Author Topic: Canadian Asset Location  (Read 2375 times)

Shooter_D

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Canadian Asset Location
« on: July 07, 2016, 02:16:31 PM »
Hi all,

I'm a Canadian DIY index investor. I have a maxed out RRSP, TFSA and I have a taxable investment account as well.

I roughly follow the Canadian Couch Potato portfolio, but I'm contemplating adding a chunk of change to my investments, and I'm a bit unsure of how to do so it without throwing my allocation too far out of whack.

Here's a breakdown of my asset locations/allocations:

RRSP:
25% US Equity

TFSA:
20% Can Bond
10% Emerging Markets
10% EAFE
10% Can REIT

Margin Taxable:
25% Can Equity

Basically, the money I want to add (almost 10% of my portfolio) would have to go to the taxable account, but I don't hold anything but Canadian equity there. I have my accounts pretty well balanced at the moment, and my TFSA is maxed so I can't really mess with those allocations by adding any more money.

I would be open to lowering my REIT allocation so that I can bump up my bond/EAFE/EM allocation, and I may have a sliver of room in my RRSP I could add for the US component, but I haven't crunched the numbers on this. I'm thinking I'll need to purchase foreign investments in my taxable account and am a bit hesitant about this.

Also, how do you deal with balancing your portfolio if you add your TFSA top-up at the start of every year? Do you allocate slightly more to those funds so you can add to the others throughout the year to bring things into balance?

Any ideas would be appreciated!

PharmaStache

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Re: Canadian Asset Location
« Reply #1 on: July 08, 2016, 08:55:41 AM »
I recently posted with a similar question.  I don't think there is any "right" way of doing this- just trial and error to see how things work for your particular situation.

How out of whack are your percentages if you add it all to Canadian equity?  When is the next time you plan on investing more money or rebalancing?

Shooter_D

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Re: Canadian Asset Location
« Reply #2 on: July 11, 2016, 01:17:40 PM »
Thanks for the reply Pharma. I have issues with the search function - it never works!

My asset allocation with a straight purchase of my Canadian equity fund would result in:

31% Can Equity
23% US Equity
18% Can Bond
9% Emerging Markets
9% EAFE
10% Can REIT

PharmaStache

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Re: Canadian Asset Location
« Reply #3 on: July 11, 2016, 05:39:49 PM »
For only being 6% off I'd just invest in canadian equity and rebalance at your set time.  Anyone is free to tell me why I'm wrong though!

In the future, you are going to probably need to hold some of those funds in multiple accounts.   

daverobev

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Re: Canadian Asset Location
« Reply #4 on: July 11, 2016, 08:12:50 PM »
As time goes on, your unreg amounts - as a proportion of total NW - will presumably grow, so I wouldn't worry about your new investments being in the "wrong place".

Just buy unreg in your correct allocation. Something like VXC would do - as a general catch-all. Then you don't have to worry about selling and rebuying in a registered account (remember, if you sell at a loss unreg and rebuy registered you can NOT claim the cap loss - if what you rebuy is 'identical' to what you sold - and if you're not buying VXC inside, it's not going to be identical).

That's assuming you'd be selling outside and rebuying in - if not then just buy whatever to meet your alloc.

Shooter_D

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Re: Canadian Asset Location
« Reply #5 on: July 12, 2016, 02:28:19 PM »
I will likely start adding money to the unreg monthly, but my next big-ish investment will be to TFSA in the new year. Also next year I will be able to add more to RRSP so those inputs could help balance things out. I suppose I will be lopsided each year until I can put new money in. I may end up holding VUN outside of my RRSP eventually. I am holding VUN because I haven't yet tried Norbert's gambit.

I guess this is a find-out-as-you-go thing. I just don't like making mistakes and losing $$. For instance, I sold VCN to buy XIC to harvest some losses. But then I bought VCN again too soon and spoiled that one.

Retire-Canada

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Re: Canadian Asset Location
« Reply #6 on: July 13, 2016, 07:03:31 AM »
A few points to consider:

- rebalancing once a year is fine
- you don't have to max out your TFSA/RRSP first thing in the new year...you can do so slowly throughout the year
- you'll also get dividends 4 times a year that can be used to adjust your actual AA back towards your desired %'s
- there is nothing wrong with holding the same ETFs in multiple accounts if that makes it easier for you to keep your AA balanced


My accounts look like:

- RRSP
--- US stocks
--- CDN stocks
---- Int'l stocks

- TFSA
--- US stocks
--- CDN stocks
---- Int'l stocks

Non-Reg
--- CDN stocks

I don't have any REITs or Bonds, but if I did they would be in my RRSP not my TFSA or Non-Reg for tax efficiency reasons.