Author Topic: Feedback on Asset Allocation  (Read 2025 times)

dreadmoose

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Feedback on Asset Allocation
« on: May 01, 2017, 04:02:26 PM »
Hi guys,

I'm quite comfortable with the ETF funds I've picked but figured it would be better to crowd source some opinions.

I started investing in Tangerine funds a couple years ago and had some decent returns. I bought a condo in November, so basically started DIY saving in December.

My current investments are through Questrade, with a few thousand dollars going in biweekly. Does anyone see any glaring mistakes with the following (TFSA for now):

Market   Target     Fund
US           45.0%    VFV.to
Canada    25.0%    HXT.to
Int'l          25.0%   XEF.to
EM Int'l    5.0%     XEC.to

 I plan on rebalancing once a year if required (currently the money going in covers bringing my asset allocation back on track).

I have two questions:

1. Would be if VFV.to is a good idea, or if I should be going with XUU to capture the entire US Market (Pros and Cons?)?
2. Should I be aware of anything for a future bonus (and eventual maxed tfsa) going to RRSP's (instead of the TFSA)?

Thank you for any opinions you care to share.
« Last Edit: May 01, 2017, 04:06:11 PM by dreadmoose »

RichMoose

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Re: Feedback on Asset Allocation
« Reply #1 on: May 01, 2017, 04:14:44 PM »
Hi guys,

I'm quite comfortable with the ETF funds I've picked but figured it would be better to crowd source some opinions.

I started investing in Tangerine funds a couple years ago and had some decent returns. I bought a condo in November, so basically started DIY saving in December.

My current investments are through Questrade, with a few thousand dollars going in biweekly. Does anyone see any glaring mistakes with the following (TFSA for now):

Market   Target     Fund
US           45.0%    VFV.to
Canada    25.0%    HXT.to
Int'l          25.0%   XEF.to
EM Int'l    5.0%     XEC.to

 I plan on rebalancing once a year if required (currently the money going in covers bringing my asset allocation back on track).

I have two questions:

1. Would be if VFV.to is a good idea, or if I should be going with XUU to capture the entire US Market (Pros and Cons?)?
2. Should I be aware of anything for a future bonus (and eventual maxed tfsa) going to RRSP's (instead of the TFSA)?

Thank you for any opinions you care to share.

Looks good and reasonable balance. I believe VEE.TO is a couple points cheaper than XEC, but it's so close I wouldn't worry about it.

VFV is good, but XUU is better bang for your buck. In the long run there probably won't be a large difference between the two. Large caps (VFV) would form over 80% of XUU anyway. XUU gives exposure to mid and small caps which have traditionally performed a bit better than large caps. Although with all the money pouring into portfolios with small cap tilts I doubt it will last.

RRSPs are a good place to hold U.S. stocks if you plan on growing that account big enough to make a U.S. Dollar RRSP worthwhile. You can always sell your VFV/XUU in your TFSA when the time comes for $10, so it shouldn't have an effect on your decisions today.

You're on the right track, keep it going!

MustacheAndaHalf

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Re: Feedback on Asset Allocation
« Reply #2 on: May 01, 2017, 05:59:00 PM »
Consider adding bonds so that increasing your bond percentage is easier when it becomes more important.  Most Vanguard Target Retirement funds use about 10% bonds when retirement is far away, and slowly progress towards a retirement bond allocation.

Le Barbu

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Re: Feedback on Asset Allocation
« Reply #3 on: May 01, 2017, 06:29:58 PM »
dreadmoose, rich Moose, there is a lot of moosetachians in the line up of this thread!

dreadmoose

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Re: Feedback on Asset Allocation
« Reply #4 on: May 03, 2017, 11:47:07 AM »
Looks good and reasonable balance. I believe VEE.TO is a couple points cheaper than XEC, but it's so close I wouldn't worry about it.

VFV is good, but XUU is better bang for your buck. In the long run there probably won't be a large difference between the two. Large caps (VFV) would form over 80% of XUU anyway. XUU gives exposure to mid and small caps which have traditionally performed a bit better than large caps. Although with all the money pouring into portfolios with small cap tilts I doubt it will last.

RRSPs are a good place to hold U.S. stocks if you plan on growing that account big enough to make a U.S. Dollar RRSP worthwhile. You can always sell your VFV/XUU in your TFSA when the time comes for $10, so it shouldn't have an effect on your decisions today.

You're on the right track, keep it going!

Thank you so much for the input. Is there a decent small / mid cap ETF that I could buy a representative amount of to replace what I'm missing or should I look long term at maybe switching over to XUU? (I do have some interest in watching the different funds perform seperately... which I guess I could track either way).

Consider adding bonds so that increasing your bond percentage is easier when it becomes more important.  Most Vanguard Target Retirement funds use about 10% bonds when retirement is far away, and slowly progress towards a retirement bond allocation.

Why would adding bonds now make it easier later on? (Shouldn't their availability not change).

I have wrapped my head around going 100% equities with the only caveat being that I do really see risk as volatility so will need to be shaken awake (and may lower my risk as my stache grows out of accumulation phase).

RichMoose

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Re: Feedback on Asset Allocation
« Reply #5 on: May 03, 2017, 10:16:48 PM »
I don't think there's any harm in switching to XUU, but there's no rush to go there. I would not buy a small cap fund to make up for VFV, it will only serve to needlessly complicate your portfolio.

Take your time, focus on saving first, and learn as much as you can about portfolio structuring and risk tolerance. Your biggest enemy in the investing world is not being able to stomach a loss that your portfolio can realize. The next biggest is believing you can stock-pick your way to success.

Once you've got that under control, you are pretty much guaranteed to do better than most.

Going 100% stocks is ok when you're starting out and new contributions form a relatively large portion of your total portfolio. In a market downturn, the new contributions will give you a nice boost as you buy at lower values and meaningfully bring down your Weighted Cost Average.

MustacheAndaHalf

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Re: Feedback on Asset Allocation
« Reply #6 on: May 04, 2017, 07:21:14 AM »
Consider adding bonds so that increasing your bond percentage is easier when it becomes more important.  Most Vanguard Target Retirement funds use about 10% bonds when retirement is far away, and slowly progress towards a retirement bond allocation.

Why would adding bonds now make it easier later on? (Shouldn't their availability not change).

I have wrapped my head around going 100% equities with the only caveat being that I do really see risk as volatility so will need to be shaken awake (and may lower my risk as my stache grows out of accumulation phase).
It's behavioral advice.  Right now you have 0% bonds.  You aren't practicing rebalancing between stocks and bonds.  If you allocate 5-10% bonds it won't have a significant impact on performance.

But even better advice is simply to look at Vanguard Target Retirement funds, all of which have 10% bonds or more.  Retirement experts allocate 10% bonds (or more) while you're using no bonds at all.

Le Barbu

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Re: Feedback on Asset Allocation
« Reply #7 on: May 04, 2017, 08:03:04 AM »
Consider adding bonds so that increasing your bond percentage is easier when it becomes more important.  Most Vanguard Target Retirement funds use about 10% bonds when retirement is far away, and slowly progress towards a retirement bond allocation.

Why would adding bonds now make it easier later on? (Shouldn't their availability not change).

I have wrapped my head around going 100% equities with the only caveat being that I do really see risk as volatility so will need to be shaken awake (and may lower my risk as my stache grows out of accumulation phase).
It's behavioral advice.  Right now you have 0% bonds.  You aren't practicing rebalancing between stocks and bonds.  If you allocate 5-10% bonds it won't have a significant impact on performance.

But even better advice is simply to look at Vanguard Target Retirement funds, all of which have 10% bonds or more.  Retirement experts allocate 10% bonds (or more) while you're using no bonds at all.

After 20 years investing, my 2 biggest regrets are: owned 2%MER mutual funds for the first 15 years* and have 25% in bonds (while having a mortgage!). Now, 0.1%MER and no bonds! Feel better now.

*2000-2003-2008 felt bad anyway!