2025 Mid-Term Portfolio Update – Millennial Revolution

Firecrackers were early retirees in the world travel. She once lived in one of Canada’s most expensive cities, but instead of drowning her debts, she refused home ownership. The result is a 7-figure portfolio that allows her and her husband to retire and travel the world at the age of 31. Their stories have been published on CBC, Huffington Post, CNBC, BNN, Business Insider and Yahoo Finance. By far, this is the most shared story in CBC history, with their viral videos about money on CBC earning 4.5 million views.

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“May you always live in interesting times.”

– Ancient Chinese proverb

I answer: Shut up, ancient China!

Oh, we live in interesting times. Some are too interesting, some might say.

I usually like to read news, filter the headlines of the day, and figure out which actions may affect the world economy and the fire community as a whole, rather than Clickbait-y noise.

But not this year. nuh-uh. Now, whenever I open the news website, I feel fear and then “What happened today?” There are riots in Los Angeles, a trade war with everyone, and now the United States has begun an actual shooting war with Iran.

So, in all this madness, let’s look at the reaction of our portfolio.

Preferred stocks

Back in 2025, I made a judgment to exchange the bond portion of the portfolio for the preferred shares. Admittedly, this is a big difference from the passive indexing strategy I have with stocks, but I think the value is too compelling.

To review, Canada’s preferred shares are primarily used as a structure for interest rate acquisitions, which means their interest rates are reset to current market conditions every 5 years. I use the fund ZPR, which is structured as the preferred stock ladder where 20% of the preferred stocks are always reset in any given year. Back in late 2022 (I thought the combination of attractive dividend yields (6%) on the entry dividend hike was a quote I couldn’t refuse, we paid off on nearly 20% of the asset class last year and even beat the U.S. Index!

Fast forward to 2025. How does the interest rate environment change?

Here is a chart of Canada’s benchmark interest rates (set by our central bank) over the past 5 years.

Remember, the preferred shares reset in 2025 from the 2020 interest rate (2026), the first-choice shares reset in 2021, and so on. If we look at the chart, we can see that in 2020, interest rates in Canada are 0.25%. Today’s interest rate is 2.75%. So, this means that everything reset this year will increase production, as 2.75% is above 0.25%.

In fact, from this chart, we can see that this will continue since the interest rate in 2021 is also trapped at 0.25%. Interest rates start to rise in 2022 to combat inflation, and at some point it makes sense to exit this position as new preferred stocks will start resetting at an equal rate (eventually, lower than before). But until this happens, I want a dividend hike.

So how do funds do it?

After a brief sucking period, when everything plummeted early this year, the preferred stock came back, releasing a 4% gain YTD. Combining it with the current dividend yield of 5%, I am very happy considering that I have both earning income and good appreciation. For comparison, the Canadian Bond Index Zag is flat for the year. Again, we can’t expect this performance forever, especially after last year’s blockbuster growth, but as long as fundamentals support increasing dividends, I’ll stick with it.

That’s what I think about fixed income. Since I retired and focused more on income in my investments, I found myself doing more active management in this aspect of my portfolio. Fixed income tends to be less fanatic and is more influenced by factors like interest rates, dividend yields, and debt levels, which I can use math and logic to understand. In this regard, I am more of an investor of “value” and can easily choose a deal that I think is undervalued and brings particularly attractive returns.

Stocks, on the other hand, are completely different animals. Let’s see how they’ve performed so far this year.

United States Index

Ah, America.

What can I say nothing hasn’t said in every corner of Wall Street? The trade war is not good. Conventional wars, even worse. Make the stock market sad.

But Trump will do what Trump is going to do, we just have to deal with it. So, how has the U.S. index performed so far this year?

As expected to some extent, all of this in the news has had an impact on the U.S. index and, in the latest developments in Iran, it is unlikely that it will soon get better. But do you know? I think it will be worse. Obviously, -1% is not good, but I think we will be in the bear market sector of -20%. So, this fact is basically flat and actually terrible.

Of course, this may change at any time as the tariff bites over the summer, or as the impact of Trump’s attack on Iran becomes clearer, so we have to wait and see if the market remains stable or drops soon.

Canada Index

With all the noise about tariffs, and how Canada’s economy depends on trade with the United States, TSX can’t do well, right?

OK, my prediction is wrong again. TSX has risen 8% in some way this year.

Three things seem to cause unexpected headwinds for TSX.

First, the impact of tariffs has caused inflation expectations to soar, and gold prices rise when inflation raises its ugly head. Canada’s mining industry can produce a lot of gold, so it looks shiny now.

Secondly, Iran’s spiral state. I don’t know how things will end, but I do know that whenever there is a war in the Middle East, oil prices soar. Suddenly, Canada’s kindness, stability and politeness seemed pretty good.

Finally, our recent federal election replaced our former prime minister. Justin Trudeau and Donald Trump really really don’t like each other, and their personal hatred is certainly becoming a problem. Now we have Mark Carney. He’s calm, he’s cool, he’s bored, and that’s exactly the kind of leader we need right now.

EAFE index

Now it’s time to see what’s going on in the entire pond.

Wow! Go to Europe!

I’ve been an investor for over a decade and have never seen so many EAFEs. Even if the world economy is shaken and everything is falling, EAFE will usually delay with it.

But not this year.

The media has made a lot of headlines lately, talking about Wall Street’s abbreviation Tacos (Trump is always chicken), but they have created a more interesting person to describe this year’s trading strategy, which is Abusa: anywhere but the United States.

The global economy proved to be in good shape until Trump basically undermined the stability of the United States. Money escapes uncertainty, so this basically puts a big red sign on the U.S. stock market that says “Go away, money!”

But do you know? The U.S. stock market is not the only game in town. Investors will go to a stable place, now the EU’s total population is with the United States, good financial markets and a stable government that is stable, while a stable government is not engaged in any active war, trade or other means.

Therefore, Eafe is performing more and more.

Together now

After withdrawing the cost of living this year from investments in early 2025, our portfolio is about $2,325,000 left.

Let’s see what our portfolio looks like so far this year.

So despite all this nonsense, our investment has grown by about 6.5% so far this year, setting the value of our portfolio at $2,477,000.

This tells me two things.

First, while I can use math to understand fixed income investments, I simply can’t predict anything on any stock. I’m sure the trade war will put the world economy into recession, but we’re here. So while I now think that fixed income may be limited in limited active management, I will certainly stick to the passive index of a portfolio invested in 75% of the stock.

The second is that you cannot ignore the international market. U.S. stocks have been leading the way over the past few years, so it is believed that investors should put all their money into VTI and ignore all other parts of the world.

Not this year.

A true passive indexing strategy must be globally diversified, including contact with multiple countries and geographical regions. You never know when war, natural disaster or political unrest will hit any area, so the bet is wise.

Reward content: JL Collins interviewed Hasan Minhaj

A few days ago, comedian and host of the Netflix show Patriot Act, Hasan Minhaj sat down to interview our good friend JL “Godfather” Collins, which I think is the best interview anyone in the firefighting world has ever done and they will let it go. This is fun, informative and should be watched for anyone interested in fire.

check it out! You know you want.

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