Author Topic: Canadians Investing - up to date information?  (Read 6081 times)

EarthshipSandra

  • 5 O'Clock Shadow
  • *
  • Posts: 25
  • Age: 53
  • Location: Darfield, BC Canada
    • The Darfield Earthship
Canadians Investing - up to date information?
« on: February 13, 2016, 09:31:33 AM »
I haven't seen an up-to-date thread on Investing in Canada so at the risk of adding another number to the hundreds at the bottom of this forum category, here goes!

We're smacking ourselves (figuratively) and finally getting ourselves straightened out again. We have a healthy amount to invest  (mostly sitting in RRSPs right now).  They used to be invested in mutual funds but we pulled everything out pre-2008 and parked them in safer spots...but since then we've been twitchy and they haven't done much.

Our investing education (and lifestyle re-direction) led us to MMM...luckily we've been out of debt for some time and back on track the last few years in saving a good percentage of our income. Getting out of debt and saving $ is easy for us.

But investing. Aye yi yi. 

So, we've read all the Frugal Toque blog posts about Canadian investing and also the MMM philosophy re: index funds and the love-affair with Vanguard (even in Canada). We've looked at The Couch Potato's sample portfolios. We've sat down and discussed goals, risk tolerance, blah blah blah...

But we've yet to commit. We are thinking of half into a Couch Potato-like mix and then some DRIP investing.  But we still can't bring ourselves to do it until we understand better what this means. For example, does an index fund with stocks generate dividends and if so what happens to them (inside or automatic re-investing mechanism?).  Fees...we have our money parked with BMO Investorline and it appears they charge nothing to buy the Vanguard funds that are offered (that's good news...we weren't sure BMO had the Van funds we were interested in, initially). We need to learn a bit more about Qtrade and Questrade (in our reading it seems like one during the life of the MMM blog trumped the other in terms of saving fees).

We've also examined our RRSP and TFSA tools and have a strategy as to where to put ongoing funds in the upcoming year...optimized by our expected income and expenses.

I'm hoping that there are Canadians out there sitting exactly where we are so that we can share information. My husband is able to wrap his head around this a little better than I am, but I'm a great researcher and accumulator of information. :)

A bit about us: out of debt in 2005 when we paid off our mortgage. Closed our business in 2008 (early) when we saw the writing on the wall (we shipped machine log homes globally). We walked away with money in the bank because we read the signs correctly at the right time. We took a diversion from our plans for early retirement when we took a portion of our savings ($75,000) to build an earthship (home) in BC Canada and to homeschool our kids. We did return to part time work (engineer and writer).  Although we did not save much in the first few years of our part time work, we are now saving a great percentage, even with kids in Grade 10, 11, 12 and all the demands that can mean. Despite being in our mid to late 40s we're pretty sure we can still retire early-ish (another 10 years maybe? once we can accelerate both income and savings when the kids are gone). The flip side to earning less is that we've done some fun stuff over the years with the kids while we've had them close to us! No regrets there.

nobodyspecial

  • Handlebar Stache
  • *****
  • Posts: 1468
  • Location: Land above the land of the free
Re: Canadians Investing - up to date information?
« Reply #1 on: February 13, 2016, 09:54:54 AM »
Buy VXC from Questrade (no fee to buy ETFs) and forget about it.

If you feel like playing Gordon Gekko buy some boring Canadian companies that pay dividends (RBC, Telus, Bell) and put them in a TFSA

If you have more than $250k or one of you earns a lot less than the other, it may be worth talking to a fee-only adviser about clever tax stuff.
« Last Edit: February 13, 2016, 07:39:48 PM by nobodyspecial »

RichMoose

  • Pencil Stache
  • ****
  • Posts: 971
  • Location: Alberta
  • RiskManagement
    • The Rich Moose | A Better Canadian Finance Blog
Re: Canadians Investing - up to date information?
« Reply #2 on: February 13, 2016, 01:28:39 PM »
Hey, always more than happy to give some advice!

Whether you decide to invest via dividend stocks or ETFs, it doesn't really matter too much from a returns perspective as long as you buy quality companies and hold them. The biggest problem most people have with investing in individual stocks is they tend to buy and sell because individual stocks will (generally speaking) be more volatile than the overall index. This means potentially more sleepless nights.

For ease of management, I would say that the Couch Potato strategy is best for 95% of investors. You should first determine your risk tolerance as this will define your overall strategy. Once you've settled on that it's easy. Simply divide your holdings into Canadian ETF, International ETF, and Bond ETF. Vanguard is great, but iShares and BMO also offer price competitive products which in some cases are more liquid, meaning they have higher daily trading volumes. This is important as it can help reduce the bid-ask spreads, saving you money in the long run.

I would recommend the following funds:
-Canadian Index (XIC.TO, VCE.TO)
-International Index (VXC.TO)
-Bond (VAB.TO, VSB.TO, ZAG.TO, XQB.TO, XSH.TO)
Just pick one in each category and stick with it.

The dividends in index funds will simply be paid as cash into the account that holds the investment. You can then buy more. Some brokerages offer a synthetic DRIP style for dividend re-investment. If your investment amounts are higher, taking the dividend in cash can help re-balance your portfolio.

meghan88

  • Pencil Stache
  • ****
  • Posts: 763
  • Location: Montreal
Re: Canadians Investing - up to date information?
« Reply #3 on: February 13, 2016, 01:46:40 PM »
Hi EarthshipSandra,

I think there's a ton of info out there about what to choose re. TFSA vs. RRSP if you only have limited funds to contribute to each.  I generally max out both every year, and advise my sig-O to do the same.  If you're going to FIRE early, you can draw down from the RRSP first ... I believe that's the way to go during low income years before you start getting the (pathetic) government pension payouts.

I've had bad investment advisors over the years (Nortel! Yellow Pages bonds! Dream Office REIT!) so I'm switching over to a self-managed Vanguard-type couch potato portfolio (VCN or XIC, VAB and VXC), though the transition is painful as I'm not sure when to cut the cord on certain things.

Good luck to you!!  Keep us posted as to how it's going.

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1347
Re: Canadians Investing - up to date information?
« Reply #4 on: February 13, 2016, 07:32:43 PM »
BMO Investorline will charge $9.95 per trade (buy or sell), and you can trade any of the Vanguard Canada or US (in USD) ETFs.

https://www.vanguardcanada.ca/individual/etfs/etfs.htm

A year ago I cut the cord from high fee mutual funds and couldn't be happier.  30% VAB / 25% VCN / 25 % VAB / 17% XEF / 3% VEE for me.  VCN and VEE are currently biting the bullet hard, so I'm buying more to balance out again.
« Last Edit: February 13, 2016, 07:38:48 PM by Heckler »

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1347
Re: Canadians Investing - up to date information?
« Reply #5 on: February 13, 2016, 07:42:22 PM »
ETFs will have distributions, paid monthly or quarterly.  (see distribution by unit in the link above)  You  can elect to reinvest these for no cost at BMO IL.  If the dividend is enough to buy a full unit of the ETF it will, and the excess of the distribution will show up as cash in your account.  The default is to have distributions show up as cash in your account to do with what you wish (for $9.95 a trade).

GreenQueen

  • 5 O'Clock Shadow
  • *
  • Posts: 93
  • Location: Up North
Re: Canadians Investing - up to date information?
« Reply #6 on: February 13, 2016, 08:53:01 PM »
Following avidly :-)

meghan88

  • Pencil Stache
  • ****
  • Posts: 763
  • Location: Montreal
Re: Canadians Investing - up to date information?
« Reply #7 on: February 14, 2016, 05:14:28 PM »
The lower things go, the larger the yield on ETFs, stocks and REITs, unless and until dividends get cut.

Stasher

  • Handlebar Stache
  • *****
  • Posts: 2330
  • Age: 46
  • Location: Cowichan Valley, Vancouver Island
  • Power through Positivity
    • Mindful Explorer
Re: Canadians Investing - up to date information?
« Reply #8 on: February 15, 2016, 08:42:29 PM »
Sandra , love the the radical transformation of your life. Now that is a story to sit down and listen to.

I went completely Vanguard Index funds as outlined in the CCP website and based on MMM post with Frugal Toque.
I went with 50% VXC 25% VCN 25% VAB
I hold these funds in both TFSA and RRSP accounts.
They do indeed pay out generous dividends into the cash portion of those accounts and as an example my RRSP with $120K is tracking to generate $3200 in dividend income for 2016. Of course I am at a point that I keep re-investing that cash and buy more shares as per my asset allocation.

I would think you are sitting in a great spot to be buying into those funds as many feel that VCN is "on sale" right now due to the oil equities getting hammered.

PharmaStache

  • Bristles
  • ***
  • Posts: 260
  • Location: Canada
  • Peg City 'Stache
Re: Canadians Investing - up to date information?
« Reply #9 on: February 16, 2016, 10:56:17 AM »
Anyone have XAW?  I like that it include US mid and small cap stocks, since I believe VXC only has large cap?

Dominator

  • 5 O'Clock Shadow
  • *
  • Posts: 9
  • Location: Ontario, Canada
Re: Canadians Investing - up to date information?
« Reply #10 on: February 16, 2016, 02:03:27 PM »
I'm basically following the recommended ETFs from the Canadian Couch Potato portfolio. The only difference is I buy XAW instead of VXC because it has a slightly lower MER.

I try to balance it 60% XAW, 20% VCN, 20% VAB.

I use Questrade to buy my ETFs, and the way dividends work is they are paid as cash into your Questrade RRSP or TFSA account and then you just buy more ETFs with the cash after it gets deposited.

VAB distributes dividends every month, VCN once every 3 months, and XAW once every 6 months.

beee

  • Stubble
  • **
  • Posts: 181
  • Age: 32
  • Location: Edmonton, Canada
    • HoneyMoney.io
Re: Canadians Investing - up to date information?
« Reply #11 on: February 17, 2016, 03:10:19 PM »
We have 80% XAW and 20% VCN. Don't have any bonds for now, as we're pretty young (27).

Stasher

  • Handlebar Stache
  • *****
  • Posts: 2330
  • Age: 46
  • Location: Cowichan Valley, Vancouver Island
  • Power through Positivity
    • Mindful Explorer
Re: Canadians Investing - up to date information?
« Reply #12 on: February 19, 2016, 07:56:05 AM »
Just transferred in a bunch of cash holdings from a different rrsp account into my self-directed , got about $6000 more worth of Vanguards this week. Waiting for my work Sunlife rrsp to finish transferring in to self directed account now too, that will be a nice hefty amount to buy up some funds with. At my current fund value the income tool on my Scotia online page says I earn roughly $5500/yr in dividends , will be nice to see where it jumps to after the next purchase.

EarthshipSandra

  • 5 O'Clock Shadow
  • *
  • Posts: 25
  • Age: 53
  • Location: Darfield, BC Canada
    • The Darfield Earthship
Re: Canadians Investing - up to date information?
« Reply #13 on: March 06, 2016, 09:14:48 AM »
Thanks for the ongoing information. My husband and I committed to sitting down for at least an hour a day and continuing to learn more. An hour doesn't sound like a lot, but when you feel overwhelmed by something it is a long time to feel confused. We slowly started to understand things better by making notes and tagging each other in resources we found on the net. We use googledocs and have a shared folder so that if one of us found something we could notify the other even if we were in different locations for the day. My husband wraps his head around this a lot better than I do and is very patient about explaining it to me. I am actually very smart and understand when I read enough and discuss it. Much like how I am managing our experiment in CC churning, he is taking the lead on investing. We ensure the other knows what we are thinking and we each get a chance to question or add to, the other's recommendations.  Right before we made the leap, we sat down and evaluated whether we should move our money from BMO investorline to Qtrade...after looking at the offer ($150 from Qtrade --or Qesttrade, can't remember) to move our accounts, but in the end we didn't think our activity was quite as busy right now to justify it and since we've been sitting on our asses doing very little with the money for a few years, we decided to stick with BMO until we became more confident. So, after a lot of discussion we've invested half of our stache (the half in RRSPs) in a modified version of one of the Canadian Couch Potatoes model portfolios. We've made a pact that no matter what, we will not panic, as we both think that the market hasn't quite bottomed out in Canada.  My husband continues to keep reading investment sources for Canada. As an engineer he is very good at evaluating what he reads, how it applies to us in terms of what we have to invest, our level of sophistication and being able to evaluate what we still don't know before we make any other decisions. Now it is on to the other half of the first phase stache...

Our second phase of investing is to finally start divesting ourselves of our former business equipment. There is probably $100,00 in old equipment we hung on to while we figured out if we would ever want to restart the business. But in the last few months we've been able to definitively answer that with a big fat "NO". So if anybody out there is interested in a German-made machined log-notching system for a cut rate price, let me know! It was built for about $80,000, we bought it for much less than that at a foreclosure and we're letting it go for a song! ($20,000!) Located in BC Canada. :) 

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1347
Re: Canadians Investing - up to date information?
« Reply #14 on: March 06, 2016, 11:21:44 AM »
So if anybody out there is interested in a German-made machined log-notching system for a cut rate price, let me know! It was built for about $80,000, we bought it for much less than that at a foreclosure and we're letting it go for a song! ($20,000!) Located in BC Canada. :)

for building log cabins?

EarthshipSandra

  • 5 O'Clock Shadow
  • *
  • Posts: 25
  • Age: 53
  • Location: Darfield, BC Canada
    • The Darfield Earthship
Re: Canadians Investing - up to date information?
« Reply #15 on: March 06, 2016, 11:37:41 AM »
Yes!  It's a machine that does a double H notch and can handle up to 6x8 D log easily and up to 8x10 with two passes at the notch.  It's superb for putting out 4x6 outbuildings. I could notch an 8x10 building (plus gables) in a day (easily). The machine requires 3 phase power...comes with the truss saw for angle cuts, straight cut off saw, all hydraulics and whatever parts/supplies we used to run it...everything up to the disconnect box.  Message me if you want pictures...we really want to sell it and stick the proceeds in an interest earning vehicle.


nobodyspecial

  • Handlebar Stache
  • *****
  • Posts: 1468
  • Location: Land above the land of the free
Re: Canadians Investing - up to date information?
« Reply #16 on: March 06, 2016, 11:38:57 AM »
Remember you don't have to understand everything at once.
Save as much as you can, put it into low cost index funds.

Later you can worry about foreign withholding tax in non-registered accounts and the differene between quaifying dividends

ransom132

  • 5 O'Clock Shadow
  • *
  • Posts: 91
Re: Canadians Investing - up to date information?
« Reply #17 on: March 06, 2016, 11:41:29 AM »
My investments are pretty simple, like most people here, I also invest in the Canadian Couch Potato portfolio...meaning 60% in VXC, 30% in VCN and 10% in VAB...I am not recommending you to invest like me, only you know your own risk tolerance. I also invest with Questrade, cannot complain so far.

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1347
Re: Canadians Investing - up to date information?
« Reply #18 on: March 06, 2016, 03:53:21 PM »
Not interested, just curious.  Thanks!

KMMK

  • Handlebar Stache
  • *****
  • Posts: 1468
  • Age: 43
  • Location: Edmonton, AB, Canada
    • Meena Kestirke Insurance
Re: Canadians Investing - up to date information?
« Reply #19 on: March 06, 2016, 04:07:43 PM »
Remember you don't have to understand everything at once.
Save as much as you can, put it into low cost index funds.

Later you can worry about foreign withholding tax in non-registered accounts and the differene between quaifying dividends

Yes, it doesn't have to be complex, especially when getting started. I just went with my boyfriend to set up a bi-weekly auto-contribution to his TFSA. He's doing CAN index fund with his TFSA and a similar auto-contribution with US index fund with his RRSPs. He's already with CIBC so preferred to just stick with them. Sure, he could pay less fees with TD or Questrade, and add in international and bond ala couch potato, but it's not necessary. Simple and easy, but at least started, is better than no stock market investment at all.

I like fiddling with my money, so my investments are done a bit differently (less automatic, lower fees) but it's a hobby for me and I'm fairly knowledgeable about it. That's not for everyone.