A 3 ETF Portfolio for Retirement: Simple, But Not That Simple

There are always portfolio ideas out there. A recent one surfaced on Mike’s podcast Moose on the Loose, where a portfolio constructed with three ETFs was suggested as something that could work.

I wanted to share my thoughts on this portfolio, especially since I am helping young adults with simple ETF portfolios, while retirees are also increasingly adding covered call ETFs to their strategy.

The first thought many investors can have is to approach it the way Ben Felix, and any couch potato investing aficionado, would recommend: buy one ETF and move on.

But where is the fun in that, many of you would say.

This is where I want to pause.

Investing is not supposed to be fun or entertaining. It is not a substitute for entertainment, and approaching it that way often leads to poor decisions.

For me, the objective is simple. I want my money to work for me. I see myself as the CEO of my portfolio, and I approach it like a business. My purpose is to achieve financial freedom. As an extension of that, I also want to educate as many people as possible, because I believe financial freedom is within reach for most.

When you catch yourself wanting to use the word “fun” in the same sentence as investing, it is worth stepping back and replacing it with something more intentional. That small shift changes how you approach investing and how others engage with you on the topic.

The portfolio that was discussed is structured as follows:

At a high level, it provides global equity exposure through XEQT, Canadian income exposure through HDIV with leverage, and fixed income exposure through ZDB.

On the surface, it looks balanced.

Before evaluating whether this portfolio works or not, it is important to frame the discussion properly.

There are two main schools of thought when it comes to retirement.

The first is the investment income approach. In this model, yield tends to drive decisions. Investors focus on generating income from their portfolio, often with limited or no reliance on a cash wedge.

The second is the portfolio decumulation approach. Here, the focus is on total return. Withdrawals are structured, and a cash wedge is often at the core of the strategy.

Neither approach is inherently better than the other. The choice depends on how you balance the need to feel safe with the desire to enjoy the portfolio you have built.

Personally, I navigate both approaches but lean towards total return. There are other ways to build a safe income layer without relying entirely on yield.

Remember, retirement is not a fixed date; it is a shift in how we manage our money.

One of Mike’s readers asked whether this three ETF portfolio would work.

Mike’s conclusion is that yes, it can work, but that answer comes with an important caveat. Once you start adding ETFs like HDIV, it becomes difficult to stop there. There is a behavioral element to consider, because adding income-focused ETFs often leads to adding more of them over time.

Another important point is that HDIV does not have a long track record. In investing, having at least ten years of history is useful to understand how an investment behaves through different market cycles.

From a traditional perspective, the couch potato approach would suggest that XEQT alone is sufficient. That would be the base portfolio, and any divergence from it should be intentional.

This leads to an important question: why diverge from that base?

In Mike’s discussion, I feel the portfolio was assessed from a total return perspective. However, the inclusion of HDIV suggests that the original question may have come from an investment income mindset. Without HDIV, a Canadian ETF like XIU could have served a similar role within a total return framework.

ZDB also appears to act as a form of cash wedge within the portfolio, but from a performance perspective, it may not be the most efficient option. Money market funds can offer higher yields, although the tax efficiency question remains relevant. The allocation is also significant. At 33%, it represents a large portion of the portfolio, and that level of exposure to bonds depends heavily on age and individual circumstances.

The key element of this portfolio remains HDIV. Its yield is attractive, and it is likely the main reason it is included. That raises another question: is the yield being reinvested, or is it being used?

This portfolio does not clearly fit within either of the retirement approaches discussed earlier. It sits somewhere in between. It feels like an undecided portfolio, balancing income and total return without fully committing to either.

HDIV has performed extremely well recently, largely due to its exposure to financials, energy, and materials. However, recent performance is not the same as consistency. Sector concentration plays a role, and that introduces an element of timing.

Since the portfolio was evaluated from a total return perspective, and HDIV has benefited from favorable sector exposure, it can appear to work in that context. But that does not mean you can replace HDIV with any other covered call ETF or increase the allocation and expect the same result.

Sector rotation is, in many ways, a form of market timing, and that is not something most investors can execute consistently.

If the question had been framed around a portfolio composed of XEQT, XIU, and ZDB, it would have been a clearer total return approach. The introduction of HDIV shifts the discussion toward income.

It is like saying that instead of allocating 100% to a dividend ETF like VDY at a lower yield of 3.5%, you allocate a portion of the portfolio to a higher-yield ETF like HDIV and balance the rest with broader market exposure and bonds.

An alternative way to blend exposure and income could be to allocate one third to VDY, one third to SCHD, and one third to ZDB, which would represent a clearer income-focused approach.

USCL is another leveraged covered call ETF tracking the S&P 500 as an example. So many ETFs are created now to satisfy investor appetite. It has a generous yield of 10% and tracks the S&P 500.

This portfolio can work, but that is not the most important point.

The more important question is whether it aligns with a clear strategy.

As it stands, the portfolio sits between two approaches. It combines elements of income investing and total return investing without fully committing to either. That lack of clarity can create challenges over time, especially when adjustments are needed.

The inclusion of HDIV introduces both opportunity and risk. Its yield is attractive, but its structure and limited history require understanding and discipline.

Ultimately, any portfolio should be built with intention. Simplicity can be powerful, but only when it is aligned with a clear objective.

Without that clarity, even a simple three ETF portfolio can become more complex than it appears.