Author Topic: New Canadian investor – looking for advice!  (Read 1499 times)

leah2022

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New Canadian investor – looking for advice!
« on: July 12, 2022, 01:19:53 PM »
I’m 34F, self-employed professional, living in Calgary, Canada. I rent and have no debt. I have an emergency fund, investments in a private financial investment firm, and I have cash in my bank that I need to invest.

I have been investing the past year with a financial advisor but I am looking to do it myself through a brokerage due to the high expense ratio fees (1.5-2.4%) - I learned that this amount of an expense ratio really adds up over time.  I just finished a course on investing with index funds but it was based in the US so I’m looking for some more Canadian specific advice.

1)What is a good brokerage to go with? I’m debating between Questtrade, Wealthsimple, and TD Direct Investing. All of them seem to have their pros and cons but I saw a lot of hate for Questtrade customer service on Reddit – their fees seem good though. I’m a beginner so please keep that in mind with recommendations!

2)From what I’ve read and learned so far, a three-fund portfolio seems to be a good approach (e.g., US ETFs, International ETFs, and bonds (however, not sure how directly this applies to Canada and the funds we are able to hold in our accounts – I’m still learning this. I do know that it’s best to buy only Canadian ETFs in a TFSA from what I understand?). Any advice on where to get started with deciding what types of funds to buy and how to balance it out between bonds and stocks? Even some really good resources would be helpful to give me some direction.

JAYSLOL

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Re: New Canadian investor – looking for advice!
« Reply #1 on: July 12, 2022, 01:55:29 PM »
Posting mostly to follow thread.  I’m in BC, have been using Tangerine Global Equity ETFs for my TFSA and RRSP.  I am interested in opening something where I can buy index funds that are a littler lower fee, I think mine are around .76%.  Financial advisor fees and bank mutual fund fees are nuts, it really does add up. 

Freedomin5

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Re: New Canadian investor – looking for advice!
« Reply #2 on: July 12, 2022, 05:07:13 PM »
Hi, and welcome!

You're me 7 years ago -- total Canadian newbie. Here are several resources that helped me get started.

This forum's Investment Order (Canada) post: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1351813/#msg1351813

Canadian Couch Potato: https://canadiancouchpotato.com/
I kind of binge read this site, but the posts on the model portfolios was especially helpful (https://canadiancouchpotato.com/model-portfolios/).

With regard to your questions, many people here like Questrade for their low fees. This might be a good option for you if you plan to invest small amounts frequently, like every week or every month. I personally went with TD Direct because my bank accounts are with TD, and it was easier for me to see everything on one dashboard. In addition, I only invest every quarter, so paying $9.99 for each ETF purchase doesn't break the bank. It was worth it to me to keep things as simple as possible. Also, I think if you buy TD's eSeries, there's no fee (I'm an expat and can't access eSeries, otherwise I'd probably be using those in my portfolio). Wealthsimple is more like robo-investing, but my understanding is that their fees are a bit higher because they help you rebalance and such. You could easily replicate Wealthsimple's robo-investing rebalancing function by purchasing an all-in-one fund like VGRO. Fees maybe slightly higher than DIY.

Rebalancing is not all that difficult. Canadian Couch Potato has an excel spreadsheet that can help you figure out how to rebalance, if you do want to buy multiple funds and rebalance yourself. (https://canadiancouchpotato.com/2019/02/04/a-new-rebalancing-spreadsheet-for-etfs/)

With regard to question two, here's an article specific to Canada: https://www.buildwealthcanada.ca/what-investments-to-hold-in-an-rrsp-vs-tfsa-vs-taxable-account-asset-location/#:~:text=For%20your%20bond%20ETFs%2C%20it%E2%80%99s%20generally%20best%20to,likely%20to%20grow%20the%20most%2C%20in%20your%20TFSA.

In general, you should put bonds in your RRSP, so that the dividends aren't taxed. Keep equity ETFs -- the ones that most likely to grow the quickest, in your TFSA since growth isn't taxed in your TFSA. Once you max out your RRSP and TFSA, then put any additional money into a taxable account. I'd recommend keeping equity in taxable as much as possible. Learn from my mistake -- I have some bonds in my taxable, and every month, without fail, 25% of my dividends gets lopped off for taxes, even if I automatically re-invest the dividends (DRIP).

Depending on your risk profile, at age 34, you may want to go for a more aggressive portfolio. I've found that the Canadian equity ETFs grow more slowly than the US ones. When you look at the make up of the top funds held in Canadian equity ETFs, it's mainly stable companies like financial institutions (banks, insurance companies) and communications companies (Bell, Rogers, etc.). In the US equity ETFs, it's mostly tech companies. So the Canadian equity ETFs tend to be more stable -- they tend to be less volatile. So as a Canadian, it's not as scary to go all equity ETF. At least that's how I've reasoned it out, and my portfolio is set up to reflect that. Except for the abovementioned bond mistake early in my investment journey, I've kept all other investments in a mix of Canadian equity ETFs and US equity ETFs.

Good luck on your journey! If you have any other questions, there are many many very well-informed people on this forum who can help guide you!

leah2022

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Re: New Canadian investor – looking for advice!
« Reply #3 on: July 12, 2022, 05:44:32 PM »
Thanks so much for this reply! I will read through the resources you linked to. I had found the Canadian Couch potato portfolios but I did find it somewhat confusing to be honest - I probably need to spend some more time with it. It looks like a two-fund portfolio (with bonds/stocks), at least to my newbie eye. So, as a Canadian, are we able to invest at all in the S & P 500 or any of the US ETFs? Or is that more with a non-registered account that I would do that?

Also, great tip about the bonds in RRSPs, that is helpful :)

Rockies

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Re: New Canadian investor – looking for advice!
« Reply #4 on: July 12, 2022, 10:56:59 PM »
My recommendation is to not overthink things. Go with the brokerage connected to your bank. Then follow these rules:

1. Slowly buy into large diversified indexed funds. Dont buy and sell frequently, move slowly. Because you wont be doing huge numbers of transactions you dont need to overthink the brokerage transaction fees.

2. Have an investment "philosophy" or directive before you start. This could be as basic as "I would like to invest 60% in the S&P 500, 30% in diversified global markets, and 10% in bond funds" or it could be a lot more lengthy. Then every time you feel the compulsion to buy or sell look at your directive and make sure it matches. It can be too easy to get caught up in the short term news cycle and buy or sell based on emotion.

3. Beware that most investment advisors at Canadian banks are salesmen that get paid to get you to buy mutual funds and usually will lead you down the wrong path. Just go with relatively low cost ETFs (like one from vanguard) to start.

4. Dont overthink it! You will learn over the years. Just move slowly and dont get too caught up in small mistakes and dont worry if your expense ratio is slightly higher than the best possible option. I see people over-obsessing about these small details.

4. I agree with the other posters that following the Canadian Couch Potato blog is probably the best learning resource. If you simply created a very simple 2-4 fund portfolio based on what you learned on that site and invested money into it every 6 months or 1 year you'd probably be better off than 99% of people out there.
« Last Edit: July 12, 2022, 11:04:33 PM by Rockies »

Freedomin5

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Re: New Canadian investor – looking for advice!
« Reply #5 on: July 13, 2022, 05:42:33 AM »
So, as a Canadian, are we able to invest at all in the S & P 500 or any of the US ETFs? Or is that more with a non-registered account that I would do that?


Yes, you can. For example, if you want to invest in a US equity ETF, you could choose VUN (Vanguard) or XUU (iShares). Those are two well-known ETFs, though I'm sure there may be other US equity ETFs that are offered as well. These are traded on the Toronto Stock Exchange, so you can purchase them easily. You can hold them in your RRSP, TFSA, or non-registered account.

erp

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Re: New Canadian investor – looking for advice!
« Reply #6 on: July 13, 2022, 02:48:11 PM »
Welcome!

I've used Questrade for 7+ years, and haven't really had an issues with them. They're a little slow to set up and occasionally annoying to deal with, but I haven't experienced anything worse than 'mildly frustrating'. I do also have some separate accounts run through one of the major companies through my job (ie. group RRSP and pensions type arrangements) - and I haven't found them to be any better or worse. Wealthsimple seems to have very nice ads, but I think they're mostly interested in selling their robo-advisor, which doesn't seem to add a whole lot of value in my opinion.

I initially started using a Couch Potato style portfolio (the 3-fund, balancing type), and have experimented with a few different things over the years. I am currently just dumping everything into VGRO - a vanguard all-in-one fund with 80% equities/20% bonds. There are certainly somewhat more efficient options than this, but for small accounts I question how much I want to stress about it. I find that I'm pretty willing to work hard to get my MER down to about 0.5%, but I lose steam after that (there are others on these forums who will work much harder than I will). Be really careful to not just hop onto the next hot fad - I like to think that my investing strategy has a bias for inaction.

The discussion around holding bonds in your RRSP and CDN dividend payers in your non-registered is interesting in theory, and lots of really smart people have come up with very efficient descriptions of what to do. I can't be bothered and just hold VGRO in my RRSP/TFSA/non-reg - it's less efficient but easier, and I'm willing to make that trade off.

Both Rockies and Freedomin5 make excellent comments. I especially think that "advisors are salespeople" and "Don't overthink it" are spot on. You may find when you're talking to bank people that you seem to know a lot more than they do, and you'll wonder if you're missing something. My experience has been, you're probably not missing anything - they probably just don't know much.

Good luck - the first steps are the hardest, after that you can count on your autopilot to do a lot of the lifting!


Blissful Biker

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Re: New Canadian investor – looking for advice!
« Reply #7 on: July 13, 2022, 03:40:44 PM »
I learned the basics from Canadian Couch Potato and am now finding Justin Bender's blog, podcast, youtube videos and model portfolios to be very useful. 

https://www.canadianportfoliomanagerblog.com/

I am currently using his Ludicrous strategy with 5 ETFs (US, CDN, International, Emerging Markets and Bonds) but in your shoes I would go with a single asset allocation ETF across all accounts.  You'll be miles ahead of your current situation and it's dead easy.

If you find you enjoy tinkering and optimizing then eventually move into something with more moving parts.  I've helped friends and family move into DIY investing and they are all content with single asset allocation funds.

FLBiker

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Re: New Canadian investor – looking for advice!
« Reply #8 on: July 14, 2022, 05:52:49 AM »
I'm also relatively new to Canadian investing, but I have a good amount of experience investing in the US (I am am American who moved to Canada as a Permanent Resident two years ago).

I use Questrade, and I've been very happy with them.  That said, I don't know that I've ever tried to talk to them on the phone.  Some things I like about them:
you can hold USD and CAD accounts
you can buy many ETFs with no commission
the commissions when you sell are reasonable
the website is reasonably easy to use (I don't find it totally intuitive, but it's fine)

One thing I DON'T like about them is that they give you a margin account by default.  I haven't found a way to turn this off (admittedly, I haven't tried super hard) but I really don't like that.  I don't want to trade on margin.  So, to avoid that, I just always make sure I have enough cash in my account to cover my trades.  I'm not sure what "warnings" you would get if you tried to buy more shares than you had cash for, but my sense is that it wouldn't be much, so I think you could easily end up trading on margin by mistake.

Another one that looked good to me is Qtrade, but they didn't seem to have commission free trading on USD ETFs (and most of my investments are still in USD).

As far as portfolio, I personally don't have a home country bias (meaning I don't have more Canadian stocks than their global market share would indicate).  I basically just buy a US stock ETF and a rest of world (ROW) ETF in a ratio that aligns with the global market cap as the equity portion of my portfolio.  And most of my bonds are US Bonds, but CAD Bonds are perfectly fine (IMO).

The single asset allocation ETF is a great recommendation as well.  If I were investing in CAD, I'd do either VEQT or VGRO.  VEQT is 100% stock, VGRO is 80/20 stocks to bonds.  Note that these DO have some home country bias (allocating ~30% of their equities to Canada).  I don't think that's a big deal, though.

FrugalToque

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Re: New Canadian investor – looking for advice!
« Reply #9 on: July 14, 2022, 07:30:01 AM »
I am a Canadian semi-early retiree, and I've been with Questrade for most of my savings.  I still have 40%ish of my money with RBC, since I started there with an RRSP or two as required by my early 2000's era employer (you had to go with either RBC or Scotia in order to get the 50% matching).

Yes, last I checked we have some tax treaties for RRSPs but not TFSAs, so everything in my and Mrs. Toque's TFSAs are in Canadian ETFs (Vanguard's VCE, VCN, VAB, if I remember correctly).  Canadian Couch potato, as pointed out, has some good advice on stable portfolios.  I think people are generally recommending 90% equities and 10% bonds, but I think that varies with your "aggressiveness/risk tolerance".  The last time I checked, Couch Potato was showing how there's very little difference in *long term* behaviour of the three different levels of aggressiveness.

The good news? We're in the middle of a recession and everyone is all "Oh, no! We can never trust stocks again!" so it's a great time to start saving.

Toque. 
« Last Edit: July 16, 2022, 07:35:33 PM by FrugalToque »

Mighty Eyebrows

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Re: New Canadian investor – looking for advice!
« Reply #10 on: July 16, 2022, 07:21:32 PM »
I initially started using a Couch Potato style portfolio (the 3-fund, balancing type), and have experimented with a few different things over the years. I am currently just dumping everything into VGRO - a vanguard all-in-one fund with 80% equities/20% bonds.

I agree with this. The "all-in-one" or "asset allocation" ETFs like VEQT/VGRO/VBAL, or the blackrock versions XEQT/XGRO/XBAL, are excellent. Don't let simplicity fool you - they are better than almost anything that was available to previous generations of investors. You just need to decide on your risk tolerance and time horizon.

Dan Bortolotti (Canadian Couch Potato) has an excellent book covering many aspects of planning for Canadians:
https://www.amazon.ca/Reboot-Your-Portfolio-Successful-Investing/dp/1988344328


One thing I DON'T like about them is that they give you a margin account by default.  I haven't found a way to turn this off (admittedly, I haven't tried super hard) but I really don't like that.  I don't want to trade on margin.  So, to avoid that, I just always make sure I have enough cash in my account to cover my trades.  I'm not sure what "warnings" you would get if you tried to buy more shares than you had cash for, but my sense is that it wouldn't be much, so I think you could easily end up trading on margin by mistake.

We have been with Questrade for a number of years and they are fine, but I agree with this criticism of forcing every taxable account to be a "margin" account. Unnecessary move, but easily worked around if you pay attention.

Another option is to use BMO investorline which allows commission-free trading for select ETFs, including the asset allocation ETFs mentioned above.
https://www.bmoinvestorline.com/selfDirected/pdfs/no_commission_fee_etfs_en.pdf

Missy B

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Re: New Canadian investor – looking for advice!
« Reply #11 on: August 12, 2022, 10:50:56 PM »
My recommendation is to not overthink things. Go with the brokerage connected to your bank. Then follow these rules:

1. Slowly buy into large diversified indexed funds. Dont buy and sell frequently, move slowly. Because you wont be doing huge numbers of transactions you dont need to overthink the brokerage transaction fees.

2. Have an investment "philosophy" or directive before you start. This could be as basic as "I would like to invest 60% in the S&P 500, 30% in diversified global markets, and 10% in bond funds" or it could be a lot more lengthy. Then every time you feel the compulsion to buy or sell look at your directive and make sure it matches. It can be too easy to get caught up in the short term news cycle and buy or sell based on emotion.

3. Beware that most investment advisors at Canadian banks are salesmen that get paid to get you to buy mutual funds and usually will lead you down the wrong path. Just go with relatively low cost ETFs (like one from vanguard) to start.

4. Dont overthink it! You will learn over the years. Just move slowly and dont get too caught up in small mistakes and dont worry if your expense ratio is slightly higher than the best possible option. I see people over-obsessing about these small details.

4. I agree with the other posters that following the Canadian Couch Potato blog is probably the best learning resource. If you simply created a very simple 2-4 fund portfolio based on what you learned on that site and invested money into it every 6 months or 1 year you'd probably be better off than 99% of people out there.

All this. Exactly.

leah2022

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Re: New Canadian investor – looking for advice!
« Reply #12 on: September 15, 2022, 01:45:34 PM »
Thank you everyone for your help and suggestions! I opened a Questrade account (TFSA and RRSP) and started to invest 50/50 in VGRO and VBAL. I read Dan's book and looked at the model portfolios on the Canadian Portfolio Manager blog, which both helped me understand what I'm doing when I am investing in these asset allocation funds. Still a bit nerve wracking to do this on my own, but I'll continue to learn more and grow in my knowledge.

Mighty Eyebrows

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Re: New Canadian investor – looking for advice!
« Reply #13 on: September 16, 2022, 11:46:07 PM »
Thank you everyone for your help and suggestions! I opened a Questrade account (TFSA and RRSP) and started to invest 50/50 in VGRO and VBAL. I read Dan's book and looked at the model portfolios on the Canadian Portfolio Manager blog, which both helped me understand what I'm doing when I am investing in these asset allocation funds. Still a bit nerve wracking to do this on my own, but I'll continue to learn more and grow in my knowledge.

It sounds like you are well on your way. Keep reading!


Heckler

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Re: New Canadian investor – looking for advice!
« Reply #14 on: September 24, 2022, 02:00:51 PM »
I'm curious what your rationale is to go 50/50 in VGRO and VBAL? 

They are literally identical funds with simply different asset allocations which result in very slightly different returns and risks.  VGRO has a 3-year return of 6% and VBAL has a 3-year return of 4%, so you're shooting for 5%?  Keep reading CPP - Dan B constantly advocates for simplifying, setting, and forgetting your portfolio, especially when starting out.

https://www.vanguard.ca/individual/fundcompare.htm?gclid=Cj0KCQjw1bqZBhDXARIsANTjCPKcBpqQBIC1VyeBbTVNYnqtIg4oKo6ItE7LFTM20D1FN1bUBNaEa70aAhp2EALw_wcB#/target=fct&selectedFund0=F0000101Q3&selectedFund1=F0000101Q2

Over time, your 50% VGRO holding should outpace VBAL by ~2% per year.  Will you rebalance? 


(I'm asking these questions as food for thought for you)
« Last Edit: September 24, 2022, 02:02:55 PM by Heckler »