The problem with having too much equity

The Silverbergs want to move their 100% equity portfolio into low-cost ETFs. Is it the right choice for them?

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From the February/March 2016 issue of the magazine.

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The Problem

Portfolio Makeover - Before For the past 18 years, Karine and Dave Silverberg of Milton, Ont., have managed their own portfolio of mutual funds. Neither has a company pension so the 38-year-old couple has been very aggressive with asset allocation. “Up to now, we’ve been 100% in equities,” says Karine, who oversees their six-figure portfolio to which they contribute $4,000 a month. All their investments are in index funds with fees of up to 1.1%. The couple now wants to switch to lower-fee exchange-traded funds (ETFs), but is starting to question their 100% equity position. “Is it right for the long term?” asks Karine. “We won’t need the money for years.”

The Fix

Even though the Silverbergs are willing to take a high level of risk with their investments, they don’t necessarily need to take this much risk, says Shannon Dalziel, a certified financial planner with PWL Capital Inc. in Toronto. “Since they’ve implemented a frequent savings strategy, they may find that an aggressive asset allocation, along with its higher risk, isn’t necessary to meet their goals.”

In fact, a more balanced portfolio with 70% equities and 30% fixed income holdings may enable them to meet their long-term goals and also provide a lot less volatility along the way. Still, if they’re comfortable with the market swings and don’t give in to panic and sell prematurely, “the 100% equity portfolio makes sense for them—for now,” Dalziel says.

At the same time, she advises that Karine and Dave focus on what they can control—their rate of savings, as well as the fees they’re keen to lower. The couple can build a low-cost, well-diversified portfolio using just two ETFs: the Vanguard FTSE Canada All Cap Index (which holds 230 Canadian large companies) and the iShares Core MSCI All Country World ex Canada Index (which holds 5,000 companies worldwide, half of which are U.S.).

“These funds will give them simplicity, and their fees will be a razor thin 0.17%,” says Dalziel. The expectation is that a higher-equity portfolio will give this couple higher returns, but Dalziel cautions that it’s important to continually reassess their asset allocation—especially closer to retirement.

The fix

4 comments on “The problem with having too much equity

  1. Based on what it says in the article they have a large 6 figure portfolio and are adding a very generous $48,000 a year in additional capital. It also sounds like they are very comfortable with the volatility of equities and don’t panic at the ups and downs. I am wondering if they might be good candidates for dividend growth investing? A great long term solution for those that can handle the stock market swings and hopefully if given enough time the portfolio will eventually generate enough dividends to cover all of their living costs without having to dip into their capital. Just a nice way to do it because then you really don’t care what the market is doing, as long as those dividends keep coming in you’re set.


    • The recommended ETFs provide distributions just fine for that purpose. All you are advocating is an individual stock approach over an index approach, which is a terrible idea for the majority of retail investors who don’t possess the time or expertise to consistently beat the market.


      • You’re probably right, people these days spend more time deciding what smart phone to buy than planning their retirement. To each their own I guess.


  2. “fees will be a razor thing 0.17%” is a bit disingenuous when you factor in the foreign withholding taxes. From Justin Bender April 2015 …….
    “After taking into account the additional tax drag from foreign withholding taxes, the estimated cost of VXC increases to 0.66% (from 0.27%), while the estimated cost of XAW increases to 0.56% (from 0.23%.”


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