and now we are taking more of a hands on approach and trying to do more ourselves. I guess when it comes right down to it the only ones who will protect what is left of our retirement portfolio is us and we want to ensure it is in safer investments. Maybe I should ask one question at a time - GIC's are apparently the safest and are locked in for a certain amount of time, Bonds have a maturity date but the price you pay fluctuates and you can sell them at any time, correct? What I have trouble with is I am using RBC Direct Investing and there are special features listed for each bond. I don't understand these special features and what makes the price fluctuate? I have tried to find this information or clarification on each individual bond but do not know where to look, can you point me in the right direction. Thanks for all your help!
 

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dear momma,

the last thing in the world i wish to do is sound cruel, but there are a significant number of investors with inadequate knowledge & experience who seem to be falling off their advisors' laps and making their way onto this forum.

if you do not know how to read a bond table, momma, you are not ready to manage your own investments. It will take you several months of diligent study to catch up.

the corporate bonds you are noticing whose yields are significantly higher than GIC yields are the poor quality bonds. These are often the personal finance companies and sectors of the automobile industry. These are not instruments for first-time investors, imo.

in addition, bonds in small retail quantities are not something that can be sold "at any time." The hidden commissions in retail bond trading are prohibitively high. That is why so many threads here on this forum deal with bond laddering, which is a way of holding bonds to maturity and avoiding paying the 2% hidden commission for a one-way bond buy or sell.

there are standard drivers of bond prices, such as prevailing interest rates, time to maturity and quality of bond issue. There are plenty of books and articles in libraries that will explain the foregoing. Won't you please embark on a study course.

it is some time now since the worst panic selling in the crash of 2008-09 took place. Is it possible your advisor is not urging you to liquidate everything now and turn to 100% low-paying GICs or guaranteed paper at the present moment because he understands that some corner of your portfolio, howsoever small, should remain open to growth in the form of common stock.
 

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Hello,

I remember reading a book and in that book the author said that holding a good short- term fund or better ETF is the roof over your head. When the markets go crazy the Bonds keep a roof over your head.

Maybe Barclay's short term bond index (ticker:XSB) it is alittle safer that a broad bond fund but returns are alittle less. Claymore investements have an 5 year laddered ETF the ticker CBO. Also I have emailed Claymore with what some may call dumb question and they've answered really fast and in detail.
 

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The last few years have presented a significant dilemma for those nearing retirement and even experienced investors share some of your concerns. The problem is that one tends to desire safety as retirement nears but for many, the minuscule interest rates may mean a meager living standard in the future. However, while stocks may provide the chance for a better standard of living and a much better chance of recovering from the past year, they also provide significantly more risk. And then to top it off, many advisers seem to build a client portfolio that seems to be more geared to meeting their own retirement objectives rather than the clients. (I'm not saying that your adviser fits this description but from what I have seen many and perhaps even most do.)

I would suggest two options to consider:

#1. Make an appointment with a fee for service adviser. You will pay up front for advice rather than having your fees buried in high MER mutual funds. Of course you would have to do some research to ensure you find a good adviser.

#2. Consider a modified "couch potato" portfolio. This is a portfolio made up of index funds which typically have very low management expense ratios. The typical couch potato portfolio is 25% bond, 25% Canadian equity, 25% US equity and 25% international equity.

However someone nearing retirement, wanting a reasonable amount of safety, who does not have an inclination for stock trading, may want something like this (this is just off the top of my head, may not suit you at all).

20% GIC and/or cash
30% bond ETF
20% Canadian Index ETF
5% preferred share ETF
5% REIT ETF
10% US Index ETF
10% International index ETF

Ishares or Claymore carry these type of ETFs. The MERs range from about 0.15% - 0.55% depending on the ETF. Compare this to a mutual fund that charges 2.5% -- that amounts to $2500 on every $100,000 invested. That's money that can come in handy in retirement.
 

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If you were a DIY investor 2 years ago would your portfolio taken the same hit?

The answer is yes. Everybody took a hit and for the most part have recovered if they stayed in.

And we are working our way to the next correction were nobody will be to blame but you.

These are easy times for DIY investor.
 

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I would actually recommend looking for a new advisor; one you can work with on a more successful basis. You can certainly invest in GIC's on your own or create a bond ladder without much yearly maintenance. But if you're 3-4 years away from retirement (assuming you have a stable enough core of assets to retire on) do you really want to be taking all of this over on your own, learning what you need to learn and then manage everything when you retire as well?

Paying higher fees always sucks, but many people do it because it's peace of mind and they don't have to worry about managing their money; it's worth it to them. If your advisor isn't providing you with the performance or answers you want then it would seem appropriate as well to seek a few other opinions on your situation before investing on your own.

*I am not a financial advisor.
 

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Adding my $0.02: you don't just want a new advisor, you want one who specializes in retirement income planning. There are a LOT of duds out there.
 

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Madmomma,

I want you to go to the following web site and read the entire DIY investing primer -- it's about 100 pages in length.

Shake's Primer

After you've done that and you have decided that you are up for the challenge, then proceed. There are lots of helpful links on Shakespeare's web site. Come back here and ask any questions you may have.

It's not easy, but it most certainly can be done. Don't be in a rush to invest money when you don't know what you are doing. I cringe when I see folks playing around in the corporate bond market who don't know what they are doing. At best it could be an unpleasant experience, at worst, you will have your head handed to you.
 

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Discussion Starter #11
Thank you everyone for the words of advice. We have been thinking of changing out our FI as he holds the bulk of our retirement portfolio and we have come to the conclusion that his idea of safe is different from ours. We did take the step of paying for advice from another advisor and he did help us with what our "safe" retirement portfolio should look like. We went back to our FI and made the changes with him, but I don't think he was impressed with us telling him his business. We now are trying to invest the last few years of earnings and savings into somewhat safe investments according to what the second advisor told us. It is working so far, due to the amount of investigation and sweat we put into every decision. I thank you for the websites and will start reading the information and hopefully will be more confident in my picks. We have only picked the highest rated bonds, and they count as 25% of our portfolio. Will now look at the ETF's and some GIC's. Thanks again for all you help.
 

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I disagree with all the posts that recommend ETF's for either stocks or bonds. The OP says and probably means they want safety.

I would stick with relatively short term GIC's. Yes they have minimal returns. But I don't expect that situation to continue for long. I expect (even after-inflation) yields to be much better when what they buy today matures.
 

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#2. Consider a modified "couch potato" portfolio. This is a portfolio made up of index funds which typically have very low management expense ratios. The typical couch potato portfolio is 25% bond, 25% Canadian equity, 25% US equity and 25% international equity. .
Shouldn't a couch potato portfolio also reflect your investor profile?

Also, there is a stock ETF that hold the whole world, It is from Vanguard ticker: VT which is an easy way to hold Canadian, US and international stocks.
 

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Also, there is a stock ETF that hold the whole world, It is from Vanguard ticker: VT which is an easy way to hold Canadian, US and international stocks.
Be _very_ careful of that one if you are looking for returns.
You will get very low returns over a long period of time.
That index represents the entire world equity market and while certain countries experience double digit growth (China, India, etc.) the averge is very low.
This fund has returned barely 1% over a period of almost 10 years and there is no reason to expect any significant rise in returns for the next 10.
The top holdings are multi-billion dollar US companies, followed by a few Japanese and even fewer Western European companies.
 

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I wonder how Madmomma is doing

Just looking over old posts and can really identify with Madmomma. Interesting to see the advice listed here. Just wondering if the poster is still on track with her mission to self educate.
 

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Be _very_ careful of that one if you are looking for returns.
You will get very low returns over a long period of time.
That index represents the entire world equity market and while certain countries experience double digit growth (China, India, etc.) the averge is very low.
This fund has returned barely 1% over a period of almost 10 years and there is no reason to expect any significant rise in returns for the next 10.
The top holdings are multi-billion dollar US companies, followed by a few Japanese and even fewer Western European companies.
Sounds like "diworseification" gone bad.

My 2 cents: Dividend growth investing. My portfolio dropped 30-40% when "it" was happening last year. To be quite honest, it is NOT easy to be greedy when other are fearful, but it sure helps when your income grows by 9% or so while "it" was happening.

A good basket of non cyclical companies that produce consumer staples (preferable non reuseable, think soap, razor blades, etc) with a solid history of dividend growth will more than likely provide you with a growing income.

I recommend you read the investment zoo by Stephen Jarislosky, and the single best investment by lowell miller.

Also check out dividendgrowth.ca, lots of good free info.
 
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