Author Topic: Starting my portfolio of ETF - Advices required  (Read 610 times)

CouchQuetzal

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Starting my portfolio of ETF - Advices required
« on: January 15, 2019, 12:07:53 PM »
Hello!

As you can see im new here. Been reading for a while across the blog and decided to ask advices here on the forum.

A small briefing of my current situation : canadian, 26 yo, single with no kids, finished school 1.5 years ago and currently earning 47k per year (probably closer to 55k next year).

With $$ I saved during school and in the last year and a half of full time working, I currently have around 30k to play with. Im looking to invest in low fees ETF, all by myself.

After reading alot on the subject, I find myself confused and in need of more information before making a decision. At the moment, money is sleeping in a 1.6% interest rate account with zero risk, but I would like to make a decision quickly as in early 2019. I want something simple, with exposure to american/canadian/world market, a portion of bonds and also a good chunk of cash to add when the market tanks.

Which Canadian ETF would you recommend and why?

Thanks in advance for your advices,
« Last Edit: January 15, 2019, 12:15:34 PM by CouchQuetzal »

Andy R

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Re: Starting my portfolio of ETF - Advices required
« Reply #1 on: January 15, 2019, 07:19:31 PM »
Welcome to the forum.

Short answer VGRO

Long answer: Educate yourself. You will probably come back to something very similar but you will know why and it is important to know why.
https://jlcollinsnh.com/stock-series
https://investingroadmap.wordpress.com
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/forum/index.php

Freedomin5

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Re: Starting my portfolio of ETF - Advices required
« Reply #2 on: January 15, 2019, 07:57:58 PM »
Many Canadian Mustachians (including myself) follow the advice on Canadian Couch Potato: https://canadiancouchpotato.com/

Choose one of the very simple, three-fund model portfolios on the site. Read up on Canadian-specific investment advice (it's actually quite similar to the US-centric advice, but there are discussion on which ETFs to put in your RRSP vs TFSA vs taxable account to minimize taxes).

Since you're new here, you may also want to check out the Investment Order thread: https://forum.mrmoneymustache.com/investor-alley/investment-order/

The advice is specific to Americans, but if you replace "401k" with "RRSP", "Roth IRA" with "TFSA", "Treasury Note" with "GIC", and ignore the stuff about HSAs (since we get free healthcare), then you can get a general sense of the order in which you should put your funds into various investment instruments.

Edited to add: Apparently there is a Canadian-specific post in the Investment Order thread.
« Last Edit: January 16, 2019, 12:06:10 AM by Freedomin5 »

MustacheAndaHalf

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Re: Starting my portfolio of ETF - Advices required
« Reply #3 on: January 15, 2019, 09:03:06 PM »
Short answer VGRO
I disagree that OP should hold 20%+ bonds, like the above fund.  Most of the Vanguard and Fidelity target retirement funds allocate 10% bonds for someone decades from retirement.

That fund holds 60% Canadian stocks, when Canada has close to 3% of the world's stock market value.  That's depending too much on one country, and is known as the "home country bias".  The goal should be to minimize that, not allocate 60% to it.

If you could only pick one ETF, I'd go with a "total world" ETF like Vanguard Total World (VT).  That holds 53% U.S. stocks because the U.S. stock market holds 53% of the market cap of the world's stocks.  You buy a slice of thousands of companies from around the world in one purchase.

VT has an expense ratio of 0.10%, versus 0.25% for VGRO.

Andy R

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Re: Starting my portfolio of ETF - Advices required
« Reply #4 on: January 15, 2019, 09:34:21 PM »
Short answer VGRO
I disagree that OP should hold 20%+ bonds, like the above fund.  Most of the Vanguard and Fidelity target retirement funds allocate 10% bonds for someone decades from retirement.

That fund holds 60% Canadian stocks, when Canada has close to 3% of the world's stock market value.  That's depending too much on one country, and is known as the "home country bias".  The goal should be to minimize that, not allocate 60% to it.

If you could only pick one ETF, I'd go with a "total world" ETF like Vanguard Total World (VT).  That holds 53% U.S. stocks because the U.S. stock market holds 53% of the market cap of the world's stocks.  You buy a slice of thousands of companies from around the world in one purchase.

VT has an expense ratio of 0.10%, versus 0.25% for VGRO.

The amount of bonds depends on the persons risk tolerance. I wouldn't recommend 90% stocks for anyone who has not learned enough to even make their own allocation, which includes a lot of people. Also why I said to learn first and make your own decision.

Also it's no where near 60% Canadian stocks. Where on earth did you get that number from.

CouchQuetzal

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Re: Starting my portfolio of ETF - Advices required
« Reply #5 on: January 16, 2019, 06:16:58 AM »
Glad to hear all of your advices. I will definitely read more about it in the upcoming months. Im determined to find myself a suitable portfolio in which i'll be confident in the long term.

VGRO looks like a good bet for me right now. Almost 12000 holdings, 0.22% management fees, and pretty cheap (around 25$ a share) which allows me to buy 100 shares a few times without transaction fees. (My bank offer free ETF transaction for 100 shares and more, so I was planning to always buy 100 or more shares at a time). Although I wouldnt go 100% into this fund since I find that 80% stocks - 20% bonds is quite risky in times like now.

As for VT, it is not on the Vanguard canadian ETFs that I can buy. I suppose it is listed on the US side. Is there an equivalent that I can check on the TSX?

Thanks again and have a nice day Mustachians

CouchQuetzal

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Re: Starting my portfolio of ETF - Advices required
« Reply #6 on: January 16, 2019, 08:04:45 AM »
Im debating beside using Ishares/Vanguard ETFs (XGRO/VGRO) and making my investment simple without having to rebalance my portfolio and using a mix of ZAG/VCN/XAW ETFs by myself. I would prefer the second option but management fees are quite similar, between 0.18-0.22% for the first option and between 0.12-0.16% for the second option.

Also, should I invest all my $$ in one phase, or go gradually with investing a certain % each month?

MustacheAndaHalf

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Re: Starting my portfolio of ETF - Advices required
« Reply #7 on: January 16, 2019, 09:08:21 AM »
Short answer VGRO
I disagree that OP should hold 20%+ bonds, like the above fund.  Most of the Vanguard and Fidelity target retirement funds allocate 10% bonds for someone decades from retirement.

That fund holds 60% Canadian stocks, when Canada has close to 3% of the world's stock market value.  That's depending too much on one country, and is known as the "home country bias".  The goal should be to minimize that, not allocate 60% to it.
...

The amount of bonds depends on the persons risk tolerance. I wouldn't recommend 90% stocks for anyone who has not learned enough to even make their own allocation, which includes a lot of people. Also why I said to learn first and make your own decision.

Also it's no where near 60% Canadian stocks. Where on earth did you get that number from.
I can't find that 60% either - it looks like 29% of the equity is in Canadian stocks.  Here's what I get from morningstar:
http://portfolios.morningstar.com/fund/summary?t=VGRO&region=usa&culture=en_US
23% Canadian equity (out of 79% equity total, so 23/79 = 29% equity alllocation)
31% U.S. equity
24% International equity


And here's the allocation for Vanguard Target 2050:
http://portfolios.morningstar.com/fund/summary?t=VFIFX
10% bonds
54% U.S. stock
34% international

Here's Fidelity's indexed 2050 retirement fund:
10% bonds
63% U.S. stock
26% international stock

I consider Fidelity and Vanguard's opinions on bond allocation to have more weight than what we say here.  Both of them allocate 10% bonds.  Neither of them allocate an extra +20% to a single country.