Canadian Couch Potato Model Portfolios - Anyone have experience?

[MustachianPhD]

Hi there,

I am new to investing and learned about Canadian Couch Potato from the MMM forum. I am wondering if others on here are Canadian and have used some of CCP's strategies?

My question relates to: http://canadiancouchpotato.com/model-portfolios-2/

I currently have less than $25,000 to invest so I am considering some Tangerine Investment Funds as CCP's advice. My goal is to be able to have the $25,000 needed to start TD e-Series, then the $50,000 needed to open up an account to buy Vanguard. My question is, what do I do with the Tangerine ones when I reach the savings needed for TD and Vanguard? I have everything in a TFSA, so do I need to withdraw from Tangerine, then wait a year to be able to put it all back into a TFSA with TD, and then repeat for Vanguard? I don't understand how to ladder all this. Or, do I just keep it in Tangerine until I save up an additional $25,000 for TD, etc.?

Sorry for the basic question, but I don't understand what to do while building up a larger nestegg to invest.

Thanks so much.

[swick]

I'm still in the process of getting it all figured out, but my thread here has some good info:
http://forum.mrmoneymustache.com/investor-alley/canadian-first-time-setting-up-investment-plan-please-help!/

With buying Vanguard through Questrade, you don't need a 50,00 minimum.

[lavar]

Hi there, do you plan to use an unregistered account? If it is a TFSA you don't need 25k to avoid fees with TD Direct Investing. Actually, even if unregistered you can get a free mutual funds account through TD - then convert it to an eseries account.

What some people do if they want to minimize transactions - unless using questrade, and some other options where certain ETFs don't have commissions to purchase - is to purchase mutual funds with regular contributions through the year (say $1000 a month - which would incur large fee's if you were splitting it between several commissioned etfs each month) and then at the end of the year, selling the mutual funds and repurchasing the same indexes using ETFs (e.g., 4 commissioned transactions vs 4 x 12 transactions). You would do all this within the same account so you don't run afoul of contribution rules. You may also need to be mindful of minimum holding periods to avoid supplementary fees when selling the e-series funds.

As always, don't let decision paralysis keep you out of the market. Whether its Tangerine, TD e-series or Vanguard funds, the most important thing is time in market. Optimization should be secondary!

[Kaspian]

You don't need $25K to start with TD e-Series.  Do you already have a bank account there?  You also don't have to do the whole Waterhouse or Direct Investing thing.  You also don't need to setup a regular mutual fund account and then convert it.

 You can just fill in the form:

http://www.tdcanadatrust.com/document/PDF/mutualfunds/pdf2014/572074.pdf

From the page:

http://www.tdcanadatrust.com/products-services/investing/mutual-funds/td-eseries-funds.jsp#what-does-td-offer

Choose "Personal Non-Registered" checkbox, fill in the rest, and mail it in.  It will take them 2-3 weeks to set it all up. 

You can later convert it to the Direct Investing thing, but Canadian Couch Potato says it's not worth doing unless until your portfolio hits > $400K.  TD does keep trying to get me to convert it though because they know with an investing (i.e., instant trading) account instead of a non-registered mutual fund account I'll be likely to make more trades, do spur-of-the-moment stupid moves/buys/sells, and hence rack up fees like crazy.

[GuitarStv]

I've been doing this through TD for a while.  It's working out OK.  Setting up their eSeries account is a big pain in the ass though.

[Lynne]

My goal is to be able to have the $25,000 needed to start TD e-Series, then the $50,000 needed to open up an account to buy Vanguard.

CCP only suggests tiers like that because of transaction costs.  I have less than $25K invested, but it's all at Questrade, which lets you buy ETFs with no commissions (which is all I'm buying).  So CCP's reasoning doesn't really apply to me - I am better off with this strategy than with Tangerine.

This also means I won't need to change my strategy later when I hit a certain amount of $, and I can just keep on with what I'm doing now.  Nice and simple.  :)  At least, it is once everything's set up.

[Lynne]

(Okay, CCP probably also suggests starting with Tangerine because it's more user-friendly and less intimidating for beginners, and like lavar said, it's better to put your money in *something* than nothing, even if it's not the most optimal thing.)

[KMMK]

I'm happy with TD e-series. Like others have said you don't need $25,000 - that's just to waive the annual fee, which isn't a big deal. If you plan to move to something else I wouldn't bother with Tangerine. That's really only good for people who don't want to worry about rebalancing ever.

[Cookie78]

My goal is to be able to have the $25,000 needed to start TD e-Series, then the $50,000 needed to open up an account to buy Vanguard.

CCP only suggests tiers like that because of transaction costs.  I have less than $25K invested, but it's all at Questrade, which lets you buy ETFs with no commissions (which is all I'm buying).  So CCP's reasoning doesn't really apply to me - I am better off with this strategy than with Tangerine.

This also means I won't need to change my strategy later when I hit a certain amount of $, and I can just keep on with what I'm doing now.  Nice and simple.  :)  At least, it is once everything's set up.

This is exactly what I did also. Less hassle, and it wasn't hard to get set up.

My question is, what do I do with the Tangerine ones when I reach the savings needed for TD and Vanguard? I have everything in a TFSA, so do I need to withdraw from Tangerine, then wait a year to be able to put it all back into a TFSA with TD, and then repeat for Vanguard?

As for this part, you should be able to transfer the funds in kind. I recently transferred my TFSA to Questrade this way, without impacting contribution amounts.

[Retire-Canada]

I currently have less than $25,000 to invest so I am considering some Tangerine Investment Funds as CCP's advice. My goal is to be able to have the $25,000 needed to start TD e-Series, then the $50,000 needed to open up an account to buy Vanguard

Just start with a Questrade account s others have noted. There is no cost to buy ETFs and typical share values are $30-$100 so even a few thousand dollars is more than enough to setup a CCP portfolio with Vanguard products there.

-- Vik

[AmbitiousCanuck]

My wife and I both have accounts with Questrade.  There is no minimum amount required, although they charge a fee if your total assets are below $5,000 which most people have much more than that anyway.  Investing in ETFs through Questrade is one of the cheapest ways to get into index funds in Canada right now, if you consider both trading fees and MERs.

Basically, you open an RRSP, TFSA or unregistered (margin) account with Questrade (or all three if you like).  Transfer in your existing assets from other accounts, or transfer in cash.  You then buy ETFs on the stock market (Usually the TSX), just like you would buy a regular stock.  An ETF is an index fund that is sold on a stock exchange.  Its similar to a mutual fund, but there are some minor differences.  Usually ETFs have lower fees than equivalent mutual funds.

If you do sign up with Questrade, feel free to use my referral code which will give me $25 and you between $25 and $250, depending how much you deposit: 495822885388555

[Lynne]

My wife and I both have accounts with Questrade.  There is no minimum amount required, although they charge a fee if your total assets are below $5,000

...an inactivity fee.  As long as you make a trade every quarter, there is no fee even if your account is worth less than $5000.  If you're just starting out, you can still do Questrade and avoid fees.

[AmbitiousCanuck]

My wife and I both have accounts with Questrade.  There is no minimum amount required, although they charge a fee if your total assets are below $5,000

...an inactivity fee.  As long as you make a trade every quarter, there is no fee even if your account is worth less than $5000.  If you're just starting out, you can still do Questrade and avoid fees.

Unfortunately, simply making any trade is not enough to avoid the inactivity fee.  You have to make a "comissionable trade", and since it is free to buy ETFs, they don't count as a comissionable trade.  So if you are only holding ETFs, and have under $5000, you will be subject to the inactivity fee.  However, the $5000 amount is the combined total of all your accounts, and as of this month you can also link your account with the accounts of other family members, and the combined total of all linked accounts will be used to waive the inactivity fee for each account.

[1967mama]

Following with interest. Opened a Questrade account a month ago and bought our first Vanguard fund.

[Harvestqueen]

I also use the e-series funds via TD Waterhouse for both an RESP and TFSA and am very happy with them.  Additionally, I use the e-series funds in my son's RESP via a TD mutual fund account that I converted to an e-series account.  I had a great experience opening the e-series account as well.  I just printed off the conversion form and brought it in to the branch when I was opening up the RESP account.  We got the forms filled out in the appointment, the branch faxed it in and it was converted within a week.  It seems this is an anomaly though :-)

[Lynne]

My wife and I both have accounts with Questrade.  There is no minimum amount required, although they charge a fee if your total assets are below $5,000

...an inactivity fee.  As long as you make a trade every quarter, there is no fee even if your account is worth less than $5000.  If you're just starting out, you can still do Questrade and avoid fees.

Unfortunately, simply making any trade is not enough to avoid the inactivity fee.  You have to make a "comissionable trade", and since it is free to buy ETFs, they don't count as a comissionable trade.  So if you are only holding ETFs, and have under $5000, you will be subject to the inactivity fee.

Not true in my experience.  I have less than $5K in there right now (sigh), I only buy ETFs, and they don't charge me that quarterly inactivity fee.  I see on their website it says, "Commissionable trades include free trades or trades made using commission rebates."  I suppose ETF purchases fall under the first category.  (They do still make some money on those trades...)

[AmbitiousCanuck]

Unfortunately, simply making any trade is not enough to avoid the inactivity fee.  You have to make a "comissionable trade", and since it is free to buy ETFs, they don't count as a comissionable trade.  So if you are only holding ETFs, and have under $5000, you will be subject to the inactivity fee.

Not true in my experience.  I have less than $5K in there right now (sigh), I only buy ETFs, and they don't charge me that quarterly inactivity fee.  I see on their website it says, "Commissionable trades include free trades or trades made using commission rebates."  I suppose ETF purchases fall under the first category.  (They do still make some money on those trades...)

Aha, good catch!  Their terminology is confusing, as "comissionable trades" as defined for their promotions does not include ETF buys (as I was explicitly told by a customer service rep).  Anyway, that's great news for small investors!  You should look into their new family program (if you haven't already) if anyone else in your household or family has a Questrade account.

[MustachianPhD]

Thank you so much, everyone! All of your replies have offered very valuable information. I'm digesting it and may be back with some more specific questions in response to certain replies. Thanks again.

[Lynne]

You should look into their new family program (if you haven't already) if anyone else in your household or family has a Questrade account.

Hah.  Alas, I'm pretty sure I'll pass the $5K mark well before I'll manage to convince anyone else in my family that they should start investing.  (I have some hopes for my younger brother and sister, but I doubt it'll happen this year.)  I'm just dribbling a bit of money into it here and there for now, but once my student loan is paid off - no more than eight months from now! - I'll start gearing up in a big way.  Can't wait.  :)

[daverobev]

People opening Questrade accounts - they have a referral system now (my code is in my sig).

I wrote a little piece in the reader recommendations section a day or two ago.

There is a $5k threshold to waive their inactivity fee (or make a free ETF purchase, that counts as activity).

If you want automatic withdrawals and investments, go eSeries or Tangerine. If you don't know what to do and feel it might be a year or two before you've figured it all out... go Tangerine ASAP and THEN do the learning.

Otherwise, Questrade are pretty good. IQ Essential (trading platform) does all a couch potato would need. Don't use them for margin, though (unregistered), their rates are bad.

For a TFSA I'd say they are excellent, really.

[garce]

(Newbie question)
Are all the recommended funds/etfs/etc from coach potato supported by questrade?

[Retire-Canada]

You can't get the Tangerine or the TD funds. You can get all the Vanguard options.

[garce]

What about the other couch potato alternatives?

BMO Aggregate Bond Index ETF ZAG
BMO S&P/TSX Capped Composite Index ETF ZCN
BMO S&P 500 Index ETF ZSP
BMO MSCI EAFE Index ETF ZEA
BMO MSCI Emerging Markets Index ETF ZEM
Shares Core High Quality Canadian Bond Index ETF XQB
iShares Core S&P/TSX Capped Composite Index ETF XIC
iShares Core S&P 500 Index ETF XUS
iShares Core MSCI EAFE IMI Index ETF XEF
iShares Core MSCI Emerging Markets IMI Index ETF XEC

[garce]

Also Dimensional funds F Class please

[GuitarStv]

Check the MER on any funds you're looking at doing a CCP portfolio with.  Provided it's in line with the funds recommended on the site you should be fine.

[Kaspian]

Check the MER on any funds you're looking at doing a CCP portfolio with.  Provided it's in line with the funds recommended on the site you should be fine.

^^ What he said, garce.  You listed way too many funds there.  One of the primary purposes of CCP is to keep it as simple as possible.  Pick platform, a Canadian index, a US one, an Int'l, a bond fun, choose your asset allocation, then fuggedaboutit. 

[gerardc]

Do you guys use the CAD currency hedged versions of those funds, or the raw versions?

I'm thinking hedged version is better if you plan to live/spend mostly in Canada, otherwise unhedged. But I'm unsure of the hedging costs/inefficiencies.

[K-ice]

I only buy CAD currency ETFs.

I’ve been tempted to do a Norbert’s Gambit and get some USD ETFs in my RRSP. I believe there are some tax advantages, but I haven’t figured out all the details yet.

https://www.moneysense.ca/magazine-archive/norberts-gambit-a-better-way-to-buy-u-s-dollars/

[daverobev]

Do you guys use the CAD currency hedged versions of those funds, or the raw versions?

I'm thinking hedged version is better if you plan to live/spend mostly in Canada, otherwise unhedged. But I'm unsure of the hedging costs/inefficiencies.

In accumulation, you WANT volatility for dollar cost averaging. If the CAD is strong, great - you buy foreign stuff on the cheap.

It all balances out anyway - as currency goes up, stocks go down to compensate. And vice versa. Hedging adds cost but gains you little, and then imperfectly. So, no. No need to hedge, for your average bod.

[powersuitrecall]

There was a point at which I considered opening a Questrade account, but ultimately decided to consolidate all our finances at TD for simplicity.  Plus, I enjoy the ability to invest on the same day my pay arrives.

Here's how we do CCP ... I spread out our asset allocation over all of our accounts for tax efficiency:

              TFSA  RRSP(CAD)  RRSP(USD)     Taxable
              --------------------------------------
Equity CAN    VCN        VCN       ---    TDB900/HXT
Equity US     ---        ---       VTI          ---
Equity INT'L  ---        ---      VXUS          ---
Bonds         ZAG        ZAG       ---          ---

US and International equities are held in US dollars in a USD RRSP account (I convert CAD-USD using Norbert's Gambit).  I hold ETFs in all accounts unless I'm making weekly contributions to the account, in which case I buy the e-Series fund and move it into ETFs once a year.  For instance, I'm currently buying only TDB900 in our taxable but will move it into HXT at the end of the year.

I rebalance each account once a year, so the $10/trade cost at TD is relatively small price to pay for the convenience.

I don't use currency hedged ETFs for the same reasons daverobev mentioned, plus I'm not convinced the hedged funds to as good of a job tracking the indices they advertise.
https://canadiancouchpotato.com/2010/10/29/to-hedge-or-not-to-hedge/
https://canadiancouchpotato.com/2014/03/06/why-currency-hedging-doesnt-work-in-canada/
https://canadiancouchpotato.com/2015/02/04/stepping-back-from-the-hedge/
https://canadiancouchpotato.com/2016/03/07/ask-the-spud-is-it-time-to-hedge-currency/

I should mention that the above is by no means a blueprint for how everyone should invest.  I am definitely not an expert but I'm trying to be as efficient/simple as possible.

Cheers!

[Prairie Stash]

@powersuitrecall seeing as your in Ontario its a good idea to have seperate taxable accounts. If one of you is low income, under $45k/year, CDN dividends have favourable tax treatments (better then a TFSA if you're low income).

The way you said "our" taxable implies a singular account, plus saying "my" pay makes me wonder if your spouse is low income. A low income person in Ontario should prefer CDN dividends over a swap based product. Swap based is for high income people with taxable accounts, try plugging eligible dividends into last years tax return, you don't have to take my word. There are legal ways to transfer money to low income spouses to have the gains and dividends in their hands, not your own.

Bonds in TFSA and RRSP is different. I prefer high growth in TFSA, low growth (bonds) in RRSP. In the asset accumulation phase rebalancing can be achieved by adding money, as opposed to selling.

My apologies if I read too much into it. Asset allocation across spouses is another layer on top of asset allocation across accounts.

[powersuitrecall]

@powersuitrecall seeing as your in Ontario its a good idea to have seperate taxable accounts. If one of you is low income, under $45k/year, CDN dividends have favourable tax treatments (better then a TFSA if you're low income).

The way you said "our" taxable implies a singular account, plus saying "my" pay makes me wonder if your spouse is low income. A low income person in Ontario should prefer CDN dividends over a swap based product. Swap based is for high income people with taxable accounts, try plugging eligible dividends into last years tax return, you don't have to take my word. There are legal ways to transfer money to low income spouses to have the gains and dividends in their hands, not your own.

Bonds in TFSA and RRSP is different. I prefer high growth in TFSA, low growth (bonds) in RRSP. In the asset accumulation phase rebalancing can be achieved by adding money, as opposed to selling.

My apologies if I read too much into it. Asset allocation across spouses is another layer on top of asset allocation across accounts.

Your comments are welcome Prairie Stash!  My use of "my" and "our" was a little loose.  As it stands today, both DW and I have nearly identical salaries.  We both contribute equally to the "taxable" account and, in the eyes of CRA, pay taxes on dividends accordingly.  I decided on a swap based product as I have unused capital losses from a regretful experience with Nortel stock.

In about a year I will be RE'ing, while DW will continue to work for a couple of years.   Her salary will cover our expenses and allow contributions to the kids' RESP, both of our TFSAs and her RRSP.  At that time I will have to make some decisions on how to deal with these accounts.  I will no doubt be looking for advice at that time :)

Cheers!