Author Topic: Canadian Investor - Comments on my portfolio  (Read 3570 times)

Retire-Canada

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Re: Canadian Investor - Comments on my portfolio
« Reply #50 on: December 03, 2020, 07:15:54 AM »
Eh, what's the point of the AA if it's guaranteed to be wrong, though?

For example, let's say:

400k - RRSP - US

100k - TFSA - ROW

300k - unreg - mix Canada, bonds, ROW

If you want 50% US in your AA, in the above you don't really have it. That 400k in the RRSP of US is not worth the same as the 400k outside. This isn't about tax on taking the money out (directly); it's that if you want half of your after-tax pot amount in US, you do not have that in the allocation above.

You are not taking that $400K out of your RRSP on the day your are thinking about this. So the idea it's worth less outside is meaningless. You could decide to totally reshuffle your AA so RoW and Canada is in the RRSP and then a week later switch it back to US in the RRSP.

Additionally like we discussed above if your RRSP is large you are not making any decisions about where to get the money from as you really have to drawdown the RRSP in order to avoid issues with the mandatory WRs at 71. So what's the point of worrying about a theoretical after-tax value of your AA when it's not informing any decisions?

The only part of the argument that makes sense is you need to account for taxes in FIRE planning, but there are simpler ways to do so.
« Last Edit: December 03, 2020, 07:19:30 AM by Retire-Canada »

daverobev

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Re: Canadian Investor - Comments on my portfolio
« Reply #51 on: December 03, 2020, 07:26:07 AM »
I think you're missing my point, and I'm sorry I'm not getting it across clearly.

I'm talking about the growth of that money over time.

Let's say the US does better than ROW over time. The RRSP will have grown; but because you lose when you withdraw, your true AA means you will not really have had 50% US across that time.

I can make a really extreme example.

You have a million dollars total, you want 50% US, 500k is in the RRSP. The US does better than everything else - US grows 10%, everything else grows 5% a year.

If you discount the RRSP by your expected 20% tax rate to 400k, you need to have an extra 50k outside the RRSP as US as well (because you're saying you have 500k outside and after tax only 400k inside).

Changing AA after a few years does not rectify the lost growth because you held less US than you wanted. Your AA was not followed.

max9505672

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Re: Canadian Investor - Comments on my portfolio
« Reply #52 on: December 07, 2020, 02:47:43 PM »
Obviously you can't make this perfect, it just isn't possible. But at least, sell ~15% of your total amount of XAW in the TFSA, sell the VAB in the RRSP, buy VTI in the RRSP and ZEA in the TFSA, and then bonds unregistered. The only thing with ZEA IIRC is that it doesn't hold emerging but as I said - not possible to get this perfect.

While RRSP room is less than US exposure desired, 100% of RRSP should be VTI.
Thanks for the advices.

Before I make any changes, I just noticed I am tracking my AA% without considering the USD vs CAD value. So letís say I have 100k$ VTI in my RRSP, itís worth +/- 130k$ CAD right? Would that make sense to calculate this way? I guess I have been underestimating my US exposure.

daverobev

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Re: Canadian Investor - Comments on my portfolio
« Reply #53 on: December 08, 2020, 03:24:28 AM »
Obviously you can't make this perfect, it just isn't possible. But at least, sell ~15% of your total amount of XAW in the TFSA, sell the VAB in the RRSP, buy VTI in the RRSP and ZEA in the TFSA, and then bonds unregistered. The only thing with ZEA IIRC is that it doesn't hold emerging but as I said - not possible to get this perfect.

While RRSP room is less than US exposure desired, 100% of RRSP should be VTI.
Thanks for the advices.

Before I make any changes, I just noticed I am tracking my AA% without considering the USD vs CAD value. So letís say I have 100k$ VTI in my RRSP, itís worth +/- 130k$ CAD right? Would that make sense to calculate this way? I guess I have been underestimating my US exposure.

Yes, of course you have to convert everything one way or the other - in my spreadsheet I have a cell for currency rates, but I do a line per account - in Questrade you can see 'total value in CAD' so I just take that number.

As I already said you may or may not want to discount the RRSP to account that the amount you will receive when you pull it out will be less. Not sure if that idea gets across though, so you may want to ignore, it isn't going to make that much of a difference.

max9505672

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Re: Canadian Investor - Comments on my portfolio
« Reply #54 on: December 08, 2020, 12:31:41 PM »
Yes, of course you have to convert everything one way or the other - in my spreadsheet I have a cell for currency rates, but I do a line per account - in Questrade you can see 'total value in CAD' so I just take that number.

As I already said you may or may not want to discount the RRSP to account that the amount you will receive when you pull it out will be less. Not sure if that idea gets across though, so you may want to ignore, it isn't going to make that much of a difference.
Nevermind for the first part, this is also what I am doing everytime I re-balance.

Regarding discounting the RRSP is to assume taxes will have to be paid on this amount when I withdraw right? For example, 100k$ is probably worth 80k$ after withdrawing (based on a multitude of variables). I get that. Itís probably also true for unregistered account (taxes on capital gains to be paid later). At this point, I find that this requires too many assumptions and is probably harder to manage. Unless you have a simple way to suggest?

Le North Dreamer

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Re: Canadian Investor - Comments on my portfolio
« Reply #55 on: December 08, 2020, 04:13:51 PM »
Nevermind for the first part, this is also what I am doing every time I re-balance.

Regarding discounting the RRSP is to assume taxes will have to be paid on this amount when I withdraw right? For example, 100k$ is probably worth 80k$ after withdrawing (based on a multitude of variables). I get that. Itís probably also true for unregistered account (taxes on capital gains to be paid later). At this point, I find that this requires too many assumptions and is probably harder to manage. Unless you have a simple way to suggest?

I personally have an expense item called "taxes" in my FIRE budget to factor in the taxes on revenues I am planning to make to cover my FIRE expenses. This allows me to play with the number based on certain assumptions but keeping everything quite simple. Happy to hear any other methods.

daverobev

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Re: Canadian Investor - Comments on my portfolio
« Reply #56 on: December 09, 2020, 05:08:10 AM »
Yes, of course you have to convert everything one way or the other - in my spreadsheet I have a cell for currency rates, but I do a line per account - in Questrade you can see 'total value in CAD' so I just take that number.

As I already said you may or may not want to discount the RRSP to account that the amount you will receive when you pull it out will be less. Not sure if that idea gets across though, so you may want to ignore, it isn't going to make that much of a difference.
Nevermind for the first part, this is also what I am doing everytime I re-balance.

Regarding discounting the RRSP is to assume taxes will have to be paid on this amount when I withdraw right? For example, 100k$ is probably worth 80k$ after withdrawing (based on a multitude of variables). I get that. Itís probably also true for unregistered account (taxes on capital gains to be paid later). At this point, I find that this requires too many assumptions and is probably harder to manage. Unless you have a simple way to suggest?

When I was doing it, for asset allocation purposes, I think I was just putting a flat 10% reduction in the weighting of anything in my RRSP.

I haven't updated my AA lately, partly because I'm no longer living in Canada and the tax shelters I have available are different. My situation is, frankly, a mess of accounts and of no use to anyone!

max9505672

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Re: Canadian Investor - Comments on my portfolio
« Reply #57 on: December 09, 2020, 11:19:58 AM »
Yes, of course you have to convert everything one way or the other - in my spreadsheet I have a cell for currency rates, but I do a line per account - in Questrade you can see 'total value in CAD' so I just take that number.

As I already said you may or may not want to discount the RRSP to account that the amount you will receive when you pull it out will be less. Not sure if that idea gets across though, so you may want to ignore, it isn't going to make that much of a difference.
Nevermind for the first part, this is also what I am doing everytime I re-balance.

Regarding discounting the RRSP is to assume taxes will have to be paid on this amount when I withdraw right? For example, 100k$ is probably worth 80k$ after withdrawing (based on a multitude of variables). I get that. Itís probably also true for unregistered account (taxes on capital gains to be paid later). At this point, I find that this requires too many assumptions and is probably harder to manage. Unless you have a simple way to suggest?

When I was doing it, for asset allocation purposes, I think I was just putting a flat 10% reduction in the weighting of anything in my RRSP.

I haven't updated my AA lately, partly because I'm no longer living in Canada and the tax shelters I have available are different. My situation is, frankly, a mess of accounts and of no use to anyone!
I understand what you are doing and it makes sense. Are you doing the same with your NW?

daverobev

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Re: Canadian Investor - Comments on my portfolio
« Reply #58 on: December 09, 2020, 02:42:26 PM »
Yes, of course you have to convert everything one way or the other - in my spreadsheet I have a cell for currency rates, but I do a line per account - in Questrade you can see 'total value in CAD' so I just take that number.

As I already said you may or may not want to discount the RRSP to account that the amount you will receive when you pull it out will be less. Not sure if that idea gets across though, so you may want to ignore, it isn't going to make that much of a difference.
Nevermind for the first part, this is also what I am doing everytime I re-balance.

Regarding discounting the RRSP is to assume taxes will have to be paid on this amount when I withdraw right? For example, 100k$ is probably worth 80k$ after withdrawing (based on a multitude of variables). I get that. Itís probably also true for unregistered account (taxes on capital gains to be paid later). At this point, I find that this requires too many assumptions and is probably harder to manage. Unless you have a simple way to suggest?

When I was doing it, for asset allocation purposes, I think I was just putting a flat 10% reduction in the weighting of anything in my RRSP.

I haven't updated my AA lately, partly because I'm no longer living in Canada and the tax shelters I have available are different. My situation is, frankly, a mess of accounts and of no use to anyone!
I understand what you are doing and it makes sense. Are you doing the same with your NW?

Naw - I'm kind've at the point that I've done enough, I think. I've done what I can to optimise, and I'm not on the salary -> saving part of the journey now. Plus it's all such a mess - of accounts, countries, etc. I'll get to state pension age all things being equal, and once I'm there it's all good anyway.

max9505672

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Re: Canadian Investor - Comments on my portfolio
« Reply #59 on: December 11, 2020, 09:07:04 PM »
Naw - I'm kind've at the point that I've done enough, I think. I've done what I can to optimise, and I'm not on the salary -> saving part of the journey now. Plus it's all such a mess - of accounts, countries, etc. I'll get to state pension age all things being equal, and once I'm there it's all good anyway.
Thanks for the input, it has been very helpful.

Iíll update once I am done with another round of updates on my funds/accounts.

chicklets123

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Re: Canadian Investor - Comments on my portfolio
« Reply #60 on: January 22, 2021, 09:04:43 AM »
Can someone comment on my account please. I have some funds elsewhere with portfolio managers but new money I want to manage.

Currently It is:

VFV-60%
XUU-5%
ARKK-25%
Penny/Bitcoin/other-10%

Do I need VEE?

Thank you


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