Author Topic: Canadian investors, Why is it a good idea to hold VTI in my RRSP instead of VXC?  (Read 2206 times)


  • Pencil Stache
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  • Location: Canada
OK so I am roughly following the couch potato assertive to aggressive:

Lets say:
VAB = 20%
VCN = 30%
VXC = 50%

I need some more international and US exposure and also have some room in my RRSP.

Instead of purchasing more VXC, can someone please remind me why it is a good idea to hold VTI in my RRSP?

There is less withholding tax ...

I am a bit concerned about converting my CAD to USD which will be necessary. Do you have any tips on converting?

Next, looking at other Vanguard ETFs to bring up my international exposure I think I will need VI or VIU.

"Vanguard Canada has also created two new ETFs that will exclude Canada: the Vanguard FTSE Developed All Cap ex North America (VIU) and the hedged VI. These will be a better option for Canadians looking for more precision in their international equity allocation."

Do you have any advice on why to pick the VIU or the hedged VI?

Ultimately I guess my couch-potato would look like this:

VAB = 20%
VCN = 30%
VTI = 25% (Held in RRSP)
VIU = 25% (or VI)

Any thoughts?



  • 5 O'Clock Shadow
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  • Posts: 60
It is just withholding tax, which is ~.15 * 2% (dividend yield), so a ~.3% yearly drag. It's really not the end of the world either way, but an optimization you could do.

Look up Norbert's Gambit for how to convert efficiently.

Hedging versus unhedging is a whole other topic.  Here's a recent CCP article on it: Dan always comes down on the unhedged side, but opinions online are somewhat split.

For international, it is popular to use XEF and XEC as they hold the stocks directly,.


  • Pencil Stache
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  • Posts: 965
  • Location: Alberta
  • RiskManagement
    • The Rich Moose | A Better Canadian Finance Blog
The first two questions have already been answered so I'll try to address the VI(U) & VTI  vs.  VXC issue.

First off is that the fees for VXC are higher than the fees for VXC and VTI and it's Canadian listed version VUN. So you could save between 5 and 10 basis points right there.

Next, international markets do not all behave equally and they certainly do not move in lockstep with US markets. VXC is a cap weighted index so when US stocks are valued much higher than other international stocks (like right now for example), VXC will actually hold more of its value in US stocks. This is counteractive to the point of maintaining a balanced portfolio where on an annual basis you sell high and buy low to re-balance your portfolio. At some point the extra fees and trading costs are no longer worth it, but from a pure performance perspective it makes sense to break up your portfolio into multiple categories to achieve a greater benefit from re-balancing. The attached image can put it into a visual perspective a bit better, but if you look at returns for each category, more often than not an asset class that performs very well one year performs not so well the next.

So rather than VAB, VCN, VXC a better option could be:

VAB: 20%
VCN: 20%
VUN: 20%
VE: 20%
VA: 20%

I would only say it is worthwhile doing this for larger portfolios. If you're portfolio is worth less than $100k, it is simply not worth it to re-balance annually with multiple trades worth a few thousand each.