Author Topic: Canadian Couch Potato - Should I switch ETFs?  (Read 1994 times)

Eckhart

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Canadian Couch Potato - Should I switch ETFs?
« on: November 15, 2017, 06:45:49 AM »
Hello MMM forum members!

Long time reader, first time poster in need of some investment advice.

I began investing in 2015 using the Canadian couch potato model ETF portfolio.  This consists of VAB, VCN, and VXC ETFs.  I am currently managing four accounts, my TFSA and RRSP as well as my wife TFSA and RRSP.  I am using the aggressive model, which is 10% VAB, 30% VCN, and 60% VXC.  I currently have 125K invested across all accounts.

In 2016, CCP recommended using ZAG instead of VAB.  Also XAW instead of VXC. 

My question is this:  Should I sell my VAB and VXC in all accounts, then purchase ZAG and XAW?  All accounts are tax-free, so I only would pay some selling fees to Questrade.

The MER on my 2015 CCP portfolio is .19%, while the 2016 CCP portfolio is .16%.

Doing a quick calculation, my portfolio has a .03% higher MER.  Therefore, on 125K, this would amount to $37.50 annually. (125000*.0003).  The selling fees to questrade across all accounts could amount to around $80, but over time this fee would be worth it given the savings in MER, assuming similar returns for either portfolio.

All thoughts and comments are greatly appreciated!

sencha

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Re: Canadian Couch Potato - Should I switch ETFs?
« Reply #1 on: November 15, 2017, 09:23:33 AM »
I have a similar situation, but with a smaller account the selling fees will take a greater cut of the profit from switching.

My plan is to continue buying VAB and VXC as I make TFSA contributions, in a way that will approximately balance my account. Once the price of these ETFs is such that I have to sell some of them to rebalance, I will take the opportunity to sell all of my holdings in them to switch to the new recommended funds.

Maybe by that time Vanguard will lower their fees to keep up with the competition ;)

Eckhart

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Re: Canadian Couch Potato - Should I switch ETFs?
« Reply #2 on: November 19, 2017, 12:19:59 PM »
Thanks for the reply Sencha!

I have decided to stick with my current ETFs for several reasons.

1.  Vanguard may lower fees in the future

2.  The CCP model portfolio ETFs may change again in the next year or two

3.  Once you max out your RRSP and TFSA and need to open a margin account, it is best to start placing certain ETFs into specific accounts to minimize taxes.   This would be a good time to sell and switch to lower fee ETFs.  See http://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/

4.  Dan Bortolotti, the man behind the CCP model portfolios, says there is no reason to change.  http://canadiancouchpotato.com/2017/01/13/model-portfolio-update-for-2017/

joonifloofeefloo

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Re: Canadian Couch Potato - Should I switch ETFs?
« Reply #3 on: November 19, 2017, 05:10:48 PM »
I was coming to say what you said in #4 :)

Many years they tweak their recommendations -a new fund with lower fee, etc- but they usually say the new model only applies if just starting out; those of us with CCP portfolios in place don't need to change them.

I'm changing mine this year to the latest only because I have to (get to) change most of my stuff for other reasons anyway.

Retire-Canada

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Re: Canadian Couch Potato - Should I switch ETFs?
« Reply #4 on: November 25, 2017, 05:31:38 PM »
1.  Vanguard may lower fees in the future

Vanguard is customer owned. It charges the actual costs of operating the fund to the fund owners. So if the fund gets more efficient to operate they will lower the MER. The other way to look at it is if the alternative funds are offering a lower MER at a for profit company than they are either 1) running the fund more efficiently than Vanguard including shareholder profit considerations or 2) subsidizing the cost of the fund from other higher fee funds. If it's the later option that MER may not stay that low.