At what rate would you re-allocate the majority of your portfolio to fixed income? | GIC discussions | Discussion forum

I'm beginning to agree, for older folks who've got their pile they can safely whittle down, i.e. increase fixed income portion. With pretty well everybody's attitudes today re capitalism, profit, large corporations, resource development, wealth creation, work ethic, etc, etc, I increasingly feel the past patterns are done in the developed world, so for older folks it might make sense to play it safe if their capital is sufficient. Younger folks and others have no choice but to be in the market and hope for the best, interest rates are further and further away from real inflation so you're just losing money there and that's not an option for some people. Unless they're 100% getting a sufficient inheritance.

5% and I'm thinking of selling all stock and investing all in GIC's 5 to 10 years will give me an income of 78k without CCP or OAS or pension and not reducing any of my capital

I would re-allocate based on need for the money and not by the rates on the GIC's.

The return of stocks is not predictable over short periods of time. It is risky to wait until the year before retiring or after one retires to start selling equities to build a ladder of GIC's that will fund the next five to ten years.

Once the next five to ten years are secured, then one can sell more stocks opportunistically during those years to fund the years after that.

Newbies or otherwise, I don't see the logic of a magic number. What good is (for example) 6% if your purchasing power is dropping by 12% during the same time and you're relying on that income to cover your bills?

Bill said
Newbies or otherwise, I don't see the logic of a magic number. What good is (for example) 6% if your purchasing power is dropping by 12% during the same time and you're relying on that income to cover your bills?  

Well, Bill, I don't really care if you don't see the logic of my magic number of six. The point is, it's perfectly logical given my situation. If we see persistent 12 percent inflation, the proceeds of my 6 percent ladder would still cover me nicely. If it's higher than that, well, I guess I'll have to dip into my principal. And if we see persistent 12 percent inflation, I suspect you can kiss your stock market returns goodbye. The point is, it works for me. And I sleep well at night, not worrying if Elon's predictions are on point. Everyone's situation is different, don't you think?

.
Silly people ... GICs are just so 'Yesterday'.

Bitcoin is Low now. It's time to Dive-In . . .

Kowa-Bunga ❗❗

Dean

This is a complicated question, and personal circumstances certainly do enter into it.

At 75, and considering my assets and "guaranteed" income sources, it's not a decision I have to make, but I do think about such questions because, in my real life, people do sometimes ask me for advice and I am interested in such questions.

Norman1 and AltaRed have made particularly important points here already.

To those, I might add, don't fall into the trap of comparing dividend returns to GIC returns and then deciding to switch to GICs when their returns exceed those of dividends or vice versa. They are not directly comparable because the dividends come with volatility risk. By the time you decide that GICs have crossed that threshold, stocks will likely have fallen and you will lose as tons of other people will have the same idea. You may already be losing, although I don't follow stocks closely, but this is what my neighbours are complaining about. In other words, it may already be too late to make this switch, or soon will be by the time you decide on the basis of a number, as too many people may have the same idea at the same time. Hence, Norman1's approach makes a lot more sense.

It's worth remembering too that there is no such thing as "no risk". Even with GICs etc., you have currency risk, inflation risk, and opportunity risk in the case of locked-in GICs.

If you're going to stick mostly with fixed income, you should diversify it as much as possible, with a ladder that does go out ten years, possibly diversify into another currency or two (depending on what you think of those currencies' futures - sovereign), consider bonds held to maturity, also consider annuities bought at staggered times to diversify rates of return.
Options for diversification within fixed income are limited. Perhaps others will have some other suggestions for that.

Yes, lifeonanisland, I do completely agree everybody's situation is different. I just personally don't get how one can do such specific calculations to determine 6% exactly, i.e. not 5.75%, or 6.25%, is the magic number, given that for me there's a lot of guesswork/estimates involved in how the future plays out. But that's just me, i.e. aside for tax purposes I've never done much specific calculations re my money, I've always kind of broad brushed my finances, so credit to you if you can calculate the GIC rates that let you sleep soundly.