For as long as I can remember, the traditional balanced portfolio has been 60% equities and 40% bonds. Indeed, all of my own model portfolios use that overall asset mix as a starting point. But a lot of industry folks are arguing that a 60/40 blend no longer makes sense.
In a recent article from the Associated Press, one fund manager put it this way: “One reason I’m skeptical about 60/40 is that it’s probably not aggressive enough, at least for a 40-year-old investor. You need to invest more in assets that are riskier than bonds if you want to meet your investment goals without having to save an extremely large percentage of your income.”
Historically, there’s no question this allocation served investors well. According to Vanguard, a portfolio of 60% stocks and 40% bonds would have returned 8.6% annualized from 1926 through 2011. Even if you subtract a full percentage point for costs, that rate of return would have been adequate to meet any reasonable retirement goal.
But that figure is based on an 86-year period where bond returns averaged 5.6%. In Canada, a diversified bond portfolio returned over 9% annually during the last 30 years as interest rates trended steadily downward, causing bonds to rise in value. But today, a fund tracking the DEX Universe Bond Index yields about 2.3% before fees. And while no one knows where interest rates are headed, it is mathematically impossible for bonds to continue the same price appreciation they enjoyed over the last three decades.
So where does that leave our 60/40 investor? With such a large allocation to low-yielding bonds, expecting anything close to 8.6% annual returns is clearly unrealistic: I would run screaming from any financial planner who made projections like that. However, I’m concerned when people tell investors they “need to invest more in assets that are riskier.”
Make the right adjustments
If you can’t expect bonds to deliver more than 2% or 3% for the foreseeable future, you need to make some adjustments. The problem is, telling people they need to adjust their risk tolerance is a non-starter. The expected returns of stocks and bonds change over time, but the human aversion to losses does not.
The fund manager in the AP article says with a higher allocation to equities “you’ll have a much better chance to achieve your retirement savings goals than you would with just 60 percent.” But that’s only true if the investor sticks to the plan—and an allocation of 70% or 80% equities is well outside most people’s comfort zone. Most people have a difficult enough time dealing with the volatility of a 60/40 portfolio.
Using Larry Swedroe’s rule of thumb, a portfolio with 70% equities can be expected to lose about 30% during a major downturn. With 80% equities, you should be prepared for a 35% loss. Most investors simply don’t have the stomach to lose a third of their life savings during a bear market, and today’s low yields on bonds and GICs don’t change this fact.
The solution, then, is not to discard the 60/40 portfolio and tell people they need to take more risk. A more prudent solution is to accept that most of us will need to save more money than our parents did. Or we’ll need to work a few years longer, or spend less in retirement. Nobody is jumping for joy about those options, but they are more realistic than the alternatives.
Maybe a greater diversification would be better?
Well the DEX Universe bond index does have a mix of corporate and gov bonds.
@Bettrave and Jungle: The DEX Universe includes about 30% corporate bonds, but even these have a yield to maturity well under 3%. So you’re not solving the problem, and by increasing your holdings in corporate bonds you’d be taking on more more risk. (Not a lot more, but it’s significant.)
My wife has a pension that will cover 50% percent (indexed for inflation) of our annual spending requirements when we retire. We will also qualify for CPP and OAS lowering our need for investment income. Does that mean I should change my allocation of my registered and non registered investments to 80 – 20 or 100 – 0? What is the proper way to account for the pension, CPP and OAS in regards to equity / bond mix?
Thanks,
The mathematical impossibility is definitely worth underscoring. Taking more risk is probably the dream come true for the fund manager (more fees!) – and potentially more volatility turning more investors chasing returns and hiring more … managers.
Your solution, however, is the right one as far as investors having to adjust their expectations. There are two key additional ingredients that bear mentioning:
1) control costs – use low costs products (ETFs) unless you truly see value in what you pay more for.
2) consider a tactical component to your portfolio where you and/or your advisor look to dial your risk level within your equity allocation up or down as YOU see fit.
@Al: That’s a very common question but the answer, unfortunately, is that there’s no easy answer. One could argue that a pension functions like a fixed-income investment, in that it generates a predictable income stream over the long term. So that might mean you can increase the equity component of your portfolio accordingly. But just because a person has a pension doesn’t necessarily mean they’re comfortable with the volatility of a 80% or 100% equity portfolio.
This is an important financial planning question that has to be made after carefully considering all of your circumstances. Rules of thumb aren’t helpful.
As a result of Justin Bender’s mention of Mebane Faber in a previous comment I just finished reading The Ivy Portfolio which he wrote. In it he describes the investing strategy of the large US university endowments (Yale, Harvard, etc) who have been able to achieve higher than market returns with lower volatility. He suggests methods by which individual investors can mimic this strategy. The takeaway is that one can reduce volatility and increase returns through a combinatinon of 1) increasing and diversifying the equity component (more real estate, foreign stocks and introducing commodities into the mix) and reducing the bond component; and 2) rebalancing using one or a combination of a number of tactical rules-based approaches.
Do you have any comments on this approach?
@Noel:
https://canadiancouchpotato.com/2012/05/14/market-timing-goes-to-college/
https://canadiancouchpotato.com/2012/05/17/why-i-have-no-faith-in-market-timing/
I’m in a similar position as Al.
I have a DB Pension (same company as you Dan) and am an active couch potato. Last year I switched my RRSP to a 75/25 split. I saw it the same way you do, my pension acts as fixed income so I’m able to take more risk.
With my TFSA I’m actually about to convert it to a 90/10 split. All index funds again.
That being said I agree a lot of it has to do with risk tolerance. I know if my portfolio dropped 20-30% tomorrow I would not be temped to sell. I would rebalance every year like a good couch potato. I also have 30+ years before I retire.
You make an excellent point. Choosing your level of risk is not about time periods when you feel comfortable but about periods when stocks are in gut-wrenching free-fall. Bond returns today are low, but it helps to look at them in real (after inflation) terms. Viewed this way, the gap beteen today’s bond returns and historical bond returns doesn’t look quite as bad.
When I’m doing my projections for savings and investment returns I always use a modest rate of return. 5% generally. I’ve been to advisors using 8-10% but to me that’s pretty optimistic. I’d rather save as much as I can and hope for more than 5% than rely on 8%. I’m at about a 65/35 split right now so I don’t think that is too much to ask for.
Great post.
I’m with Barry.
I’m very fortunate to have a DB pension. I consider this a big bond in my portfolio. Because of that stability, I’m holding more equities and taking on more equity risk.
Other folks might not be in this position.
Expecting 8.5% returns from a 60/40 split likely is not going to happen going-forward. I’d be happy with 7% from my portfolio.
I’d rather not work any longer than I have to, so I guess my option is to spend less and more wisely with lower than historical market returns.
Each year I analyze the best option for additional cash I have at my disposal. My considerations are to pay down the mortgage, contribute to an RRSP or make a non registered contribution. As I must accomplish all of the above goals to have a secure income in my retirement I consider any of the three as acceptable. I do not feel there is a clear winner (for my circumstance). I do not believe this is like math where we do brackets first followed by multiplication/division etc. At some point in our life the line becomes blurred and there may be no clear winner. Is that a fair statement or should there always be a preferred option?
I’m more than happy to have a 100% equities exposure. This has resulted in some pretty big drawdowns in years like 2008-09, but the bounce back was so fast that if you slept for two quarters it wasn’t that big of a deal. A 100% equities exposure can expect, over the long term, approximately 7% real return, which is more than enough for real wealth creation. No thanks to 2% bonds – may as well have a high interest savings account for your bond allocation.
@Al: I like your approach. It’s fair to say one is likely to be better than another (e.g. if you’re in the highest tax bracket and your mortgage rate is very low, the RRSP contribution is probably preferable), but paying off debt and saving money is never a bad thing. It’s pretty hard to go wrong with any of those choices.
@Cdn Dividend Blogger: You’ll probably agree that you’re in a small minority if you’re comfortable with the volatility of a 100% equity portfolio. Yes, things bounced back quite quickly in 2009 and 2010, but we didn’t know that in the depths of the crisis, and a lot of people sold in a panic. I’m not sure I agree about using a savings account instead of bonds, but a GIC ladder is certainly a reasonable alternative these days.
@Barry – It seems like you are allocating your assets based on a certain mix in your RRSP and TSFA. Why not preserve the same mix but allocate based on where you are going to pay the least tax? ie increase the bonds in the RRSP by the $ amount in the TSFA (10%) and increase the equity in the TSFA by the same amount.
Some simple arithmetic will allow you to keep your notional 75%/10% RRSP and 90%/10% TSFA mix that you have now but put more money into your pocket at the end of the day.
“The solution, then, is not to discard the 60/40 portfolio and tell people they need to take more risk. A more prudent solution is to accept that most of us will need to save more money than our parents did. Or we’ll need to work a few years longer, or spend less in retirement. Nobody is jumping for joy about those options, but they are more realistic than the alternatives.”
I’m glad this is where the blog ended, since for some of us, investing is a tool to manage personal and household finance.
As I understand, the best sure way to gain wealth is to save it. Not everyone is an entrepreneur or a real estate mogul. We work. We bank time. We save for a rainy day.
What has helped me immensely is not only saving but having an Investment Policy Statement to guide what I am doing with my money. It’s a roadmap worth developing with a financial advisor. Depending on your portfolio size, a person might discover they need far less risk than they suppose to meet financial goals that are 15-20 or more away. It’s a matter of being able to stay on plan, and to anticipate what might come up between now and the end of work.
@Noel – I have thought about that before, I only started DIY a few years back and am now comfortable discussing risk tolerance / asset allocation as well as specific funds.
I have recognized that I need to get a better grasp on taxes in certain accounts and how to balance accordingly. I believe @CdnCouchPotato posted an excel chart that would help with this.
My next step is to learn as much about tax ramifications as I can and when I have the knowledge I plan on doing what you have suggested.
@SterlingF I ran into the same thing with an RESP. The advisor was estimating an 8% return annually with high fee managed funds. I challenged the numbers as wildly optimistic and got a blank stare. I decided on indexing with larger contributions and a more realistic return of 4 to 5 %. Have been indexing ever since.
@Al and Sterling: Were those 8% expected returns after the 2% management fee? :) That’s especially ridiculous in an RESP, where you are almost certainly going to be in conservative investments for last several years—and these are the years when the account will be largest and the rate of return will have the greatest effect in dollar terms.
@Canadian Couch Potato: Yes after fees. The advisor lost me there and the meeting ended shortly after. As for the 60/40 split I am comfortable with that allocation in the RESP for now. I will reduce exposure as time goes on and probably wrap up the tail end with a GIC ladder.
I must admit, being a latecomer to investing and trying to make up for 20 years of international travelling and lost retirement savings as a result, it is hard to stomach the low return on bonds now and for the foreseeable future. But even though I am somewhat prepared for a drop in the stock market, the same threats that are keeping the bonds market artificially low are also profoundly not encouraging for equity investment.
I could tell myself that I have 20 years left before I retire and therefore if the past is anything to go by, if the market plummeted, I’d have time to recover – but then I look at Japan which has had 20 years of the conditions now being imposed upon the western markets (ie excessive government manipulation of money) which didn’t exist in western markets before (to this extent?!), and all Japan has done is stagnate. There will always be outlier exceptions, but once the general market finds them, those who got in early have already profited…
I guess its as you say, the couch potato portfolio offers diversity and if western equities and bonds aren’t going to produce much stability and growth going forward, lets hope there is growth in other international markets to balance the portfolio… But it is miserable to realise that potentially going forward, the decades of almost being guaranteed earning 8% returns without a horrendous amount of risk appear to be gone for the forseeable future.
Great article and discussion. I have always had trouble with traditional asset allocation models, particularly those based on age:
When I was young I did not want to be aggressive with stocks because it was harder to save the money because my pay was so low, so there was strong aversion to losing it – fortunately GIC rates were north of 10% at the time. However my experience is many young people today feel likewise even with low rates. Savings rates are at record lows, esp. amongst the young.
As one gets older and portfolio size increases I would imagine it is indeed much more difficult to put capital at risk because of the potential response to absolute versus relative performance. There is a natural tendency to compare dollar values to what one is earning – A 350K 50/50 portfolio could lose $100,000 with a 30% drawdown. If that person was a professional making, or who made, say between $75K and $100K the drawdown corresponds to entire years income which would be very hard to stomach especially after saving for decades.
If Bill Gross and PIMCO are correct that its a low return world in the next decade or two the best, but potentially most difficult solution to make sure bad outcomes don’t happen in retirement may be to up the savings rate dramatically while minimizing debt. This would be particularly important if volatility is also higher because, implicitly lower savings rate portfolios which are higher risk will have higher swings in value which, because the stakes are higher on the path toward the terminal value of the portfolio, may result in behaviours which can be negatively self reinforcing – such as reducing capital at risk at market bottoms and adding to capital at risk at tops.
It may be prudent to model a 2-3% real return to minimize the risk of bad outcomes and to place this in the context of the floor income required in retirement from all sources (CPP, OAS, pensions, insurance policies etc…). Any greater than this could be regarded as a retirement lifestyle bonus.
I’ve been following this website for the last few weeks, and I just want to say I’ve taken the plunge today, switching my portfolio from individual stocks to ETFs, specifically using the Complete Couch Potato model.
I’m 32 now, and have $40,000 CDN and $20,000 USD in my trading account. I figure that I still have at least 25 years of working life left, and with that time horizon I should be able to ride out any bear markets over the long run, so I’ve set up my portfolio to be 70% equity with 30% bond. It seems a bit aggressive but I’m comfortable with a 30% drop (hopefully it won’t happen again as in 2008/2009) and I plan to gradually add more money every month or every other month. While adding fund I also plan to slowly adjust my ratio to increase the bond portion as I age.
I want to thank Dan for setting up this website and opening up my eyes to passive investing, as oppose to trying to beat the market as all the gurus out there preach. As Harry Callahan once said “A man’s got to know his limitations.”
@DaveL: Congrats on pulling the trigger, and happy if this blog was helpful to you. Sounds like you’ve thought it all through and are on the right track. Good luck going forward.
Your blog has helped me considerably, especially using the model portfolios as guides. When will you be reevaluating them for 2013. Eg ZCN is similar to XIC and has a better MER and yield.
@Claire: Stay tuned, that’s coming soon. :)
@Dan: Can you also include these comparisons too; XBB vs VAB (or ZAG) and XRB vs ZRR?
When you say ” a GIC ladder is certainly a reasonable alternative these days”, how would you suggest a way to decide between for example the XBB approach (“DEX Universe Bond Index yields about 2.3% before fee”) , or a 7 year ladder paying 2.6 % in first year (up to 3% for 7 years) without any fees? http://www.acceleratefinancial.ca/rates/rates.aspx
Thanks Dan!
Another reason to have a significant portion in bonds/fixed income is to be able to buy more equities when the market will inevitably tank. In fact, I am hoping for this.
I am 35 years old and have 35% in bonds with the rest in ETFs. If you were to put 90-100% l in equities, then you wouldn’t have the cash available to buy more stocks when they are low (during a crash) and take advantage of cheap prices. Remember, when the market crashes, bonds go up in value and you can actually sell them at a high price and then buy stocks at a low price which should be the goal of all investors.
Personally, I am using the rule of 100: your age in bond, 100-age in equities with rebalancing every years.
For a 30 yrs old person: 70% equity, 30% bond.
I think the asset allocation should change based on the horizon (ex: age).
I have read some book advertizing the rule of 110 or 120 but I took 100. I like this rule of thumb by its simplicity.
Dan, could you explain why it’s mathematically impossible for bond prices to keep appreciating? Naively speaking, if yields have dropped by, say, a factor of four over the last few decades, leading to 4x price appreciation, it seems to me that yields could drop again by a factor of 4 and lead to another 4x price appreciation. What makes this impossible?
For now, the best alternative if you still got a lot of room in your TFSA is to replace a part of your fixed income with a high interest saving account at People Trust at 3%. They had kept that rate for a while. Better yield than bond, no risk with the capital it like eating the cake and eating too.
The only downside are the risk of rate change but your money is not frozen so you can change to a better option at anytime and the limit of the contribution to that rate is 25500$ by person but couple could go as hight as 51 000$ with 2 account. This is the best option for those couple that have a portfolio as high 130 000$ or less and they want 40% of fixed income. Over that amount you will have to look for other option like lower % fixed income target, wait an other year to be able to contribut more, find an other high saving account or get in bond market.
Until People Trust keep that rate this option is a no brainer for relative small account for fixed income.
@Patrick
I believe Dan means that because our interest rate in Canada is already rock bottom, there is no place for it to go but up. When interest rate increases, the bond price will drop. Another reason I read is that as more people realize that companies are raking in money, they’ll start abandoning bond and move their money into equities, thus dropping the bond price and increasing the interest rate.
@Que: I’m reviewing all those options, rest assured. I will give you sneak preview and say that these decisions are really very small and should not preoccupy investors. Ultimately using ZCN instead of XIC, or ZAG instead of XBB, is likely to make no meaningful difference over the long run.
@Patrick: As you know, with every drop in rates, existing bonds rise in value. In mid-1982, the yield on 10-year Government of Canada bonds was over 16%. By 2011, it had fallen to about 2%. That’s a drop of 14 percentage points, which led to huge capital gains for bond holders.
But once you are starting from 2%, you can only fall another 2 percentage points, unless you believe interest rates can fall below zero. (They have for very brief periods in some countries in the past, but these are aberrations.) So a 9% or 10% return on bonds is impossible for the foreseeable future.
Hey Dan, great article. Just because things ‘change’ doesn’t mean the plan should change. Investors’ risk tolerance does not change. And tolerance for volatility is very, very low.
And we could stay in this low interest rate environment for a decade, or not. No one knows where any asset class is going at any time, short or long-term.
There’s that great expression; the markets can remain irrational longer than you can remain solvent. The markets are not rational because they are being controlled or manipulated by government measures.
Thanks again.
@CCP: Wouldn’t a drop in interest rates from 2% to 0.25% generate exactly the same capital gain in bonds as the drop from 16% to 2% generated? I know 0.25% seems quite far-fetched, but back in 1982, 2% was even more far fetched probably.
@Martin: Nope. It’s the difference in interest rates that matters not their ratio. So, 2% would have to drop to -12%. Technically, it’s the ratio of one plus the rate. So to get 1.16/1.02 = 1.02/(1+r), r is about -10%. In any case, it’s tricky for rates to go below zero. People can do better than a negative rate by hoarding cash in a mattress.
The asset allocation is a function of risk tolerance for particular economic environments and since we cannot predict these its useful to see what are pension fund and sovereign wealth fund asset allocations (OTPP, Norway, CalPERS, Ford F, Harvard, Yale, etc…) understanding they have a very long time horizon but also a need to fund current obligations.
Its also useful to know how prices of different asset classes respond to disinflation or inflation under real economy growth or contraction phases (eg. disinflation/growth, inflation/growth etc…) as well as what happens to assets during the extreme conditions of inflationary and deflationary depressions. Finally its nice to have the correlations between asset classes clear over long time horizons. Morgan Stanley publishes these in their quarterly market analyses.
All of the above were really helpful in choosing a default asset allocation but it still comes down for me to the basic question ” How comfortable am I in a drawdown of X$ in a year” if invested X amount in equities.?”
@Martin: A bond’s (or bond fund’s) duration is a good estimate of how its price would change if interest rates rise or fall. This is an important concept to understand when assessing the risks and expected returns of bonds:
https://canadiancouchpotato.com/2011/07/07/holding-your-bond-fund-for-the-duration/
@Dale – That quote regarding the markets being irrational is a great one. It was actually quipped by Warren Buffett in reference to why he never sells short. If one buys long then the upside is multiples of what you invest and the downside is only what you invest. If one sells short then theoretically the downside is infinity as the stock rises due to irrational investors (assuming you are right) and the upside is only what you invest. Because selling short requires borrowing on margin and borrowing even more to meet margin requirements as the price of the stock rises, there is the possibility of not being able to remain solvent.
What I like about passiave index portfolio investing is that although markets can exhibit irrational behaviour it is generally in the short term, diversification amongst equities and bonds can temper this somewhat and one is is never shorting the market (or shouldn’t be!).
@Michael James – Right, and the increase in the market value of the bonds would also depend on the duration of the bond or weighted average duration of all the bonds in a bond portfolio. So, a drop in rates will affect different bonds and bond portfolio’s differently, albeit all increasing in market value.
@Michael,Dan: Thanks for the answer. I wonder why it’s 1+r though?
Consider: bond A yields a% and bond B yields b%. If an investor assigns equal value to equal income streams, shouldn’t their prices be in a ratio of a:b?
Of course, I’m neglecting the repayment of the principal; but suppose these bonds are long-term enough that the net present value would be negligible…
@Patrick: I guess what I’m describing here isn’t so much a bond as an annuity. I guess I need to go read up about duration again.
@Patrick: Your principal matters, too. If two bonds both pay $100 per year in interest, one bond returns $10,000 principal after 10 years, and the other returns only $5000 in principal after 10 years, you would pay more for the first bond.
Thank you Michael James and CCP for opening my eyes! I have quickly done some back of the envelope calculations for a hypothetical 10 year duration 0-coupon bond with a 2% yield to maturity (too keep things simple), and it seems that the maximum upside on this bond is about 22% (assuming yields can’t go below 0%). The downside though is gigantic, if yields were to go back up to 16%, this bond would be crushed with a 73% loss of value! And 16% is in no way an upper bound on yields, they can conceivably go higher. Makes me think that this perceived “safer” part of part of my portfolio is actually just a pile of dynamite…
I have been extremely averse to bonds since I started investing about 15 years ago, to my own detriment. Conventional wisdom says that I must increase my allocation to bonds as I age (I am 42), although I have not really done so to any significant degree. However, it looks like increasing my allocation to bonds at this point could be an even worse financial move than being under-weight bonds over the last 15 years. I feel caught between a rock and a hard place!
@Martin: I’ve written lot about this topic. There are certainly risks inherent in bonds, but “a pile of dynamite” is probably overstating it:
http://www.moneysense.ca/2011/10/12/this-is-no-time-to-bail-on-bonds/
https://canadiancouchpotato.com/2011/07/04/will-rising-rates-really-clobber-bonds/
https://canadiancouchpotato.com/2012/07/03/how-will-rising-rates-affect-bonds/
You may also find this article from Dan Hallett useful:
http://thewealthsteward.com/2012/12/bond-bears-growl-is-all-noise/
Dan, would love to hear your opinion on the new First Asset Provincial bond offering.
http://www.theglobeandmail.com/globe-investor/funds-and-etfs/etfs/provincial-bond-etf-a-low-risk-route-to-higher-returns/article7608386/
This makes perfect since to me: if a province defaults, I’ll have much bigger problems than worrying about my portfolio, and hyper-inflation would probably kill federal bonds anyway.
@Kiyo: I’ll need to look more deeply at this question. My first reaction is that provincial bonds are hardly new, so surely these same questions have been asked before.
I’m not sure there’s a significant difference between an A-rated provincial bond and an A-rated corporate bond. If the market really believes the federal government will bail out the province but not the company, why do the bonds have the same credit rating?
@CCP: I’m sure this has been dealt with succinctly somewhere, but I can’t find it all in one place. This blog item is about the wisdom of 60/40 Equities to Income ratio, and it has been discussed and analyzed clearly — I’ve made my peace with that aspect of my portfolio allocation. My current worry is in the disposition of that 40% Income allocation.
I hear you loudly not to expect continued 8% – like yield such as we have been enjoying for the past 15 years — that was a result of bond appreciation in the face of declining 5-10 year interest rates which clearly are an impossibility now. So what does this tell us as to what to place in this 40% slot? All the discussion and comments above resulting from this post seem to be telling how bad the results of filling this slot with bond index fund. Better, then, to fill this slot with GIC ladder or perhaps even Interest bearing Cash? Or at least that’s the impression I get with first reading. However, on reading again closely, that action is not necessarily what is being advised, perhaps.
I was wondering, if I am absolutely certain that my investment horizon is at least 5 years, perhaps 10-12 years, that is I will not be drawing down significant cash for 5 years, am I safe filling that 40% slot with XBB or a mix of XBB and Real Return Bond such as XRB? Do I need only enough interest bearing cash in the amount that I will be spending in the next 5 years?
Hi Dan, I am also about to take the plunge and jump on my couch! I have a couple of questions related to asset allocation as it relates to the type of account. I have 5 accounts to manage: 1) my rrsp 50% 2) my lira 10% 3) my wife’s rrsp 20% 4) my wife’s spousal rrsp 10% 5) resp 10%. The question I have is should I steer equities to my Lira or bonds? Is there any type of advantage as it relates to the future tax implications? My thinking is if equities “always” outperform bonds in the long term is it better to have lira gains outpace regular rrsp’s? I have done a few searches and can’t seem to find any advice which leads me to believe an rrsp and lira are ultimately treated the same upon withdrawal from a tax standpoint. Help!!!
@Bh: In terms of taxation upon withdrawal, RRSPs and LIRAs are identical: all withdrawals are fully taxable. So if you are including bonds in the portfolio, they should be in one of these accounts. Beyond that, I can’t offer any advice about how to spread your assets across multiple accounts. This is very difficult decision that involves a lot of careful planning:
https://canadiancouchpotato.com/2012/03/12/ask-the-spud-investing-with-multiple-accounts/
https://canadiancouchpotato.com/2012/03/15/a-spreadsheet-to-manage-multiple-accounts/