The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: fb132 on May 15, 2015, 06:09:29 AM
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Currently, I have 25K$ in RRSP with RBC mutual funds and about 14K$ in the TFSA RBC mutual funds. Now I know, my mutual funds have high MER (2%), butI have 0 clue on how ETF works and when I read about them, I am confused, I don't even know where to start so that scares me from making the jump to the next level of investing.
Should I look for a financial advisor? What are my next steps. I even read the canadian couch potato site and they talk about vanguard, but I really don't understand how to start that model or what to look for. When I go to the vanguard canada website, it says shares can be bought through a broker or financial advisor. I am telling you, I am a terrible newbie when it comes to investments, I understand absolutely nothing, I basically need a baby type tutorial that explains me like a child how to do something when it comes to investments. So please fellow Mustachians, help me out on my next step to not only understand how it works, but what I should do. I have read different posts here on investments, but I still don't have a clue on what to do or where to start.
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Don't get stressed fb132! i JUST went through this whole process - actually I have all my money transferred and sitting in my Questrade account and am buying today :)
My thread is here:http://forum.mrmoneymustache.com/investor-alley/canadian-first-time-setting-up-investment-plan-please-help!/ (http://forum.mrmoneymustache.com/investor-alley/canadian-first-time-setting-up-investment-plan-please-help!/) It is a great place to start!
My suggestions:
- Read my thread, ask questions - our community is great!
- Open a Questrade account (let me know if you want my referral code, they are offering some great cash bonuses)
- Transfer accounts from RBC to Questrade. Questrade will cover these costs if your accounts are big enough, I think 25.000.
- Complete a risk profile so you know how comfortable you are. Choose a CCP model portfolio that matches.
- Buy!
If I can do it, with help from this community pretty sure you can too :) A lot of the recommendations about the expense of buying ETFS are moot if you go with a company like Questrade, free buys but a small ENC fee when you sell...don't get hung up on that, I did.
Have any questions? lots of people will be able to help.
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First of all, way to go on taking the interest in learning this for yourself. IMO it's one of the most important things we can all learn, and many are afraid to dip their toe in this water. It can be intimidating but you will get the hang of it! And it'll be worth it once you do.
Swicks advice above is good, but I just wanted to mention the reason for opening an account like quest trade. You don't have to go wih questtrade specifically, but what you need to do is open a self directed account with *someone* so you can do your own trades. This is how you will be able to buy and sell ETFs for yourself, and it's all done online.
The advantage to an online brokerage like questrade is, as swick said, they offer free buys of ETFs. All banks have their own direct trading brokerage... Your own bank has one as well. Trades there cost 9.95 (to buy or sell.) if you're more comfortable with your own bank, then you can also stay with them -- just know that they will charge a fee for every time you buy a chunk of ETFs. And you need to open this direct investing account so you can do your own trades online.
I have my RRSP and TFSA with TD direct, and have had no issues with them so far. I like having all my accounts in one places and like the TD online interface, so don't mind paying 10 bucks every month or so when I make a transaction.
Here is the link to rbc direct:
http://www.rbcdirectinvesting.com
Just so you can research for yourself and choose what's best for you. But the main idea here is that the first step is to open an online self directed account with a bank or online brokerage. Then you can be in control of all your own trades, and move on to the next step, which is learning about what to invest in.
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butI have 0 clue on how ETF works and when I read about them, I am confused, I don't even know where to start so that scares me from making the jump to the next level of investing.
Go to the library and get out the book "Millionaire Teacher" by Andrew Hallam. Well written, readable and approachable (especially if you are interested in ETFs and index investing). The book is a personal finance primer. I am a mid level sort of investor (knowledge wise) and have a Large portfolio. This is the book I wish I had read about 10 years ago when starting out.
Should I look for a financial advisor?
NO !! Not yet anyway. Increase your knowledge first and then decide if you need one. FA are like used car salesmen. 1 in 10 is trustworthy and helpful. Knowing enough to pick that 1 and to tell the other 9 to F-Off is an essential skill and will only come to you when you know more. Otherwise you are a ripe chicken for the plucking.
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So lets say I open with RBC Direct Investing and I listen to Canadian couch potato's advice on vanguard ETF.
If I read it correctly, it suggests that I put 40% in VAB (Vanguard Canadian Aggregate Bond Index) and 20% in VCN (Vanguard FTSE Canada All Cap Index ETF) and 20% in VXC (Vanguard FTSE All World Ex Canada Index)...in other words if I have 100$ to invest, 40$ would go to VAB, 20$ to VCN and 20$ to VXC, did I get that part,right??? And do I keep at it for a long time or does canadian couch potato change its model once in awhile?
Sorry if I ask way too many questions, I want to make sure I understand before heading into something big like investing.
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Currently, I have 25K$ in RRSP with RBC mutual funds and about 14K$ in the TFSA RBC mutual funds. Now I know, my mutual funds have high MER (2%), butI have 0 clue on how ETF works and when I read about them, I am confused, I don't even know where to start so that scares me from making the jump to the next level of investing.
Should I look for a financial advisor? What are my next steps. I even read the canadian couch potato site and they talk about vanguard, but I really don't understand how to start that model or what to look for. When I go to the vanguard canada website, it says shares can be bought through a broker or financial advisor. I am telling you, I am a terrible newbie when it comes to investments, I understand absolutely nothing, I basically need a baby type tutorial that explains me like a child how to do something when it comes to investments. So please fellow Mustachians, help me out on my next step to not only understand how it works, but what I should do. I have read different posts here on investments, but I still don't have a clue on what to do or where to start.
Go back to CCP. Read the three options they suggest. ETFs via a broker are the most complex option. You don't have to go this route.
http://canadiancouchpotato.com/model-portfolios-2/
Tangerine and TD e-series funds are great options as well and are easier to use.
Investing is a complex subject and everyone learns at a different rate. Don't stress yourself out.
I'd suggest:
1. leave your existing investments where they are until you feel comfortable about moving them
2. put new money in one of the lower rate mutual fund options suggested by CCP
3. keep reading about investing and talking to people
4. as you learn and develop your investing skills put new money in vehicles that make sense to you
5. don't stress about money in a higher rate mutual fund until you feel comfortable moving it to a new investment vehicle
6. eventually once you're comfortable with your knowledge base you can move any money in sub-optimal investments to ones you think are better
This is a marathon not a race. The only way you'll lose is by not starting.
I would skip the financial advisor. They are leeches/vampires and not after your best interests.
Don't beat yourself up about how much you know now.
Don't worry about the fact that in 5yrs you will look back and think "I would have invested differently."
-- Vik
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So lets say I open with RBC Direct Investing and I listen to Canadian couch potato's advice on vanguard ETF.
If I read it correctly, it suggests that I put 40% in VAB (Vanguard Canadian Aggregate Bond Index) and 20% in VCN (Vanguard FTSE Canada All Cap Index ETF) and 20% in VXC (Vanguard FTSE All World Ex Canada Index)...in other words if I have 100$ to invest, 40$ would go to VAB, 20$ to VCN and 20$ to VXC, did I get that part,right??? And do I keep at it for a long time or does canadian couch potato change its model once in awhile?
Sorry if I ask way too many questions, I want to make sure I understand before heading into something big like investing.
The math is off $40 + $20 + $20 = $80. VXC should be $40.
However you buy shares of ETFs so you can't just put $20 in VAB as it's trading around $26/share.
You also don't have to split each input of money exactly along the recommended allocation.
If I am putting my monthly savings in ETF I tend to buy the one that is furtherest from my desired asset allocation. Next time I buy I put all my money into the one that is now furthest from my targets. This bumps my asset allocation in the correct direction. I don't stress about keeping everything perfect aligned with a CCP portfolio target.
So if it was me and I was starting from zero on that CCP model portfolio adding $100 a month I'd do this:
1. $100 to VAB
2. $100 to VXC
3. $100 to VCN
4. $100 to VAB
5. $100 to VXC [reached approx asset allocation of 40/20/40]
6. $100 to whichever ETF is furthest from targets.
-- Vik
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So lets say I open with RBC Direct Investing and I listen to Canadian couch potato's advice on vanguard ETF.
If I read it correctly, it suggests that I put 40% in VAB (Vanguard Canadian Aggregate Bond Index) and 20% in VCN (Vanguard FTSE Canada All Cap Index ETF) and 20% in VXC (Vanguard FTSE All World Ex Canada Index)...in other words if I have 100$ to invest, 40$ would go to VAB, 20$ to VCN and 20$ to VXC, did I get that part,right??? And do I keep at it for a long time or does canadian couch potato change its model once in awhile?
Sorry if I ask way too many questions, I want to make sure I understand before heading into something big like investing.
Yes, you are reading the 40/20/20 split correctly (oops). No you aren't! 40/20/40 is correct. The balanced model?
Yes, CCP changes their models from time to time as new ETFs become available to the market. Generally he moves his recommendations toward a more simplified and lower cost profile based on new ETFs. But, not in a knee jerk way. He also goes to length to suggest that you don't want to go changing your portfolio around at every new recommendation since you will erode gains through buy/sell. I recommend simplicity.
The problem with place like RBC, TD, BMO etc are that if you plan on making frequent deposits (i.e. frequent investment buys) after your original transfer of monies, the trade costs become exorbitant. Thus, swick (and my) recommendations to go with Questrade IF you plan on buying with every paycheque you get. This is what I do. This is how I rebalance my portfolio - by buying the worst performing ETF to rebalance.
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So lets say I open with RBC Direct Investing and I listen to Canadian couch potato's advice on vanguard ETF.
If I read it correctly, it suggests that I put 40% in VAB (Vanguard Canadian Aggregate Bond Index) and 20% in VCN (Vanguard FTSE Canada All Cap Index ETF) and 20% in VXC (Vanguard FTSE All World Ex Canada Index)...in other words if I have 100$ to invest, 40$ would go to VAB, 20$ to VCN and 20$ to VXC, did I get that part,right??? And do I keep at it for a long time or does canadian couch potato change its model once in awhile?
Sorry if I ask way too many questions, I want to make sure I understand before heading into something big like investing.
For sure, ask as many questions as you need to... You don't want to rush into anything. There's no rush. Many people keep their money in cash until they understand what they're buying. Never do anything you don't fully understand.
First of all, if you go with a bank brokerage like RBC investing, you don't wand to be making any buys at that level. I know you're using 100$ as an example, but just want to be clear that that is way too low an amount to be pirchasing, given that the fees would eat up 1/3 of that! You would pay $10 for the purchase of each fund, or $30 total. So you would need to wait until you have 1-2k per fund that you want to purchase, so that your fees don't eat up years of returns.
If you'd like to buy $100 worth of ETFs at a time, then questrade would be a better option.
Secondly, your question here is about rebalancing. The asset allocations CCP is suggesting are goals to start out with, and keep track of as time goes on. Typically (but not always) when equities (stocks) go down, bonds are more stable, or might go up. So if that happens, then your initial allocation will have changed. Let's say you start out with 20% bonds and 80% North American equities. If the equities drop in value, then your portfolio might be at 70% equities and 30% bonds. You can then choose to rebalance, or sell off some bonds to bring their weighting back to 20%, and buy some equities to bring that level back up to your 80% desired allocation. It's best to choose ahead of time how often you want to rebalance. Some do so quarterly, some annually. If you decide in a plan and stick to it, then it will prevent any sort of panic selling or buying, which is easy to do.
A good way to get a feel for all of this is to set up a test account, where you're not actually buying anything in real life, but just testing out how a theoretical portfolio would react to changes in the market. It looks like rbc offers such a service, as does questrade, no doubt.
Also second the reco for Millionaire Teacher, if you do get into index investing. Very easy to read and understand, and he explains all of the above (rebalancing) very clearly.
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Yea I did a mistake there in my calculations,lol. I type way too fast and I don't always read what I am about to post :P
So far, Questrade will be my choice. Concerning Questrade, I won't be touching my RBC mutual funds right now, but can I start investing starting next week 1000$ or is there a minimum in order to open an accoutn with them. I wouldn't mind keeping for now my current investments with my bank, but I would like to start my investments with vanguard ETF starting from next week with each paycheck I get.
Also, should I stick with Balanced or Assertive...My mind says to go with Assertive, because I have been already investing in a mutual fund with 80/20 that is considered as growth. So am I right to go with the Assertive choice (25% on VAB, 25% on VCN and 50% on VXC)??? And when is it time to rebalance my funds or is it even necessary??? I am usually the type of person who just invest every paycheck without really worrying if my investments go up and down...I am way far from FIRE (a good 15-20 years minimum).
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Yea I did a mistake there in my calculations,lol. I type way too fast and I don't always read what I am about to post :P
So far, Questrade will be my choice. Concerning Questrade, I won't be touching my RBC mutual funds right now, but can I start investing starting next week 1000$ or is there a minimum in order to open an accoutn with them. I wouldn't mind keeping for now my current investments with my bank, but I would like to start my investments with vanguard ETF starting from next week with each paycheck I get.
Also, should I stick with Balanced or Assertive...My mind says to go with Assertive, because I have been already investing in a mutual fund with 80/20 that is considered as growth. So am I right to go with the Assertive choice (25% on VAB, 25% on VCN and 50% on VXC)??? And when is it time to rebalance my funds or is it even necessary??? I am usually the type of person who just invest every paycheck without really worrying if my investments go up and down...I am way far from FIRE (a good 15-20 years minimum).
Your own comfort level is the way to determine stock:bond ratio. Since you suggest that you don't worry much and that FIRE is 15-20 the general consensus would be to have a high stock allocation. I think the Assertive fits that bill.
Regarding rebalance: I find that if you are putting cash in every fortnight (2 weeks) keep it simple by buying the worst performing of you VAB, VCN, VXC. So, an example. Say you have $25 VAB, $25 VCN and $50 VXC the instant you first invest. 2 weeks later lets say your portfolio is $23VAB, $25VCN and $54VXC. In this case, your VAB is the worst performing. So, you take your shiny new dollar from paycheque and buy $1 of VAB. This now ensures you always "BUY LOW" and provides the tendency to rebalance your portfolio...
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so lets say I put in 25$ in VAB, 25$ on VCN and 50$ on VXC and I get the numbers you put out 2 weeks later, meaning the value is 23$ in VAB, 25$ in VCN and 54$ in VXC, I simply invest on my next paycheck 26$ in VAB, 25$ in VCN and 49$ in VXC? in order to make it a little even?
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Ok, so I just created my Questrade account, I signed my documents with the e signature. What's next??? It says my account needs a photo valid id, do I just send them by mail a copy of my passport or driver's licence (I don't have a digital camera)? And then when I click My Ressource-> Getting Started and then click on "Start Trading" in the self directed box, it pops up a window saying "We’re sorry! You do not have permission for this application" .Is it because I didn't send my photo id yet? I am confused on what to do next.
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Ok, so I just created my Questrade account, I signed my documents with the e signature. What's next??? It says my account needs a photo valid id, do I just send them by mail a copy of my passport or driver's licence (I don't have a digital camera)? And then when I click My Ressource-> Getting Started and then click on "Start Trading" in the self directed box, it pops up a window saying "We’re sorry! You do not have permission for this application" .Is it because I didn't send my photo id yet? I am confused on what to do next.
Yes, you could allocate more evenly across your ETFs when you add more money.
I found with Questrade that their online chat service was super helpful. I would hit them on that to answer account opening specifics.
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Ok, so I just created my Questrade account, I signed my documents with the e signature. What's next??? It says my account needs a photo valid id, do I just send them by mail a copy of my passport or driver's licence (I don't have a digital camera)? And then when I click My Ressource-> Getting Started and then click on "Start Trading" in the self directed box, it pops up a window saying "We’re sorry! You do not have permission for this application" .Is it because I didn't send my photo id yet? I am confused on what to do next.
Yes, you could allocate more evenly across your ETFs when you add more money.
I found with Questrade that their online chat service was super helpful. I would hit them on that to answer account opening specifics.
I spoke to a rep, she was helpfull. I have to always keep a minimum of 1000$ in the questtrade account, I guess, I will start mailing my photo ID now and hopefully in a week or 2 I can set it up. So to recap it all, once my Questrade account is running up fine, I will be putting like stated 25% in VAB, 25% in VCN and 50% in VXC. I will most probably put 600-700$ per month.
1 last question, should I buy those stocks weekly (Dollar cost average) even though I will have the 600-700$ for that month or should I just say "fuck that, put it all now and invest the following month another 600-700$ and the following another 600-700$, etc, etc....?
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1 last question, should I buy those stocks weekly (Dollar cost average) even though I will have the 600-700$ for that month or should I just say "fuck that, put it all now and invest the following month another 600-700$ and the following another 600-700$, etc, etc....?
No market timing allowed. Each time you have a lump of cash; buy your ETFs! So, yes. Fuck that. :-)
It also takes stress and potentially bad decision making out of the equation.
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Thank you guys, this was really helpfull. In the past, even though I was happy with my rate of return with my mutual funds, the fact I was paying 2% MER didn't sit well with me because it means in the long run I could of been making even more money if it wasn't for the fee. I am only 33, but at least now I know where I am heading and I have learned alot just on this thread alone and I got even the courage to create my own account with Questrade which was daunting for me since at first it felt like I was heading towards the uknown, so thank you alot everyone for helping me and learning about investing. I do not claim I know everything now, but at least I know I am heading in the right direction. Considering most people I know are broke, I am happy to see that I did not follow their path through consumerism and I am glad this website exist (a big thank you to Pete MMM himself for starting all this and opening our eyes) or else I would still be that fool who would spend all his paycheck on "stuff".
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I have another question, I just read that VXC shouldn't be held in the TFSA as I would pay for two levels of foreign witholding taxes? Should I still keep it in the TFSA and just follow the canadian couch potato or am I better off replacing it??? Anyone care to share their portfolio suggestions for the tfsa?
I was reading http://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/ (http://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/) , is it a good idea simply to invest in iShares S&P/TSX Capped REIT (XRE) like it suggests? Should I add some bonds into it (with VBA for example)
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That's just an example of how to allocate with an existing portfolio that includes taxable accounts.
I strongly suggest you find yourself a copy of Dans Guide to the Perfect Portfolio. And read it twice.
http://canadiancouchpotato.com/resources/
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Generally growth stocks should be held in your TFSA. You'll get charged withholding tax on US stocks (whereas you won't in your rrsp) so cdn is generally better kept there. This is because all that growth will happen tax free, vs. in your rrsp where you will eventually have to pay tax on it.
Keep bonds in your rrsp for the flip side of this reason -- slow growth. Bonds should also never be in a taxable act because interest is taxed less favourably than dividends or capital gains.
Some people go for the growth over concerns about withholding taxes. I.e. It would have been better to have all your US stocks in your TFSA, pay the withholding tax, but have seen major growth over the past 7 years, vs. holding them in your rrsp over that time and paying tax on the growth on retirement. Personally I hold foreign ETFs in my TFSA for this reason.
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I have another question, I just read that VXC shouldn't be held in the TFSA as I would pay for two levels of foreign witholding taxes? Should I still keep it in the TFSA and just follow the canadian couch potato or am I better off replacing it??? Anyone care to share their portfolio suggestions for the tfsa?
I was reading http://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/ (http://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/) , is it a good idea simply to invest in iShares S&P/TSX Capped REIT (XRE) like it suggests? Should I add some bonds into it (with VBA for example)
With VXC you will pay 2 levels of withholding tax. This is because VXC is composed of etfs within an etf. Instead I would recommend a combination of VUN (US broad base index) and XEF (Ishares International) You will have lower costs and pay less withholding tax on dividends. XEF holds the international stocks directory compared to VXC which holds foreign stocks indirectly through other funds. The withholding tax is only on the dividend not on capital gains. With VUN it works out to about an extra .15% mer equivalent. Not enough to worry about whether its should be in a tfsa vs. rrsp. Just focus on keeping initial costs low and your allocation
My allocation is: 40% VAB, 20% XEF, 20% VUN, 20% VCN. I keep track of my total allocation across TFSA, RRSP, LIRA, RESP through a simple spreadsheet. I ignore the market and simply re-balance every 6 months, automatically buying low and selling high. You can re-balance by buying and selling or by adding money to lagging categories or a combination of both.
Here is an article on withholding taxes on international ETF's
http://canadiancouchpotato.com/2014/09/12/foreign-withholding-taxes-in-international-equity-etfs/
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Maybe I am wrong, but I have a feeling I am better off simply investing 100% in canadian market in the TFSA, I was reading this post http://forum.mrmoneymustache.com/investor-alley/couchpotato-investing-and-dividends/msg631986/#msg631986 (http://forum.mrmoneymustache.com/investor-alley/couchpotato-investing-and-dividends/msg631986/#msg631986)
One person suggested in that post to put in the TFSA 20% in VAB, 25% in ZCN (BMO S&P/TSX Capped Composite Index ETF) which would be perfect because it is money that can be used at anytime if I ever need it (for example buying a new home or a real emergency where the roof collapses, the wall collapses and loss of job) while putting in my RRSP (long term so higher risk) 10% in VAB, 20% in XEF and 25% in XUS....Another suggestion was made from that link to put only VCN in the TFSA and VAB, XEF and XUS in the RRSP.
I think that would cover everything,right?
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Thanks very much fb132 for starting this thread, and thanks to all our fellow mustachians for their great advice. I find myself in the very same position and really had no idea how to start investing from a Canadian perspective - this has been so helpful!
Kudos to this community!
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Maybe I am wrong, but I have a feeling I am better off simply investing 100% in canadian market in the TFSA, I was reading this post http://forum.mrmoneymustache.com/investor-alley/couchpotato-investing-and-dividends/msg631986/#msg631986 (http://forum.mrmoneymustache.com/investor-alley/couchpotato-investing-and-dividends/msg631986/#msg631986)
One person suggested in that post to put in the TFSA 20% in VAB, 25% in ZCN (BMO S&P/TSX Capped Composite Index ETF) which would be perfect because it is money that can be used at anytime if I ever need it (for example buying a new home or a real emergency where the roof collapses, the wall collapses and loss of job) while putting in my RRSP (long term so higher risk) 10% in VAB, 20% in XEF and 25% in XUS....Another suggestion was made from that link to put only VCN in the TFSA and VAB, XEF and XUS in the RRSP.
I think that would cover everything,right?
That might be ideal, unless you get to a point like me where you max out rrsp's and TFSA's every year. Therefore my wife and I have VAB, XEF and VUN spread across RRSP's, LIRA and TFSA's. We have VCN (Canadian Index) in a non registered account. In my case, I treat everything as retirement accounts as I do not plan on withdrawing from TFSA's or RRSP's until I retire. If done properly, TFSA's can be a powerful tool to lower your tax burden in retirement. Since we will be withdrawing from both my wife and my accounts equally, the plan is to pay no or little tax in retirement!
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Maybe I am wrong, but I have a feeling I am better off simply investing 100% in canadian market in the TFSA, I was reading this post http://forum.mrmoneymustache.com/investor-alley/couchpotato-investing-and-dividends/msg631986/#msg631986 (http://forum.mrmoneymustache.com/investor-alley/couchpotato-investing-and-dividends/msg631986/#msg631986)
One person suggested in that post to put in the TFSA 20% in VAB, 25% in ZCN (BMO S&P/TSX Capped Composite Index ETF) which would be perfect because it is money that can be used at anytime if I ever need it (for example buying a new home or a real emergency where the roof collapses, the wall collapses and loss of job) while putting in my RRSP (long term so higher risk) 10% in VAB, 20% in XEF and 25% in XUS....Another suggestion was made from that link to put only VCN in the TFSA and VAB, XEF and XUS in the RRSP.
I think that would cover everything,right?
That might be ideal, unless you get to a point like me where you max out rrsp's and TFSA's every year. Therefore my wife and I have VAB, XEF and VUN spread across RRSP's, LIRA and TFSA's. We have VCN (Canadian Index) in a non registered account. In my case, I treat everything as retirement accounts as I do not plan on withdrawing from TFSA's or RRSP's until I retire. If done properly, TFSA's can be a powerful tool to lower your tax burden in retirement. Since we will be withdrawing from both my wife and my accounts equally, the plan is to pay no or little tax in retirement!
So what ETF's did you put exactly in the RRSP and TFSA, I am curious, I like getting all sorts of idea's and then making up my mind, that is how I learn. You say you have VAB, XEF and VUN spread accross, but what are the percentage you put in the TFSA for example.
Btw, good job on maxing out both RRSP and TFSA...I could only aspire doing that, but my income isnt high enough for me to max both especially since the goverment boosted the TFSA contribution from 5500$ a year to 10000$. I am not complaining though, it only means there will always be room for me to invest tax free :) .
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I have all VAB,XEF and VUN in the TFSA and RRSP in various percentages. I am not to hung up on this because when using vun and xef separate, the withholding tax equals only equivalent to a .15% mer additional cost in the TFSA. Instead what I focus on is getting my initial costs down as much as possible. My allocation of 40,20,20,20 is across all accounts combined - and I focus on maintaining the allocation above all else and to do that properly, I have no choice to hold some VUN in my TFSA. My only rule is that I use my unregistered account for VCN - everything else is a mixed bag and is fluid based on what is happening overall to the growth of my account.
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Mine is more complicated than I'd like. Mostly it is because I've been investing in ETF's for a while (i.e. vanguard wasn't in Canada yet) and as you pointed out earlier on...more simple methods of investing have become available. So, for instance, I still have VXUS. But, I now buy XEC/XEF.
Proportions as follows:
VUN = 40%
VCN = 10%
ZEF = 17.5%
XEC = 7.5%
CHB = 5%
ZRE = 5%
VSC = 10%
ZPR = 5%
Also, bear in mind that simple is good when your portfolio is not overly large. But, as thrifty canadian suggests, once you have a larger portfolio and multiple TFSA/RRSP maxed out...you have to then put things in the non-registered. Since we are federal gov't workers, our RRSP limits are very small. Thus the non-registered is proportionally much larger and makes the tax planning a bit awkward.
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Thank you thriftycanadian, I will use your suggestion for my TFSA investment and do what you do except with changes in percentage: 30% VAB, 25% XEF, 25% VUN, 20% VCN
Not only the witholding taxes will be low, but it covers basically all the major markets if I am not mistaken.
Maybe its a stupid question what I am going to ask, but since there are witholding taxes on the XEF and VUN, is the tax paid during purchase of the stock or does that need to involve the accountant (like having to fill out some forms) during income tax time? I just want my investments to be hassle free.
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Thank you thriftycanadian, I will use your suggestion for my TFSA investment and do what you do except with changes in percentage: 30% VAB, 25% XEF, 25% VUN, 20% VCN
Not only the witholding taxes will be low, but it covers basically all the major markets if I am not mistaken.
Maybe its a stupid question what I am going to ask, but since there are witholding taxes on the XEF and VUN, is the tax paid during purchase of the stock or does that need to involve the accountant (like having to fill out some forms) during income tax time? I just want my investments to be hassle free.
Should be automatic, no accountant needed as the broker pays it to the IRS directly before you even notice it. However double check with your financial institution that VUN is at the correct amount withholding tax. I believe it can be higher than necessary if the broker does not set it up correctly. Good plan on the 30% VAB at this point, I am at 40% only because I am close to FIRE and wanted to reduce stocks a bit more in favour of bonds.
In terms of major market coverage, yes the above etfs do - thousands of stocks spread around the world in real companies. BTW-XEF pays a nice dividend. You could also get into emerging markets through XEC, I chose to stay out of that as there are countries in that ETF have corrupt governments and I would not feel safe drinking water out of the tap if I traveled there. If I can't drink the tap water, I don't invest! - own rule of thumb. However, many investors see value in emerging markets
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Infact I am using Questrade so I have no clue if it does automatically or not.
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Infact I am using Questrade so I have no clue if it does automatically or not.
All would be automatic, just ask them how much. You want 15% taken off, not 30%
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BMO has a W8-BEN form that had to be submitted with photo ID to claim the reduction in US taxes.
http://www.bmo.com/self-directed/forms/personal-accounts
I'd expect Questtrade should have the same.
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BMO has a W8-BEN form that had to be submitted with photo ID to claim the reduction in US taxes.
http://www.bmo.com/self-directed/forms/personal-accounts
I'd expect Questtrade should have the same.
Good point, did not know the name of the form. TDW submitted it for me when I opened my account with them. Having that form submitted is difference of getting only 15% withholding tax on dividends vs. 30%.
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BMO has a W8-BEN form that had to be submitted with photo ID to claim the reduction in US taxes.
http://www.bmo.com/self-directed/forms/personal-accounts
I'd expect Questtrade should have the same.
Does that form apply to an ETF like VXC, or it only applies to an ETF like VUS which is all US.
That's the only part I am confused, I know for certain VAB and VCN belong in the TFSA (in other words, I do not worry about having to sign any forms, the hassle factor is very very low), but should I add those out of country stocks like VXC, VUS or XEF in the TFSA without hassle or should I simply stick with VAB and VCN in the TFSA, and once I maximize my TFSA, I add VXC (or VUS and XEF) along with the other 2 in the RRSP.
I was reading this article I found in which he says the writer simply puts all his money on VAB and VCN in the TFSA and follows the Vanguard model portfolio for the RRSP (meaning he invests in VAB, VCN and VXC for the RRSP). http://www.moneyaftergraduation.com/2015/01/26/easy-index-fund-investing/ (http://www.moneyaftergraduation.com/2015/01/26/easy-index-fund-investing/)
Would that be wiser for my situation? And should I contribute to the RRSP and TFSA at the sametime or am I better off maximizing my TFSA first (since I am in the lower tax bracket) and then maximize my RRSP once the TFSA is full?
I know I ask alot of question, but I need to know for sure where to put my money and I want it to be hassle free, forms-free, I dont want to deal with all kinds of issues that I didn't think of.
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Would that be wiser for my situation? And should I contribute to the RRSP and TFSA at the sametime or am I better off maximizing my TFSA first (since I am in the lower tax bracket) and then maximize my RRSP once the TFSA is full?
If you are going to max both in each year it doesn't matter. If you aren't sure fill your TFSA up first then your RRSP.
If you are in a low tax bracket now figure out what your expected retirement income will be and look at the pros/cons of using the RRSP vs. a non-reg account once you filled up your TFSA. Every dollar out of a RRSP is taxed as income. You'll pay taxes now on dollars invested in a non-reg account, but you'll only pay taxes on dividends and capital gains down the road in a non-reg account which both have better tax rates. You can also use losses to offset capital gains. RRSP is great when you are making $150K/yr working and $45K/yr in retirement. As the income spread shrinks or becomes negative it's a less compelling investment option.
-- Vik
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Would that be wiser for my situation? And should I contribute to the RRSP and TFSA at the sametime or am I better off maximizing my TFSA first (since I am in the lower tax bracket) and then maximize my RRSP once the TFSA is full?
If you are going to max both in each year it doesn't matter. If you aren't sure fill your TFSA up first then your RRSP.
If you are in a low tax bracket now figure out what your expected retirement income will be and look at the pros/cons of using the RRSP vs. a non-reg account once you filled up your TFSA.
-- Vik
Ok, so I am going to maximize my TFSA for now, I am inclined to use the CCP or Thriftycanadian's ETF's for my TFSA, I will be putting VAB, VCN and VXC (or XEF and VUN) in my TFSA, sure I will have taxes that will be witheld, but it doesn't matter as long as in the end I make money for FI and I am sure it would still be cheaper than my current mutual funds that have a MER of 2,06%. Am I right?
Once my TFSA are maxed (If I ever do get there), I will use the same strategy for the RRSP.
To Vik: I make under 40000$, so the RRSP for now is not an option and it will be years before I even reach 40000$. I have managed to save up 25K$ in the RRSP for the HBP, but for now it is not worth investing in the RRSP with all that free room I have in the TFSA.
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This is super helpful to me as I am in the same boat! And the other thread swick posted a link to as well. Lots of reading to do. Started reading The Perfect Portfolio this morning.
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That's why I opened up this thread, it forced me not only to learn about investing, but it forced me to also go out and read old posts and share stuff I also read online. I have always wanted to invest on my own instead of using the bank's mutual fund and I figured that at my age (33), it is now or never to learn and I am glad you got to learn as much I did.
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That's why I opened up this thread, it forced me not only to learn about investing, but it forced me to also go out and read old posts and share stuff I also read online. I have always wanted to invest on my own instead of using the bank's mutual fund and I figured that at my age (33), it is now or never to learn and I am glad you got to learn as much I did.
Its great to invest on your own. By lowering your mer's you can literally retire a decade or more sooner from that alone! I fired my adviser over 10 years ago-one of the best choices I ever made in my entire life! I think someone else mentioned this, but I would strongly recommend the book "Millionaire Teacher" by Andrew Hallam.
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I have a question regarding Questrade, I just made my first transfer from my bank account to Questrade (TFSA account). The cash that will be in my questrade account, is it regarded as cash inside a TFSA or will it be only in the TFSA once I buy stocks?
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I have a question regarding Questrade, I just made my first transfer from my bank account to Questrade (TFSA account). The cash that will be in my questrade account, is it regarded as cash inside a TFSA or will it be only in the TFSA once I buy stocks?
If you made the payment to the actual TFSA account, it will sit as cash within the TFSA until you buy securities.
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ok, so basically it is like I just contributed to my TFSA even though it is only cash. Lets say this year, I put in 30 000$ in my TFSA and I get a return from dividends of 1000$, is that 1000$ considered an addition to my contribution to the TFSA, meaning that in reality I have put in 31000$ in my TFSA according to CRA?
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ok, so basically it is like I just contributed to my TFSA even though it is only cash. Lets say this year, I put in 30 000$ in my TFSA and I get a return from dividends of 1000$, is that 1000$ considered an addition to my contribution to the TFSA, meaning that in reality I have put in 31000$ in my TFSA according to CRA?
All investment gains whether from interest, dividends or capital gains do not take away from your contribution room and continue to compound tax free within the TFSA
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Thank you very much thriftycanadian, you have been very helpfull, now all there is for me to do is wait for my questrade to confirm my ID, wait for my funds to arrive into the account and then start trading :)
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Has anyone else noticed you can't DRIP Vanguard ETFs at RBC direct investing?
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Has anyone else noticed you can't DRIP Vanguard ETFs at RBC direct investing?
No? I can drip them at TDW.
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Ugh don't buy VUN in your TFSA, buy VTI in your RRSP, if possible.
Questrade automatically does the W-8BEN stuff, you don't actually need to fill in a form with them.
I'm not a fan of VXC either.
XEF and XEA go better in a TFSA than VUN, IMHO.
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Ugh don't buy VUN in your TFSA, buy VTI in your RRSP, if possible.
Questrade automatically does the W-8BEN stuff, you don't actually need to fill in a form with them.
I'm not a fan of VXC either.
XEF and XEA go better in a TFSA than VUN, IMHO.
I think you meant ZEA,right??? And why do you believe that is a better choice?
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Ugh don't buy VUN in your TFSA, buy VTI in your RRSP, if possible.
Questrade automatically does the W-8BEN stuff, you don't actually need to fill in a form with them.
I'm not a fan of VXC either.
XEF and XEA go better in a TFSA than VUN, IMHO.
ZEA yes sorry.
ZEA and XEF hold stocks directly. Lots of developed countries that are held inside impose no withholding. If you hold a US-domiciled fund that holds these stocks then you will pay US withholding tax of 15%.
With VUN, you always pay US withholding. In a TFSA any US (or other) foreign tax imposed is gone, it's non recoverable. In an RRSP, there is no US withholding, and probably little other withholding from foreign countries that have a sensible double taxation agreement with Canada. BUT if you hold a US domiciled fund in an RRSP that then holds foreign stuff... you may still lose some withholding as the *primary* country doesn't KNOW it's a retirement account.
Basically there are multiple levels of withholding based on your residency, the ETF you bought's domicile, and the domicile of any funds, stocks or ETFs that the ETF holds.
Short answer: reduce the 'depth' of holdings. ZEA and XEF now hold stocks directly. Good! VUN basically holds VTI, NOT the stocks directly. It's FAR FAR FAR from terrible but it is sub-optimal when there are better options (Norbert's Gambit to USD and buy VTI inside an RRSP - ok, don't do it for small amounts, but when you have a chunk of a few thousand dollars in VUN, switch it).
I think you meant ZEA,right??? And why do you believe that is a better choice?
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Ugh don't buy VUN in your TFSA, buy VTI in your RRSP, if possible.
Questrade automatically does the W-8BEN stuff, you don't actually need to fill in a form with them.
I'm not a fan of VXC either.
XEF and XEA go better in a TFSA than VUN, IMHO.
ZEA yes sorry.
ZEA and XEF hold stocks directly. Lots of developed countries that are held inside impose no withholding. If you hold a US-domiciled fund that holds these stocks then you will pay US withholding tax of 15%.
With VUN, you always pay US withholding. In a TFSA any US (or other) foreign tax imposed is gone, it's non recoverable. In an RRSP, there is no US withholding, and probably little other withholding from foreign countries that have a sensible double taxation agreement with Canada. BUT if you hold a US domiciled fund in an RRSP that then holds foreign stuff... you may still lose some withholding as the *primary* country doesn't KNOW it's a retirement account.
Basically there are multiple levels of withholding based on your residency, the ETF you bought's domicile, and the domicile of any funds, stocks or ETFs that the ETF holds.
Short answer: reduce the 'depth' of holdings. ZEA and XEF now hold stocks directly. Good! VUN basically holds VTI, NOT the stocks directly. It's FAR FAR FAR from terrible but it is sub-optimal when there are better options (Norbert's Gambit to USD and buy VTI inside an RRSP - ok, don't do it for small amounts, but when you have a chunk of a few thousand dollars in VUN, switch it).
I think you meant ZEA,right??? And why do you believe that is a better choice?
You may be right, but onn the other hand, I read this article in which I agree with http://canadiancouchpotato.com/2015/01/30/the-wrong-way-to-think-about-withholding-taxes/ (http://canadiancouchpotato.com/2015/01/30/the-wrong-way-to-think-about-withholding-taxes/) in a sense that I shouldn't go haywire simply because one pays a foreign tax.
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Ugh don't buy VUN in your TFSA, buy VTI in your RRSP, if possible.
Questrade automatically does the W-8BEN stuff, you don't actually need to fill in a form with them.
I'm not a fan of VXC either.
XEF and XEA go better in a TFSA than VUN, IMHO.
ZEA yes sorry.
ZEA and XEF hold stocks directly. Lots of developed countries that are held inside impose no withholding. If you hold a US-domiciled fund that holds these stocks then you will pay US withholding tax of 15%.
With VUN, you always pay US withholding. In a TFSA any US (or other) foreign tax imposed is gone, it's non recoverable. In an RRSP, there is no US withholding, and probably little other withholding from foreign countries that have a sensible double taxation agreement with Canada. BUT if you hold a US domiciled fund in an RRSP that then holds foreign stuff... you may still lose some withholding as the *primary* country doesn't KNOW it's a retirement account.
Basically there are multiple levels of withholding based on your residency, the ETF you bought's domicile, and the domicile of any funds, stocks or ETFs that the ETF holds.
Short answer: reduce the 'depth' of holdings. ZEA and XEF now hold stocks directly. Good! VUN basically holds VTI, NOT the stocks directly. It's FAR FAR FAR from terrible but it is sub-optimal when there are better options (Norbert's Gambit to USD and buy VTI inside an RRSP - ok, don't do it for small amounts, but when you have a chunk of a few thousand dollars in VUN, switch it).
I think you meant ZEA,right??? And why do you believe that is a better choice?
Ugh, just when I think I am starting to understand things, I read a post like this and am confused again. Where can I read more about this? I just started Perfect Portfolio, will that help?
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Ugh don't buy VUN in your TFSA, buy VTI in your RRSP, if possible.
Questrade automatically does the W-8BEN stuff, you don't actually need to fill in a form with them.
I'm not a fan of VXC either.
XEF and XEA go better in a TFSA than VUN, IMHO.
ZEA yes sorry.
ZEA and XEF hold stocks directly. Lots of developed countries that are held inside impose no withholding. If you hold a US-domiciled fund that holds these stocks then you will pay US withholding tax of 15%.
With VUN, you always pay US withholding. In a TFSA any US (or other) foreign tax imposed is gone, it's non recoverable. In an RRSP, there is no US withholding, and probably little other withholding from foreign countries that have a sensible double taxation agreement with Canada. BUT if you hold a US domiciled fund in an RRSP that then holds foreign stuff... you may still lose some withholding as the *primary* country doesn't KNOW it's a retirement account.
Basically there are multiple levels of withholding based on your residency, the ETF you bought's domicile, and the domicile of any funds, stocks or ETFs that the ETF holds.
Short answer: reduce the 'depth' of holdings. ZEA and XEF now hold stocks directly. Good! VUN basically holds VTI, NOT the stocks directly. It's FAR FAR FAR from terrible but it is sub-optimal when there are better options (Norbert's Gambit to USD and buy VTI inside an RRSP - ok, don't do it for small amounts, but when you have a chunk of a few thousand dollars in VUN, switch it).
I think you meant ZEA,right??? And why do you believe that is a better choice?
You may be right, but onn the other hand, I read this article in which I agree with http://canadiancouchpotato.com/2015/01/30/the-wrong-way-to-think-about-withholding-taxes/ (http://canadiancouchpotato.com/2015/01/30/the-wrong-way-to-think-about-withholding-taxes/) in a sense that I shouldn't go haywire simply because one pays a foreign tax.
CCP is slightly out here, and certainly with respect to international. If you hold VXUS, say, in a TFSA you lose 15% to the US on top of (CCP guesses 10%) whatever to the original country.
VXC is the same. It holds *US domiciled funds* in its wrapper.
You are basically going from 0.2% with XEF and ZEA, to 0.27% MER plus US withholding on dividends plus any foreign withholding on those international stocks held by the US wrapper.
If you've got $100k invested, your TER goes from 0.2% (that's for XEF/ZEA; it's less, 0.05% I think, if you buy VTI in an RRSP using norbert's gambit!), to maybe 0.6%, or 0.7%.
So you're losing a few hundred dollars a year, every year, growing as your portfolio grows and dividends are(n't) reinvested.
Don't get me wrong - if you're sitting on the fence, buy the bloody Tangerine Balanced Growth fund with 1% MER and just get on with life. Seriously. I get it. But if you are a tinkerer, don't get VXC. It's a fairly unimpressive offering from an otherwise excellent outfit.
On a quarter mil you're losing the same percentage, except it's $1250. I can be bothered to tinker to save myself money.
But no, top priority - make an asset allocation, and stick to it, and get your money invested. Absolutely.
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Here's CCP's white paper on the topic of foreign withholding taxes.
https://www.pwlcapital.com/pwl/media/pwl-media/PDF-files/Justin%20Bender%20Assets/PWL_Bender-Bortolotti_Foreign-Withholding-Taxes_v04_hyperlinked.pdf?ext=.pdf
It's a lot to digest but it's got great examples for those who want to optimize. I feel that by the time you get to this point, it's the equivalent of splitting the difference between earning an A-, A or A+ on a test.
We've already won by:
1. Spending less than we earn
2. Avoiding debt
3. Invest the savings
4. Prioritize tax-advantaged accounts over taxable
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Have to decide for yourself if it's worth the hassle of holding VTI instead of VUN. In my case I believe it's not and I have a portfolio approaching 1MM.
VUN is simpler - again it's a difference of a .15% equivalent MER extra AND you do not have to deal with currency conversion charges and/or trying to get around them.
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Have to decide for yourself if it's worth the hassle of holding VTI instead of VUN. In my case I believe it's not and I have a portfolio approaching 1MM.
VUN is simpler - again it's a difference of a .15% equivalent MER extra AND you do not have to deal with currency conversion charges and/or trying to get around them.
Where do you get 0.15% from? 15% of 2% is 0.3% in withholding, VTI's MER is 0.05%, VUN.TO's is 0.15%. So 0.4% difference in an RRSP.
Which, on a million dollars, is $4k a year! And if you think about it, when SWR is from 3.7% to 4%, that is a HUGE chunk of your drawdown percentage you are throwing away.
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Ugh don't buy VUN in your TFSA, buy VTI in your RRSP, if possible.
Questrade automatically does the W-8BEN stuff, you don't actually need to fill in a form with them.
I'm not a fan of VXC either.
XEF and XEA go better in a TFSA than VUN, IMHO.
ZEA yes sorry.
ZEA and XEF hold stocks directly. Lots of developed countries that are held inside impose no withholding. If you hold a US-domiciled fund that holds these stocks then you will pay US withholding tax of 15%.
With VUN, you always pay US withholding. In a TFSA any US (or other) foreign tax imposed is gone, it's non recoverable. In an RRSP, there is no US withholding, and probably little other withholding from foreign countries that have a sensible double taxation agreement with Canada. BUT if you hold a US domiciled fund in an RRSP that then holds foreign stuff... you may still lose some withholding as the *primary* country doesn't KNOW it's a retirement account.
Basically there are multiple levels of withholding based on your residency, the ETF you bought's domicile, and the domicile of any funds, stocks or ETFs that the ETF holds.
Short answer: reduce the 'depth' of holdings. ZEA and XEF now hold stocks directly. Good! VUN basically holds VTI, NOT the stocks directly. It's FAR FAR FAR from terrible but it is sub-optimal when there are better options (Norbert's Gambit to USD and buy VTI inside an RRSP - ok, don't do it for small amounts, but when you have a chunk of a few thousand dollars in VUN, switch it).
I think you meant ZEA,right??? And why do you believe that is a better choice?
You may be right, but onn the other hand, I read this article in which I agree with http://canadiancouchpotato.com/2015/01/30/the-wrong-way-to-think-about-withholding-taxes/ (http://canadiancouchpotato.com/2015/01/30/the-wrong-way-to-think-about-withholding-taxes/) in a sense that I shouldn't go haywire simply because one pays a foreign tax.
CCP is slightly out here, and certainly with respect to international. If you hold VXUS, say, in a TFSA you lose 15% to the US on top of (CCP guesses 10%) whatever to the original country.
VXC is the same. It holds *US domiciled funds* in its wrapper.
You are basically going from 0.2% with XEF and ZEA, to 0.27% MER plus US withholding on dividends plus any foreign withholding on those international stocks held by the US wrapper.
If you've got $100k invested, your TER goes from 0.2% (that's for XEF/ZEA; it's less, 0.05% I think, if you buy VTI in an RRSP using norbert's gambit!), to maybe 0.6%, or 0.7%.
So you're losing a few hundred dollars a year, every year, growing as your portfolio grows and dividends are(n't) reinvested.
Don't get me wrong - if you're sitting on the fence, buy the bloody Tangerine Balanced Growth fund with 1% MER and just get on with life. Seriously. I get it. But if you are a tinkerer, don't get VXC. It's a fairly unimpressive offering from an otherwise excellent outfit.
On a quarter mil you're losing the same percentage, except it's $1250. I can be bothered to tinker to save myself money.
But no, top priority - make an asset allocation, and stick to it, and get your money invested. Absolutely.
You are right, so is this a good allocation for my ETF's in my TFSA: 25% on VAB, 25% on VCN, 25% on ZEA and 25% on XEF? Or maybe I should lower the % on VCN (since Canadian stock market represents only 3% of the world's market) and higher up the % in ZEA and XEF?
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Have to decide for yourself if it's worth the hassle of holding VTI instead of VUN. In my case I believe it's not and I have a portfolio approaching 1MM.
VUN is simpler - again it's a difference of a .15% equivalent MER extra AND you do not have to deal with currency conversion charges and/or trying to get around them.
Where do you get 0.15% from? 15% of 2% is 0.3% in withholding, VTI's MER is 0.05%, VUN.TO's is 0.15%. So 0.4% difference in an RRSP.
Which, on a million dollars, is $4k a year! And if you think about it, when SWR is from 3.7% to 4%, that is a HUGE chunk of your drawdown percentage you are throwing away.
Well, it depends on what type of account you are talking about. We have mentioned TFSA's earlier. - Here is an exact analysis for each one as taxes are treated differently in each case:
Total mer inc tax/account type
FUND Market MER RRSP TFSA TAXABLE ACCOUNT
VTI USA 0.05% 0.05% 0.32% 0.05%
VUN CND 0.17% 0.44% 0.44% 0.17%
TFSA
If the orginal mer's were equal, the cost of the withholding taxes of VUN held in a TFSA would be a wash with VTI total costs. (VTI is still taxed in a TFSA) = Many people do not realize this.
RRSP
Granted, there is more of a difference within an RRSP. If the mer's were equal, the net effect of the tax is equal to an mer of 0.27% in favour of VTI.
For me, because I hold VUN in a few types of accounts, the total net effect of the withholding tax averages about .15% mer equivalent. Factor in the benefit of reinvesting dividends from VUN, I just don't see VTI is worth the hassle -maybe when my account reaches greater heights I will. For someone starting out, the extra complexity VTI brings is hardly worth it.
Additionally, quoting your example, I don't think I will ever get to 1MM of VUN or VTI. I would have to hit a portfolio of 5MM before I had that much US exposure based on my allocation. I will be long FIRED by then.
Here is a resource that does a great job at explaining it:
http://canadiancouchpotato.com/2014/02/20/the-true-cost-of-foreign-withholding-taxes/
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In a TFSA I agree, probably not worth it; but the best place for US stuff is in an RRSP in USD. Without looking at your portfolio it's impossible to say. But for the sake of a few clicks, I'd swap VUN for VTI in say $5k increments.
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You are right, so is this a good allocation for my ETF's in my TFSA: 25% on VAB, 25% on VCN, 25% on ZEA and 25% on XEF? Or maybe I should lower the % on VCN (since Canadian stock market represents only 3% of the world's market) and higher up the % in ZEA and XEF?
Depends on the whole picture. FIRST work out your asset alloc, THEN work out where those assets should be housed. Also factor money in an RRSP is 'worth less' than money elsewhere because it will be taxed as income when you withdraw it - unless you can fit it into your personal allowance.
IF you are talking about having an RRSP, TFSA, and unreg - I would fill the TFSA with XEF or ZEA (they are basically the same, don't need both), RRSP with VTI, and put bonds and Canadian unregistered - that's the most efficient.
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You are right, so is this a good allocation for my ETF's in my TFSA: 25% on VAB, 25% on VCN, 25% on ZEA and 25% on XEF? Or maybe I should lower the % on VCN (since Canadian stock market represents only 3% of the world's market) and higher up the % in ZEA and XEF?
Depends on the whole picture. FIRST work out your asset alloc, THEN work out where those assets should be housed. Also factor money in an RRSP is 'worth less' than money elsewhere because it will be taxed as income when you withdraw it - unless you can fit it into your personal allowance.
IF you are talking about having an RRSP, TFSA, and unreg - I would fill the TFSA with XEF or ZEA (they are basically the same, don't need both), RRSP with VTI, and put bonds and Canadian unregistered - that's the most efficient.
For now I ain't touching the RRSP or the non-reg since I am in the lower tax bracket, I am trying to maximize my TFSA first. Once that's done (If I will ever be able to maximize it), then my next option would be maximizing RRSP and investing in non-reg.
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You are right, so is this a good allocation for my ETF's in my TFSA: 25% on VAB, 25% on VCN, 25% on ZEA and 25% on XEF? Or maybe I should lower the % on VCN (since Canadian stock market represents only 3% of the world's market) and higher up the % in ZEA and XEF?
Depends on the whole picture. FIRST work out your asset alloc, THEN work out where those assets should be housed. Also factor money in an RRSP is 'worth less' than money elsewhere because it will be taxed as income when you withdraw it - unless you can fit it into your personal allowance.
IF you are talking about having an RRSP, TFSA, and unreg - I would fill the TFSA with XEF or ZEA (they are basically the same, don't need both), RRSP with VTI, and put bonds and Canadian unregistered - that's the most efficient.
For now I ain't touching the RRSP or the non-reg since I am in the lower tax bracket, I am trying to maximize my TFSA first. Once that's done (If I will ever be able to maximize it), then my next option would be maximizing RRSP and investing in non-reg.
Ok fair enough, makes sense then.
I'd do 15% Canada (remembering Canada is something like 4% of global market cap? Or less? I forget), you're already getting 'exposure' to Canada through OAS/GIS/CPP/housing. Then maybe 15% bonds. 15-20% emerging (XEC, say), and the rest split between VUN and XEF or ZEA.
Something like that.
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You are right, so is this a good allocation for my ETF's in my TFSA: 25% on VAB, 25% on VCN, 25% on ZEA and 25% on XEF? Or maybe I should lower the % on VCN (since Canadian stock market represents only 3% of the world's market) and higher up the % in ZEA and XEF?
Depends on the whole picture. FIRST work out your asset alloc, THEN work out where those assets should be housed. Also factor money in an RRSP is 'worth less' than money elsewhere because it will be taxed as income when you withdraw it - unless you can fit it into your personal allowance.
IF you are talking about having an RRSP, TFSA, and unreg - I would fill the TFSA with XEF or ZEA (they are basically the same, don't need both), RRSP with VTI, and put bonds and Canadian unregistered - that's the most efficient.
For now I ain't touching the RRSP or the non-reg since I am in the lower tax bracket, I am trying to maximize my TFSA first. Once that's done (If I will ever be able to maximize it), then my next option would be maximizing RRSP and investing in non-reg.
Ok fair enough, makes sense then.
I'd do 15% Canada (remembering Canada is something like 4% of global market cap? Or less? I forget), you're already getting 'exposure' to Canada through OAS/GIS/CPP/housing. Then maybe 15% bonds. 15-20% emerging (XEC, say), and the rest split between VUN and XEF or ZEA.
Something like that.
Where do you go to see what each index funds are invested at? I only about XEF, VUN, VAB and VCN because canadian couch potatos go in details about these ETF's. Is there a website that explains in detail each ETF and where they invest?
It's been only 1 month I am trying to learn about ETF's and this is also the first month I want to "divorce" with my bank when it comes to investing (I was a former mutual fund investor), so I am still a newbie in this.
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Where do you go to see what each index funds are invested at? I only about XEF, VUN, VAB and VCN because canadian couch potatos go in details about these ETF's. Is there a website that explains in detail each ETF and where they invest?
It's been only 1 month I am trying to learn about ETF's and this is also the first month I want to "divorce" with my bank when it comes to investing (I was a former mutual fund investor), so I am still a newbie in this.
Just go directly to the ETF provider. You can download the data from there if you want to play with it.
Blackrock for XEF
i.e. http://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf (http://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf) and click on "All Holdings"
Vanguard for the 'V's
i.e. https://www.vanguardcanada.ca/individual/mvc/detail/etf/overview?portId=9557&assetCode=EQUITY##overview (https://www.vanguardcanada.ca/individual/mvc/detail/etf/overview?portId=9557&assetCode=EQUITY##overview)
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Where do you go to see what each index funds are invested at? I only about XEF, VUN, VAB and VCN because canadian couch potatos go in details about these ETF's. Is there a website that explains in detail each ETF and where they invest?
It's been only 1 month I am trying to learn about ETF's and this is also the first month I want to "divorce" with my bank when it comes to investing (I was a former mutual fund investor), so I am still a newbie in this.
Just go directly to the ETF provider. You can download the data from there if you want to play with it.
Blackrock for XEF
i.e. http://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf (http://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf) and click on "All Holdings"
Vanguard for the 'V's
i.e. https://www.vanguardcanada.ca/individual/mvc/detail/etf/overview?portId=9557&assetCode=EQUITY##overview (https://www.vanguardcanada.ca/individual/mvc/detail/etf/overview?portId=9557&assetCode=EQUITY##overview)
Thanks, they are very helpfull.
To daverobev: How does this look 15% VAB, 15% VCN, 15% XEC, 35% VUN and 25% XEF ....If I understand each ETF, XEC is for emerging markets, VUN is for the US market and XEF is for international market if I read each of the ETF's descirptions through their website,right??? The MER should be about 0,35%, right?
In the TFSA, there won't be any "gotcha" with those ETF's right. Sometimes I feel you have to always read the fineprint like the VXC where it has 2 witholding taxes or that dreadfull Norbert's Gambit(usefull,but complicated to understand) that I keep hearing about on US ETF's. All I want is to invest in peace, no forms to fill, no expensive fee's to pay...just invest for my future, because I want to be FI hopefully in my 40's (I am 33 at this moment), it would be great being FI earlier, but that would be tough.
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Where do you go to see what each index funds are invested at? I only about XEF, VUN, VAB and VCN because canadian couch potatos go in details about these ETF's. Is there a website that explains in detail each ETF and where they invest?
It's been only 1 month I am trying to learn about ETF's and this is also the first month I want to "divorce" with my bank when it comes to investing (I was a former mutual fund investor), so I am still a newbie in this.
Just go directly to the ETF provider. You can download the data from there if you want to play with it.
Blackrock for XEF
i.e. http://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf (http://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf) and click on "All Holdings"
Vanguard for the 'V's
i.e. https://www.vanguardcanada.ca/individual/mvc/detail/etf/overview?portId=9557&assetCode=EQUITY##overview (https://www.vanguardcanada.ca/individual/mvc/detail/etf/overview?portId=9557&assetCode=EQUITY##overview)
Thanks, they are very helpfull.
To daverobev: How does this look 15% VAB, 15% VCN, 15% XEC, 35% VUN and 25% XEF ....If I understand each ETF, XEC is for emerging markets, VUN is for the US market and XEF is for international market if I read each of the ETF's descirptions through their website,right??? The MER should be about 0,35%, right?
In the TFSA, there won't be any "gotcha" with those ETF's right. Sometimes I feel you have to always read the fineprint like the VXC where it has 2 witholding taxes or that dreadfull Norbert's Gambit(usefull,but complicated to understand) that I keep hearing about on US ETF's. All I want is to invest in peace, no forms to fill, no expensive fee's to pay...just invest for my future, because I want to be FI hopefully in my 40's (I am 33 at this moment), it would be great being FI earlier, but that would be tough.
I make that 105% ;)
If you want super easy go Tangerine Balanced Growth. It's one fund that is 25% each Canada/US/international/bonds. Falling off a log easy.
To get to 100 I'd reduce the US by 5% if you're going the discount brokerage route. You WILL lose an extra 0.3% US withholding on VUN, but yeah for simple just do it.
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Where do you go to see what each index funds are invested at? I only about XEF, VUN, VAB and VCN because canadian couch potatos go in details about these ETF's. Is there a website that explains in detail each ETF and where they invest?
It's been only 1 month I am trying to learn about ETF's and this is also the first month I want to "divorce" with my bank when it comes to investing (I was a former mutual fund investor), so I am still a newbie in this.
Just go directly to the ETF provider. You can download the data from there if you want to play with it.
Blackrock for XEF
i.e. http://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf (http://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf) and click on "All Holdings"
Vanguard for the 'V's
i.e. https://www.vanguardcanada.ca/individual/mvc/detail/etf/overview?portId=9557&assetCode=EQUITY##overview (https://www.vanguardcanada.ca/individual/mvc/detail/etf/overview?portId=9557&assetCode=EQUITY##overview)
Thanks, they are very helpfull.
To daverobev: How does this look 15% VAB, 15% VCN, 15% XEC, 35% VUN and 25% XEF ....If I understand each ETF, XEC is for emerging markets, VUN is for the US market and XEF is for international market if I read each of the ETF's descirptions through their website,right??? The MER should be about 0,35%, right?
In the TFSA, there won't be any "gotcha" with those ETF's right. Sometimes I feel you have to always read the fineprint like the VXC where it has 2 witholding taxes or that dreadfull Norbert's Gambit(usefull,but complicated to understand) that I keep hearing about on US ETF's. All I want is to invest in peace, no forms to fill, no expensive fee's to pay...just invest for my future, because I want to be FI hopefully in my 40's (I am 33 at this moment), it would be great being FI earlier, but that would be tough.
I make that 105% ;)
If you want super easy go Tangerine Balanced Growth. It's one fund that is 25% each Canada/US/international/bonds. Falling off a log easy.
To get to 100 I'd reduce the US by 5% if you're going the discount brokerage route. You WILL lose an extra 0.3% US withholding on VUN, but yeah for simple just do it.
lol, I did a calculation mistake again...how the hell did I pass math in the old days :P
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I am fighting over my asset allocations. As I am 33, is 75% on stocks / 25% Bonds a good asset allocation for me. If my TFSA was just for retirement, I would of gone 90/10, but since I am still unsure if I want to buy a condo in 5-10 or 15 years, that is why I thought maybe 75/25 would be a good number since it would accumulate the cash fast and the bonds may cover me for awhile if there is a market crash (There will be one, we just don't know when).
On one hand, I figure "fuck it, go all on stocks (90/10 like CCP suggests for aggressive) and will see what the future decides", but on the other hand, I figure if I meet someone in the near future, we would want to buy a condo together (not a big fan of homes, too much outside repairs).
As for retirement, I love my job, so if nothing changes it, I will likely retire at 60, but I want to be FI asap (late 40's or early 50's). Since I am low income, the fact I can't save more than 50% will hurt me on that one, but it's ok, that part doesn't worry, because like I said, I love my job.
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On one hand, I figure "fuck it, go all on stocks (90/10 like CCP suggests for aggressive) and will see what the future decides", but on the other hand, I figure if I meet someone in the near future, we would want to buy a condo together (not a big fan of homes, too much outside repairs).
How much would a condo down-payment be in your area? Figure out how many months it would take to save from scratch at your current savings rate?
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On one hand, I figure "fuck it, go all on stocks (90/10 like CCP suggests for aggressive) and will see what the future decides", but on the other hand, I figure if I meet someone in the near future, we would want to buy a condo together (not a big fan of homes, too much outside repairs).
How much would a condo down-payment be in your area? Figure out how many months it would take to save from scratch at your current savings rate?
I could get one from 150 000 to 250 000$ on average in my area (I live in a big city). The only problem is the "When will I buy it", that is the part I don't know, just like retirement, I don't have an age on when it's going to happen. I estimate my retirement at 60, but if I still enjoy my job then, I might extend it too.
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I could get one from 150 000 to 250 000$ on average in my area (I live in a big city). The only problem is the "When will I buy it", that is the part I don't know, just like retirement, I don't have an age on when it's going to happen. I estimate my retirement at 60, but if I still enjoy my job then, I might extend it too.
So say $200K.
10% down is $20K
25% down is $50K
How long at your current savings rate would it take you to save that from scratch?
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I could get one from 150 000 to 250 000$ on average in my area (I live in a big city). The only problem is the "When will I buy it", that is the part I don't know, just like retirement, I don't have an age on when it's going to happen. I estimate my retirement at 60, but if I still enjoy my job then, I might extend it too.
So say $200K.
10% down is $20K
25% down is $50K
How long at your current savings rate would it take you to save that from scratch?
I have a more ambitious goal, when I buy a condo, it will be cash, no mortgage. Right now I pay rent (whcih cost me less than if I would have a mortgage). I am not in a hurry to leave right now, because I get along with the people I live with and its a win-win situation for both of us.
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Been there, done that. Condos are an ongoing money pit. Look into "special assessments"
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Been there, done that. Condos are an ongoing money pit. Look into "special assessments"
This is the word. The Weetabix condo towers going up in Toronto will likely need to be totally reskinned within 10 years. Can everyone owner please give 20,000K?
Yeah, renting is a far better proposition. Don't even think about buying in Toronto.