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Learning, Sharing, and Teaching => Investor Alley => Topic started by: Unchained on April 24, 2014, 09:28:53 AM

Title: Buy now or wait?
Post by: Unchained on April 24, 2014, 09:28:53 AM
This might seem like a silly question.. I'm still in the early stages of building my portfolio.

A quick run down, I have a time period of over 30 years (23 years old) so my risk tolerance is moderate. I have just started building my nest egg. I'm a Canadian.

My asset allocation plan is:
10% - Canadian Bonds - VAB
10% - REITs - ZRE
15% - US Equity - VTI
15% - INTL Equity - VXUS
50% - Canadian Equity - VCN

I have about 25k in my TFSA which is mainly in Canadian equities. At least 15k of that is in a sort of mutual fund with a stock broker that my parents set up when i was young which I'm in the process of moving over to my own accounts so I can properly sell and allocate the money. Some of that mutual fund holds fixed incomes.

Now my question comes from my RRSP. I intend to hold US equities, specifically Vanguards product VTI in my RRSP so that it will be tax sheltered. At the moment the CAD conversion rate is 1 dollar to every 0.91 USD. Pretty low. I have about 5500 in my RRSP to put into VTI but once I make the CAD to USD conversion, I lose almost 500 dollars in conversion. This doesn't sound good to me and my gut is telling me to wait until the CAD comes up closer to par. Am I being silly and I should just buy? My other thought is to put the 5500 into a fixed income like VAB because once I sell the mutual funds I listed above, I will be in 100% equities which isn't what I want. If I went this route I would not be buying any VTI till the end of the year when I move my companies RRSP match in.

Any thoughts on this? Sorry if it seems like all jumble...
Title: Re: Buy now or wait?
Post by: tomq04 on April 24, 2014, 10:08:37 AM
Nothing wrong with 100% equities until you're in your 30's.  Other side of the coin is, be where you are comfortable...but common advice is let it ride on equities and start allocating into fixed income slowly starting in your 30s.
Title: Re: Buy now or wait?
Post by: Unchained on April 24, 2014, 10:38:17 AM
Thanks for the advice. Would you suggest I just buy in now regardless of the exchange rate?
Title: Re: Buy now or wait?
Post by: strider3700 on April 24, 2014, 12:30:46 PM
I wouldn't hold my breath waiting for the Canadian dollar to come back to par.   Looking at the history  the last few years is a bit of an anomaly.    And yes the conversion hurts but it's not 10% unless your broker is really screwing you.  questrade charges 2% for the conversion.   so $100.    The total looks worse because it's 10% less but that is in USD. 

 I convert back in my spreadsheet to keep things all in Canadian.  here's the google formula I use.  C4 is VTI
=(ImportXml(""&C4, "//span[@class='pr']//*[1]" )*GoogleFinance("CURRENCY:USDCAD"))

For RRSP's I have VTI, and my international   XEC and XEF.    Everything else is close to your list and in TFSA.
Title: Re: Buy now or wait?
Post by: Unchained on April 24, 2014, 12:51:05 PM
Thanks Strider I believe you may be right, also, in the long run it may not make a huge difference.

I am banking with RBC and also use RBC Direct Investing. I don't believe they charge a fee for the conversion. Their website says no. The ten percent is just because the conversion rate right now is 0.91 as you mentioned.