2025 Mid-Year Portfolio Update – Millennial Revolution

“May you always life in interesting times.”

–Ancient Chinese Proverb

To which I reply: Shut the Hell up, Ancient China!

Oh, we live in interesting times alright. A little too interesting, some might say.

I typically enjoy reading the news, sifting through the headlines of the day and figuring out what moves might affect the world economy and the FIRE community as a whole, versus the clickbait-y noise.

Not this year, though. Nuh-uh. Now, whenever I open a news site, it’s with a feeling of dread, going “What fucked up shit happened today?” There are riots in LA, trade wars with everyone, and now the USA has started an actual shooting war with Iran.

So in the midst of all this craziness, let’s look at how our portfolio has reacted.

Preferred Shares

Back in 2025, I made a judgement call to swap out the bond portion of our portfolio to preferred shares. Admittedly, it was a significant departure from the passive indexing strategy that I take with equities, but I felt the value was just too compelling.

To recap, preferred shares in Canada are mainly structured as rate-resets, which mean that their interest rates reset every 5 years to current market conditions. I use the fund ZPR, which is structured as a preferred share ladder, in which 20% of the fund’s preferred shares are always resetting in any given year. Back in late 2022 (https://www.millennial-revolution.com/invest/is-a-buy-signal-flashing-for-preferred-shares/), I thought that this combination of an attractive dividend yield (6%) on top of incoming dividend hikes was an offer I couldn’t refuse, and we were rewarded with this asset class gaining almost 20% last year and even beating the US index!

Fast forward to 2025. How has the interest rate environment changed?

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

Remember, preferred shares resetting in 2025 are resetting from 2020’s interest rate, 2026’s are resetting from 2021’s, and so on. If we look at our chart, we can see that in 2020, Canada’s interest rate was 0.25%. Today’s interest rate is 2.75%. So that means everything resetting this year is going to go up in yield, since 2.75% is higher than 0.25%.

In fact, from this chart we can see that this situation will persist throughout 2026, since 2021’s interest rates were also stuck at 0.25%. Interest rates began rising in 2022 to combat inflation, and at some point this advantage will go away as new preferred shares will start resetting at rates equal (and eventually, lower) than what they were before, so there is a point where exiting this position will make sense. But until that happens, I want my dividend hikes.

So how did the fund do?

After a brief period of sucking when everything plummeted at the start of the year, preferred shares have come roaring back, posting a respectable 4% gain YTD. Combine that with a current dividend yield of 5% and I’m pretty happy, considering I’m getting both good income, and good appreciation. For comparison, ZAG, the Canadian bond index, is flat for the year. Again, we can’t be expecting this kind of performance forever, especially after last year’s blockbuster gains, but as long as the fundamentals support increasing dividends, I’m hanging on to these.

So that’s my take on fixed income. Since I’ve retired and become more focused on income in my investments, I’ve found myself doing more active management on this side of my portfolio. Fixed income tends to swing less wildly, and is more affected by factors like interest rates, dividend yields, and debt levels, all of which I can use math and logic to understand. On this side, I’m more of a “value” investor, and am comfortable jumping on deals that I think are undervalued and delivering particularly attractive yields.

Equities, on the other hand, are a whole different animal. Let’s see how they’re doing so far this year.

US Index

Ah, the USA.

What can I say that hasn’t already been said from all corners of Wall Street? Trade wars bad. Regular wars, even worse. Make stock market sad-sad.

But Trump’s going to do what Trump’s going to do and we just have to deal with it. So how has the US index performed so far this year?

As somewhat expected, all this stuff in the news has weighed on the US index, and is unlikely to get better anytime soon with this newest development in Iran. But you know what? I thought it would be way worse. -1% isn’t great, obviously, but I thought we’d be in a -20% bear market territory. So, the fact that’s it’s basically flat for the year is actually pretty darned good.

Of course, it could all change at any moment as tariffs bite in the summer, or as the repercussions of Trump attacking Iran become more clear, so we’ll have to wait and see if markets remain somewhat stable or go back to plunging soon.

Canadian Index

With all the noise about tariffs, and how Canada’s economy is dependent on trade with the US, there’s no way the TSX can be doing well, right?

OK, once again I was dead wrong in my prediction. The TSX is somehow up 8% this year.

Three things seemed to have caused unexpected tailwinds for the TSX.

One, the effect of tariffs have caused inflation expectations to spike, and when inflation rears its ugly head, gold prices go up. Canada’s mining sector produces a lot of gold, so that’s looking pretty shiny right now.

Second, the spiralling situation in Iran. I don’t know how things are going to end there, but I do know that whenever there’s war in the Middle East, oil prices spike. All of a sudden, nice, stable, and polite Canada seems like not so bad of a partner to trade with.

And finally, our recent federal election replaced our previous Prime Minister. Justin Trudeau and Donald Trump really really really really really didn’t like each other, and their personal animosity was definitely becoming a problem. Now we have Mark Carney. He’s calm, he’s cool-headed, and he’s kind of boring, which is exactly the kind of leader we need right now.

EAFE Index

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

Wow! Go Europe!

I’ve been an investor for over a decade now, and I’ve never seen EAFE outpace the US like this. Even when the world economy’s in the shitter and everything’s going down, EAFE usually gets dragged down along with it.

But not this year.

The media recently made a lot of headlines talking about the Wall Street acronym TACO (Trump Always Chickens Out), but a much more interesting one they’ve coined to describe their trading strategy this year is ABUSA: Anywhere But USA.

As it turns out, the global economy was doing just fine until Trump basically destabilized the US. Money flees uncertainty, so this basically put a big red sign on the US stock market that read “Go Away, Money!”

But you know what? The US stock market is not the only game in town. Investors will go where there’s stability, and right now that’s in the EU, which has a total population about equal to the USA, well-regulated financial markets, and a stable government that’s not engaging in any active wars, trade or otherwise.

Hence, EAFE’s outperformance.

All Together Now

After we withdrew this year’s living expenses from our investments at the beginning of 2025, our portfolio was left with about $2,325,000.

Let’s see how our portfolio is looking so far this year.

Asset Class	Weight	YTD
Preferred Shares	25.00%	4.10%
Canada	25.00%	8.30%
US	25.00%	-0.50%
EAFE	25.00%	13.90%
Total		6.45%

So despite all this crap happening, our investments have grown so far this year by about 6.5%, placing our portfolio’s value at $2,477,000.

This tells me two things.

The first is while I can use math to gain some insight into fixed income investments, I can’t predict anything on equities at all. I was certain that the trade war would spin the world economy into a recession, and yet here we are. So while I now believe that some limited active management may be possible for fixed income, I am definitely sticking with passive indexing on the 75% of my portfolio that’s invested in equities.

The second is that you can’t ignore international markets. US stocks have been leading the way in gains over the last few years, so that’s given credence to the argument that investors should throw all their money into VTI and ignore every other region of the world.

Not this year.

A truly passive indexing strategy has to be globally diversified and includes exposure to multiple countries and geographic regions. You never know when wars, natural disasters, or political upheaval will hit any one region, so it’s smart to spread your bets.

Bonus Content: J.L. Collins Interviewed by 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 and I think it’s the best interview anyone’s done of anyone in the FIRE community, hands down. It’s funny, it’s informative, and it should be required viewing for anyone even remotely interested in FIRE.

Check it out! You know you want to.

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