What is actually considered a âpretty damn goodâ investment return? And if youâre earning 20%, 30% or even 40%+ in yield, should you really expect that to continue? Welcome back to Financial KarMoe Episode 19, where @karyungtom and Moe tackle another round of investing, personal finance and FIRE questions from the Blossom community. This episode goes deep into what a reasonable long-term investment return might look like, why comparing investment strategies isnât always as simple as comparing two numbers, and why a high distribution or yield doesnât automatically mean a higher total return. đ We start by discussing the idea of a âgoodâ return and why expected returns need to be viewed in the context of risk. We also talk about high-yield strategies, covered-call ETFs, market demand and why investors should be careful about anchoring their expectations to unusually high returns. đ We then get into what you should actually compare your investment to? Kar explains why comparing two investments can be useful when youâre trying to isolate the reason for a performance differenceâbut much less useful when the investments have completely different strategies, levels of leverage or objectives. We also tackle a question from a new investor who wants to understand what to do with a non-registered account. We discuss capital gains, Canadian dividends, interest income, tax-loss harvesting, asset location and the trade-off between optimizing every last tax dollar versus keeping your investment strategy simple. đ And yes⌠we talk about XEQT again. đ Both of us explain why weâre comfortable with the simplicity of using a broadly diversified all-equity ETF across accounts, while also discussing how investors with larger portfolios might choose to get more sophisticated with asset location. đď¸ Then we shift into an important FIRE question: What happens when you stop accumulating and start spending? Would we still hold 100% XEQT or equivalent all-equity exposure in retirement? We discuss cash wedges, bonds, sequence-of-returns risk, withdrawals, distributions and why the ârightâ portfolio may depend heavily on the size of your portfolio and your retirement timeline. đ We also answer some very non-investing questionsâincluding whether it makes sense to buy a new versus used vehicle, whether a $100,000 car is reasonable if it represents only 5% of your net worth, and whether leasing a newer vehicle can ever be justified as a lifestyle choice. đ¤ We even tackle the question: âAt what point can you stop calling yourself a beginner investor?â đĄ Finally, we discuss whether investors should try to time the market, the role of portfolio lines of credit and borrowing to invest, and why you should NEVER blindly copy another investorâs strategy. Your income, expenses, emergency reserves, job stability, family situation, risk tolerance and financial goals can all change the answer. And we finish with an important message about investing disagreements: you can disagree with someoneâs strategy without thinking theyâre an idiot. Different investors can have different goals, timelines and expectationsâand thatâs part of what makes markets work. https://youtu.be/UzNkFYu9xno
Love all your discussions đđź As for the question about the non registered for some ppl who are lower income it might make more sense to build that plus TFSA vs RRSP if you donât need the tax break now. Cash wedge: yes there is an opportunity cost to this however itâs the human aspect of not having to sell during a downturn like @retired said in her post I embrace the cash bucket idea but reduce opportunity cost is to only keep your basic expenses in that cash wedge vs your desired spending budget .. Oh yes, @karyungtom is definitely advanced investor level lol đ incredible research & insights always As for car get the best you can afford and drive it to the max.. my previous car was a 2 yr old car with 30km & I drove it to over 200km, and this last one was brand new in 2020 (used were expensive anyhow ) & I plan to drive to the end (over 200km) as well hopefully đ¤đź Thanks for helping us think through all these topics đŤś
Mr Financial@mr.financial ¡ 7d
I didn't actually expect you make a comment on my question. Well put nevertheless!!
Max Penders@mjpenders ¡ 7d
@karyungtom expected returns is the start of your journey into quant! Read Investing Amid Low Expected Returns!
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