Canadian investor - Choosing Canadian eligible divivend ETF

[daverobev]

So, what Cad/US/Intl split would you suggest for a 100% stock Canadian portfolio?

In a 'do as I say not as I do' world, probably 40 US/40 developed ex-NA/10 Canada/10 developing. Something like that.

Why would you have 3x the market cap weight for CDN stocks if none of the home basis arguments make sense to you?

The tax one does. And because if you go much lower, you might as well have none specifically.

Saying that, 50/50 VTI and VXUS would be just peachy. Though, to counter that, you don't want to end up with filling in a T1135 unless you can help it. So having VUN, XEF/XEC/etc... starts to look better if you have to invest that much unreg... and as XEF/XEC don't have any Canadian, you might add in some.. and if you're going to add in some, you might as well add enough to make it worthwhile, no? Well, ok, 5% would be fine, too.

[Retire-Canada]

The tax one does. And because if you go much lower, you might as well have none specifically.

Saying that, 50/50 VTI and VXUS would be just peachy. Though, to counter that, you don't want to end up with filling in a T1135 unless you can help it. So having VUN, XEF/XEC/etc... starts to look better if you have to invest that much unreg... and as XEF/XEC don't have any Canadian, you might add in some.. and if you're going to add in some, you might as well add enough to make it worthwhile, no? Well, ok, 5% would be fine, too.

So essentially you are just picking an arbitrary number that is admittedly home country biased just at a different ratio than the CCP folks are selecting.

[anisotropy]

I agree with all of the above, I never says that TSX is diversified through sectors and most of it is only 60 biggest Co. In Canada

Rebalancing probably did a good job because of the currency changes, oil & gold prices. This will continue for a while for sure.

I do not compare TSX with S&P500. I just assume that a 70/30 VTI/VXUS is better than a 100% VTI for a US investor.

Can you just suggest a sound AA for a 100% stock Canadian portfolio?

I think it's important to hold a minimum of 50% of your portfolio in currencies other than CAD. This exposure can be achieved using non-hedged ETFs. USD, and to a lesser extent, EUR is a good place to go because they are also reserve currencies and have substantial global power.

That said don't underestimate the importance of having at least some of your portfolio in Canadian stocks (20-30% is good). Most people think we are very tied to the US which is true economically but not when it comes to our stock market. The TSX is actually far less correlated to the S&P 500 than EAFE or ex-US indices. That means it is a good tool for balancing.

US investors who invest in all US stocks are infected with recency bias. History tells us foreign exposure is a good thing in the long run.

Ya, these non-hedge etfs can save the holders quite a bit of money through broad market crashes and provide a nice return during the growth phases.

[daverobev]

The tax one does. And because if you go much lower, you might as well have none specifically.

Saying that, 50/50 VTI and VXUS would be just peachy. Though, to counter that, you don't want to end up with filling in a T1135 unless you can help it. So having VUN, XEF/XEC/etc... starts to look better if you have to invest that much unreg... and as XEF/XEC don't have any Canadian, you might add in some.. and if you're going to add in some, you might as well add enough to make it worthwhile, no? Well, ok, 5% would be fine, too.

So essentially you are just picking an arbitrary number that is admittedly home country biased just at a different ratio than the CCP folks are selecting.

Hey, I'm quite happy with global cap weighted! It makes a hell of a lot more sense than *ten times*. 10% seems a reasonable compromise between global cap weight and 1/4 to 1/3 as many like you suggest.

If you want to push it - you're right, 10% is unnecessary, 3% is better. There's nothing, except tax treatment, special about Canada.

[max9505672]

So, what Cad/US/Intl split would you suggest for a 100% stock Canadian portfolio?

In a 'do as I say not as I do' world, probably 40 US/40 developed ex-NA/10 Canada/10 developing. Something like that.

For simplification, cost, taxes, etc, would you agree that a 20VCN/40VTI/40VXUS is not to bad?

VXUS is 7% Canada, so you're back to ~23% Canada. And there's barely any developing... but honestly that might be fair, if you're going by market cap.

10% VCN, 45% VXUS, 40% VTI, 5% XEF perhaps. Or drop the XEF, and go 10 VCN, 45 VTI, 45 VXUS.

But that's only my thinking. The more important thing, of course, is to pick an AA and stick with it - even if it IS to have 20% Canada, as long as you rebalance and don't change (esp. when something is relatively down!!) it'll be fine.

This whole thing is somewhat splitting hairs; but I just don't like "follow market cap weighting, but you can break the rules for Canada because it's special" - it just makes no sense - none of the arguments, *tax excepted*, make sense.

VTI, VXUS and all other USD ETF's are very interesting but what about people doing smaller regular investments contributions that can't justify the fees to do Norbert Gambit everytime? What would be your suggestion on CAD alternatives for US and Intl?

VUN? XAW? XEF? XEC?

And what would be a strategy to be able to able to ultimately buy some USD ETF's? Wait until you have enough to justify doing Norbert Gambit and miss on several weeks/months of compounding? Buying an CAD ''equivalent'', for example, buying VUN until you have, let's 20K$ invested, sell all that VUN and buy VTI? Is that a good buy and hold strategy?

[Retire-Canada]

And what would be a strategy to be able to able to ultimately buy some USD ETF's? Wait until you have enough to justify doing Norbert Gambit and miss on several weeks/months of compounding? Buying an CAD ''equivalent'', for example, buying VUN until you have, let's 20K$ invested, sell all that VUN and buy VTI? Is that a good buy and hold strategy?

I hold VTI and VUN. I add my monthly contributions to VUN in CAD. If I get $100K built up in VUN and I don't see a need for withdrawals in the near future [next couple years] I'll convert it to VTI. Since I am close-ish to FIRE there will come a point where it won't make sense to do the conversion and I'll just keep both VTI and VUN. They are essentially the same asset just bought/sold in different currencies.

Selling VUN and buying VTI is still buy and holding. It's just holding US stocks. The fact VTI is more "efficient" particularly in your RRSP is the motivation.

Once FIREd I'll sell VUN when I need $$ to withdraw and live off of. If I was to run out of VUN I'll sell a chunk of VTI and convert it to VUN then continue to take my withdrawals out of VUN.

[max9505672]

And what would be a strategy to be able to able to ultimately buy some USD ETF's? Wait until you have enough to justify doing Norbert Gambit and miss on several weeks/months of compounding? Buying an CAD ''equivalent'', for example, buying VUN until you have, let's 20K$ invested, sell all that VUN and buy VTI? Is that a good buy and hold strategy?

I hold VTI and VUN. I add my monthly contributions to VUN in CAD. If I get $100K built up in VUN and I don't see a need for withdrawals in the near future [next couple years] I'll convert it to VTI. Since I am close-ish to FIRE there will come a point where it won't make sense to do the conversion and I'll just keep both VTI and VUN. They are essentially the same asset just bought/sold in different currencies.

Selling VUN and buying VTI is still buy and holding. It's just holding US stocks. The fact VTI is more "efficient" particularly in your RRSP is the motivation.

Once FIREd I'll sell VUN when I need $$ to withdraw and live off of. If I was to run out of VUN I'll sell a chunk of VTI and convert it to VUN then continue to take my withdrawals out of VUN.

Makes sense. I guess the $100K is arbitrary, I'd have to calculate what amount makes sense for me.

Is it worth doing it outside of an RRSP (TFSA and non-reg.) or keeping VUN or other is fine?

[Retire-Canada]

Is it worth doing it outside of an RRSP (TFSA and non-reg.) or keeping VUN or other is fine?

The $100K is totally arbitrary. You can settle on $25K, $50K, $75K...whatever makes sense to you. I am lazy so going through the hassle of Norbert's Gambit [NG] for a small amount doesn't seem worth it and as I mentioned I am close-ish to FIRE so I may in fact never do another NG going from VUN to VTI since I need some CAD$$ to spend relatively soon.

The two benefits of VTI over VUN are:

1. MER - VTI = 0.05% & VUN = 0.16% so a 0.11% savings with VTI [not nothing, but in the big picture not a lot of $$]
2. Withholding tax on dividends = 0.3% - 0.43% per year [starts to add up to some real $$]

Where you get the benefits

- All accounts = MER savings
- RRSP - withholding tax not deducted automatically
- TFSA - withholding tax deducted and no way to claim back
- Non-Reg - withholding tax deducted, but you can claim on your CRA return and get credit for taxes paid

So I hold VTI in my RRSP. I also hold VCN only in my Non-Reg so that leaves RRSP or TFSA for any VUN. Because of my age I have a much bigger RRSP than TFSA/Non-Reg. So I have lots of room to hold various assets there and I have to spend down my RRSP aggressively at the start of FIRE or I'll end up with large mandatory withdrawals and poorly optimized taxes.

[Le Barbu]

Just bougth some XAW for TFSA yesterday

Dont bother buying US listed ETFs (VTI, VXUS) outside RRSP

Norbert-Gambits only for +50k$ IMO