Author Topic: Could I do better? A Canadian looking at a whiteboard  (Read 1434 times)

afulldeck

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Could I do better? A Canadian looking at a whiteboard
« on: April 17, 2017, 02:00:39 PM »
Over the years, I've saved, save some more, but have not really rationalized any of my assets. I'm now wondering if I'm swimming in the wrong pools and trying to figure out if I need to make any changes to my Asset Allocation. This type of question seems to be more art than science so I'm just wondering for those successful artist out there what changes would you make if you made any? 

Synopsis: Canadian- living  in Canada, investing when I can. No intention of moving out of this great country. 

My assets are as follows:

Cash Account: Mutual fund driven today.  Trying to decide if its worth taking a tax hit to change into EFTs:
 
23.6% of total Assets in Cash Account

MAC Precious Metals MFC 1042             8.9%
MAC IVY Foreign Equitey MFC 1025       5.2%
MAC Cundill Value MFC 1024                  6.3%
MAC CDN All Cap MFC 3748                  3.2%

RRSP:
XIC                                  62.8%
QQQ                                 9.1%

TFSA:
XIC                                   3.4%

scottish

  • Handlebar Stache
  • *****
  • Posts: 1317
  • Location: Ottawa
Re: Could I do better? A Canadian looking at a whiteboard
« Reply #1 on: April 17, 2017, 07:28:22 PM »
What are the unrealized gains in your cash account & how high is your marginal tax rate?

Could you defer the gains by transferring them to an RSP?

Mutual funds are statisically a bad deal for everyone except the fund manager.    Why so much on precious metals?

afulldeck

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Re: Could I do better? A Canadian looking at a whiteboard
« Reply #2 on: April 17, 2017, 08:58:39 PM »
What are the unrealized gains in your cash account & how high is your marginal tax rate?

Could you defer the gains by transferring them to an RSP?

Mutual funds are statisically a bad deal for everyone except the fund manager.    Why so much on precious metals?

Bought the Mutual Funds years ago. The metals just grew to where they are today. I suppose I could defer the gains and transfer them into an RRSP, but was trying not to add to the RRSP bucket. Marginal tax rate will depend on when or if I find work.

GreatLaker

  • Stubble
  • **
  • Posts: 138
  • Location: Canada
Re: Could I do better? A Canadian looking at a whiteboard
« Reply #3 on: April 17, 2017, 09:10:22 PM »
Common investing theme here is a balanced very low cost portfolio using ETFs. Most have higher US and global equities than you do, in line with global market cap.

Like this: http://canadiancouchpotato.com/model-portfolios-2/
Or this: http://www.canadianportfoliomanagerblog.com/model-etf-portfolios/
Or these ones: http://www.finiki.org/wiki/Simple_index_portfolios#Three_ETFs

I used to use a full service FA with a managed equity portfolio. Quarterly portfolio reports compared results to a benchmark. Over time the result trailed the benchmark by approximately the MER. So I ditched the adviser and the high management fee.

Tax on selling the mutual funds will depend on the unrealized capital gains. You can see tax rates here by province and calculate what it will cost you to sell. http://www.taxtips.ca/marginaltaxrates.htm

Then compare results of your portfolio to a comparable blend of ETFs like XIC and XWD or XEF. If the capital gains are high and you want to sell anyway consider doing it over a number of years, selling just enough each year to bring you up to the top of your current tax rate.

P.S. I don't think you can defer gains by transferring to an RRSP. In-kind transfer to an RRSP is considered by CRA to be a deemed disposition with taxes paid on the proceeds of (deemed) disposition minus the ACB.

RichMoose

  • Pencil Stache
  • ****
  • Posts: 945
  • Location: Alberta
  • RiskManagement
    • The Rich Moose | A Better Canadian Finance Blog
Re: Could I do better? A Canadian looking at a whiteboard
« Reply #4 on: April 18, 2017, 11:10:27 AM »
Over the years, I've saved, save some more, but have not really rationalized any of my assets. I'm now wondering if I'm swimming in the wrong pools and trying to figure out if I need to make any changes to my Asset Allocation. This type of question seems to be more art than science so I'm just wondering for those successful artist out there what changes would you make if you made any? 

Synopsis: Canadian- living  in Canada, investing when I can. No intention of moving out of this great country. 

My assets are as follows:

Cash Account: Mutual fund driven today.  Trying to decide if its worth taking a tax hit to change into EFTs:
 
23.6% of total Assets in Cash Account

MAC Precious Metals MFC 1042             8.9%
MAC IVY Foreign Equitey MFC 1025       5.2%
MAC Cundill Value MFC 1024                  6.3%
MAC CDN All Cap MFC 3748                  3.2%

RRSP:
XIC                                  62.8%
QQQ                                 9.1%

TFSA:
XIC                                   3.4%

I think you're mostly wrong if you believe good investing is an art. In my mind it implies your belief in fiddling around with your portfolio and jumping around between asset classes would provide better returns than sticking to a formula which is tried and true.

Good, long term portfolios are mostly science. You find a formula that has worked in the past, should continue to work in the future, and meets your personal tolerance for risk. Then you stick with it through thick and thin because you know it works over the long-term.

One look at your portfolio tells anyone with a bit of investing experience that you have a huge problem: lack of diversification and bets on past performance. It shows amateurity, but it is very fixable.

70% of your portfolio is in Canadian equities.

For US exposure you chose QQQ which is driven by tech.

Your cash account is loaded with high-fee mutuals.

These issues will hold back your performance, costing you lots of money over the years. You're very susceptible to a market crash.

My suggestion as a starting point is to read the Bogleheads guide. It's US-based, but the principles apply to Canada as well. https://www.bogleheads.org/wiki/Getting_started

CCP is great, but I wouldn't jump into it until you understand the concepts and accept the returns of passive investing.
« Last Edit: April 18, 2017, 11:25:03 AM by Mr. Rich Moose »

Kaspian

  • Handlebar Stache
  • *****
  • Posts: 1536
  • Location: Canada
    • My Necronomicon of Badassity
Re: Could I do better? A Canadian looking at a whiteboard
« Reply #5 on: April 19, 2017, 11:23:32 AM »
What have been the overall annual returns of your portfolio?  Any idea?  If not, you should probably simplify?

I also agree with Mr. Moose--there's not enough global diversification.  (Too heavily weighted towards Canada.) 
http://www.investopedia.com/terms/h/homebias.asp

Le Barbu

  • Handlebar Stache
  • *****
  • Posts: 1040
  • Age: 47
  • Location: Québec
  • I really didn’t say everything I said - Y. B.
Re: Could I do better? A Canadian looking at a whiteboard
« Reply #6 on: April 19, 2017, 11:42:25 AM »
Over the years, I've saved, save some more, but have not really rationalized any of my assets. I'm now wondering if I'm swimming in the wrong pools and trying to figure out if I need to make any changes to my Asset Allocation. This type of question seems to be more art than science so I'm just wondering for those successful artist out there what changes would you make if you made any? 

Synopsis: Canadian- living  in Canada, investing when I can. No intention of moving out of this great country. 

My assets are as follows:

Cash Account: Mutual fund driven today.  Trying to decide if its worth taking a tax hit to change into EFTs:
 
23.6% of total Assets in Cash Account

MAC Precious Metals MFC 1042             8.9%
MAC IVY Foreign Equitey MFC 1025       5.2%
MAC Cundill Value MFC 1024                  6.3%
MAC CDN All Cap MFC 3748                  3.2%

RRSP:
XIC                                  62.8%
QQQ                                 9.1%

TFSA:
XIC                                   3.4%

I would make it very simple,

Cash account ditch everything and buy XIC.

RRSP, sell XIC and QQQ, buy XAW*

TFSA, do nothing

The final AA would be 30%Canadian stocks, 40%US stocks and 30%intl stocks

*if your RRSP is over 250k$ you may want to Norbert-Gambit and buy 50%VTI and 50%VXUS...