Author Topic: Canadian Registered vs Unregistered allocation  (Read 3114 times)

Heather

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Canadian Registered vs Unregistered allocation
« on: April 12, 2013, 12:24:43 PM »
I'd like a few some suggestions for investments to be put in registered and non-registered accounts in Canada.
My savings are roughly half registered (RRSP,  and now TFSA and RESP), and half non-registered.   
It is currently not well invested, it appears. Much of the non-registered portion is in a GIC and much of the registered portion is in older style mutual funds with higher management ratios.

I don't want to make it complicated.   Maybe if I could stick with a small selection of TD E-series funds and some selected ETFs, that might be ok.     
I'm not sure how the taxation works for mutual funds and ETFs.  I read that it's smart to have your unregistered investments in things that give you dividends and capital gains. What TD E-series funds and ETFs do that?  I'm also not sure how to find out if a particular investment's capital gains qualify for tax exemption in Canada.

I'd happy to stick with some standard recommended asset allocation for a 46 year old, because who am I to second guess.

Do any readers have suggestions?

I Love Cake

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Re: Canadian Registered vs Unregistered allocation
« Reply #1 on: April 12, 2013, 12:26:45 PM »
We are living parallel lives. I hope you (me) get some sage advice

daverobev

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Re: Canadian Registered vs Unregistered allocation
« Reply #2 on: April 12, 2013, 04:56:13 PM »
Hi,

it's not tax exemption, you just get favourable treatment for dividends from Canadian companies from the CRA.

Have a read of Canadian Couch Potato - it really is an excellent site.

In short - you want Bonds and REITS in your TFSA, foreign stocks in your RRSP (especially US$), and CAD$ stocks unregistered.

Not that you *WANT* your CAD stocks unregistered, but if you don't have TFSA or RRSP room, sticking them unregistered is most tax efficient (as you get enhanced dividend tax credit - which is basically saying "these Canadian companies have already paid tax on this money, so you don't have to).

Canadian Couch Potato has a section on model portfolios, which includes the TD ones.

You can get 3% at People's Trust in their TFSA if you want to have some emergency cash. No guarantee how long that rate'll be around, but I believe it to be better than most GICs.

An alternative is Questrade where you can buy ETFs commission free, now. Selling will cost $5. You can open TFSA, RRSP and "margin" accounts (but be careful with those!).

RBC has some "ok" mutual funds; not sure which bank/s you're currently with. As in, Canadian Index is 0.7% or so, as is the US Index. Ignore anything > 1%!!

Heather

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Re: Canadian Registered vs Unregistered allocation
« Reply #3 on: April 13, 2013, 10:29:18 AM »
It's nice that the Couch Potato site offers some suggested simple portfolios.
Here is their Option#2:

Canadian equity   20%      TD Canadian Index e (TDB900)
US equity   20%      TD US Index e (TDB902)
International equity   20%      TD International Index e (TDB911)
Canadian bonds   40%      TD Canadian Bond Index e (TDB909)

If someone wanted to adopt this portfolio exactly, and they could fit only half of their savings in registed accounts, then would it look like this?

Registered:
Canadian bonds   40%      TD Canadian Bond Index e (TDB909)
Canadian equity   5%      TD Canadian Index e (TDB900)
US equity   20%      TD US Index e (TDB902)
International equity   5%      TD International Index e (TDB911)
Canadian bonds   10%      TD Canadian Bond Index e (TDB909)

Unregistered
Canadian equity   10%      TD Canadian Index e (TDB900)
US equity   20%      TD US Index e (TDB902)
International equity   10%      TD International Index e (TDB911)
Canadian bonds   20%      TD Canadian Bond Index e (TDB909)

Does that look like the best way to split it?

daverobev

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Re: Canadian Registered vs Unregistered allocation
« Reply #4 on: April 13, 2013, 10:23:45 PM »
I'd say no

Reg - Bonds
RRSP specifically US equity (not sure if that matters or not with the TD stuff - probably not, but for US$ stuff you want that in your RRSP not TFSA due to the lack of withholding tax if you put it in an RRSP!)
Everything else unregistered.

I'm not sure I'd worry about putting 5% each of "US" and "international" in registered and unregistered.

Maybe just go

Bonds - 40% - registered
US equity - 10% - registered
US - 10% - unreg
Int'l - 20% - unreg
Cad - 20% - unreg

HOWEVER I would say 50% bonds is unduly risky at the moment. The usual advice is your-age-as-bond-percentage, but bonds literally have nowhere to go (unless like the bizarre case in Germany, you end up paying more up front than you will get back!). I'm not saying cut them out, but maybe tone them down a little. Say 40%, max. 35% better. But that's your call.