Hi Everyone,
This question is directed at my fellow Canuck investors. I got into index investing just under a year ago. DW and I are on track to retire with DB pensions in a few years with 2/3 of our pensions having 100% guaranteed indexation, and the other 1/3 not guaranteed--we will only receive that indexation if the plan is fully funded at the time.
So while we have a few years left in our peak earning years with no debt before retiring we've decided to get serious about investing to have an inflation buffer for that 1/3 of our pensions where indexation is not guaranteed.
So I've spent the last year maxing out our registered accounts (I do the investing). We don't have a lot of room for RRSPs because of the DB pensions. We have maxed out the TFSAs. I recently opened non-registered accounts for both of us to continue building the stache until we get more room to invest in the registered accounts next year.
I kept it really simple in terms of what I invested in for the registered accounts: VCN, VXC and VAB--about 90% equities since we have the DB pensions. I considered going with XAW instead of VXC because of the lower MER, and the fact that it is a bit more tax efficient in terms of foreign withholding taxes. However, there was no DRIP for XAW with the discount broker I am with, so I went with VXC instead.
So for the taxable accounts, I went with XAW instead of VXC because I don't really care about DRIP in these accounts -- I'll be investing regularly and will just get distributions on the market the next time I buy.
Anyways, I'm starting to wonder if I made the right choice going with XAW for the taxable accounts. I'm about $25 k into investing in XAW in these accounts. So here's what I weighed when making this decision:
- Lower MER for XAW, more tax efficient, so overall less costly than VXC
- XAW has exposure to mid- and small-cap US stocks whereas VXC only has exposure to large-cap US stocks
- distributions - about 2% for XAW versus around 2.6% for VXC
- distributions for XAW are twice a year versus 4 times a year for VXC
- for profit (iShares) versus non-profit (Vanguard)
What swayed my decision towards XAW was the lower costs and greater exposure to mid and small cap stocks in the US, which should result in better returns.
What's giving me pause now? Well I really like distributions! VXC has a higher return that way--not sure why--and distributions happen 4 times a year as opposed to twice. With my registered accounts I really look forward to the 4 times a year when distributions and DRIP happen. This motivates me. Also, I'm in this for the long-haul--don't plan on touching these investments for at least 10-15 years, and I have more confidence in Vanguard to have my best interests at heart over the long term than iShares in terms of keeping costs down.
What do you think? I'm considering just starting to invest in VXC in these taxable accounts and leaving the $25K in XAW alone so I don't trigger capital gains....
Any thoughts or advice would be much appreciated MMM community!
WWilberforce