Author Topic: Are index funds required to be all allocated into one account?  (Read 1025 times)

kevc

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Are index funds required to be all allocated into one account?
« on: January 08, 2017, 08:26:23 PM »
Hello ladies and gents, quick question for a beginner investor here again. I'm a Canadian so we have access to TFSA and RRSP accounts.

Currently I have around 16k in my TFSA account which consists of:
VUN
VCN
XEF

Now I am going make a contribution of approximately 10 thousand into my RRSP for tax purposes. Does it matter if I buy more shares in sort of the same ratio as above and have it in this account? Does this change anything in the long run? Or would I want to hold one fund in one account and then another fund in a different one and not have them split up? Thank you guys in advanced, been very helpful here.

Ie : Would it be more beneficial to have

TFSA:
VUN + XEF Shares

RRSP: Only VCN shares?

Retire-Canada

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Re: Are index funds required to be all allocated into one account?
« Reply #1 on: January 08, 2017, 09:10:54 PM »
You don't need to replicate your asset allocation in each account. As long as your asset allocation totalled over all the accounts matches your planned asset allocation you are good.

There is no difference in holding VUN or VCN in your RRSP vs. your TFSA. If you were holding VTI [US traded version of VUN] in your RRSP you would not have your dividends taxed by the US Gov't. Downside is you have to convert CDN to USD, which is a pain and expensive if you are adding small amounts each month. You can do something called Norbit's Gamble for converting larger amounts from CDN to USD or back.

Personally I just hold VUN for convenience. I've considered converting it to VTI in my RRSP, but I'll be FIREing soon-ish and then I have to convert the USD back to CDN. So far I haven't been motivated enough to make that happen.

I won't comment on XEF as I am not familiar with it.

Assuming you fill your RRSP/TFSA room and need to invest additional fund in your Non-Registered account I'd suggest VCN or an equivalent fund as you'll get favourable tax treatment for CDN dividends.

Heckler

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Re: Are index funds required to be all allocated into one account?
« Reply #2 on: January 09, 2017, 07:53:30 AM »
Heres some reading for you.

Consider your costs to buy and sell your three (4 once you eventually add bonds) ETFS over your lifetime. 3x or 6x you commission and fees?

How efficiently do your dividends get reinvested?

How tax efficient is your portfolio design?

Does your RSP contribution save you taxes?  You will pay income tax when you take funds out of your RSP, will that be at a lower rate than today?   Depends on your income level today and when you withdraw.  (Why aren't you maxing your TFSA first?)

https://www.bogleheads.org/wiki/Asset_allocation_in_multiple_accounts

http://canadiancouchpotato.com/?s=Multiple+accounts&submit=Search
« Last Edit: January 09, 2017, 08:02:00 AM by Heckler »