Author Topic: Hey Canadians! 1.7% is not enough! Got any ideas for me?  (Read 4784 times)

lifejoy

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Hey Canadians! 1.7% is not enough! Got any ideas for me?
« on: November 04, 2013, 02:39:15 PM »
Hello :)

I invested into mutual funds at RBC, and the rate of return over the course of a year was only 1.7%. I now have $2,000 saved up, which should expand my options.

What would you suggest? GICs? Go to TD and use their e-index fund thingys? I'd love to be pointed in the right direction. Canadian couch potato makes my head hurt, so if you can dumb it down for me, I'd really appreciate it :)

Thanks!

daverobev

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #1 on: November 04, 2013, 04:21:54 PM »
Hey,

first question is: what is the money for?

If long term (ie, retirement), you need to do an asset allocation/risk profile thing. BUT IMHO if you're young and this is retirement stuff, any of the CCP portfolios will do. In which case, pick the simplest.

The point with CCP is that you have (at least) two non-correlated assets - usually stocks and bonds, but with others added in if you feel like it (your own home, arguably; other real estate and/or REITs; precious metals; etc).

If you invest in a CCP portfolio *don't fret* about the yearly returns - some years will be good, others bad, but it pretty much doesn't matter. The counter is that, with stocks AND bonds, one going down will be offset by the other going up - and you rebalance, FORCING you to sell high and buy low (so if stocks have fallen by 50% and bonds up by 50%, your old allocation of 70% stock/30% bonds will be out - so you sell bonds and buy stocks to get back to your allocation).

TD e-series is good. RBC's index funds are ok too - the difference is 0.4% in fees, which is not nothing but the important thing is to *keep plugging away* more than *have the best value* - remember you're talking 0.7% with the right RBC funds, vs 2% for the shitty managed things we're (almost) all avoiding (here)!

daverobev

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #2 on: November 04, 2013, 04:27:17 PM »
From http://canadiancouchpotato.com/model-portfolios/

1. The Global Couch Potato is *fine*, don't worry about the other options. I personally would go with a Questrade account as it is much more flexible and buying ETFs is free with them - in which case you just follow Option 1. Throw money at your account/s every month and buy!

BUT you can't do automatic contributions like that. With RBC, TD etc you can. That's important for some people. In which case try to set up Option 2 - set up your monthly contributions - job done! Or just keep on with the RBC funds - assuming you're using Canadian Index and US Index. The bond fund they have is a bit pricey at 1% I think but even so it's not a show stopper - making sure you buy and continue to buy is the important thing (and avoiding managed junk - you don't want a person selling and buying to make themselves commissions! These 'index trackers' just follow whatever index, rebalancing quarterly or twice a year or whatever).

Not sure what else I can say to help.

lifejoy

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #3 on: November 04, 2013, 11:12:41 PM »
This is a big help!

I'm saving money for retirement, hope to put in $200/month into my RRSP. Definitely long-term planning.

Daverobev - automatic contributions are what I want. Any tips on how to avoid managed options? Is there some way to avoid the MER fee? Would that be with Bonds and GICs?

My parents aren't directly involved with investing, and my friends aren't interested yet. I really appreciate all the advice I get here :)

I'm going to take a good hard look at those model portfolios. Thanks!

lifejoy

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #4 on: November 04, 2013, 11:17:48 PM »
PS -

Total newbie over here. The global couch potato option looks great, but how would I begin in setting that up? For example, option 3 involves some RBC and TD... Would I open an account at each branch?

Apologies if this is easily answered on google. But I find I learn better in a more conversational style. :)

plainjane

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #5 on: November 05, 2013, 07:12:24 AM »
Daverobev - automatic contributions are what I want. Any tips on how to avoid managed options? Is there some way to avoid the MER fee? Would that be with Bonds and GICs?

AFAIK you cannot avoid some degree of an MER on a fund - they need to pay someone at some point to keep an eye on it and give them a reason to offer it.  GICs won't have an MER, but they also won't give you much (if any) growth.

If you just want to set it and forget it, the Streetwise fund from ING is really easy and will let you do the automatic contributions you are looking for.  http://canadiancouchpotato.com/2012/04/09/ings-streetwise-fund-v-td-e-series/

The TD e-series will take a bit more work on your end to set up, and you'll need to do the rebalancing yourself.  You are probably not ready for the 1st or 3rd option on the Global Couch Potato, it involves a 3rd party brokerage account, not branch accounts at the banks.

Given your current level of investment knowledge, the ING funds are probably a good place to start, and you can put money there until you've got the knowledge base and comfort level to run the e-series yourself. 

daverobev

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #6 on: November 05, 2013, 07:47:10 AM »
Yup, there are a few zero-MER funds/ETFs out there, but not many. It's just the costs the organisation incurs, buying the stocks, doing the admin, etc. This is why Vanguard are so good - they cut out all the bullshit and just charge a reasonable amount.

Libraryjoy, the one fund streetwise thing is pretty good - you are literally buying one thing. The MER is a little worse than the e-series but hey if it gets you going.. great. Or just keep on with RBC, again, assuming you're using the 'right' funds.

With MER anything over 1% is pretty much out (aside from that 'one fund' from Streetwise), 0.7% (RBC) is high for what it is but not the end of the world; 0.3% is good (e-series); and below that is great.

Again personally I'd want to go with the e-series if I was not comfortable with having a brokerage account. But you can do ok with RBC too. One thing that is regularly said is "don't even bother with bonds if you have *any* debt" - so you'd only need to buy the Canadian and US index funds with RBC for a while...

Kazimieras

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #7 on: November 05, 2013, 09:40:29 AM »
+1 on daverobev's advice.

Keep your fees low, and typically an ETF will typically let you do that. One thing to remember though is that an RRSP just defers when you pay tax on the money. If you're starting out you may be better off putting the money in a TFSA (which can be invested like an RRSP) and then moving the money into an RRSP one your income has gone up a bit more and is taxed more heavily.

GuitarStv

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #8 on: November 05, 2013, 10:02:47 AM »
I don't agree with the RRSP advice unless you're making very very little right now.  Especially if you're expecting to retire early.

The RRSP allows you to defer paying tax until the future . . . when you'll be making little or nothing (because you're retired).  It's going to be cheaper to pay tax on that reduced income than your higher current income, unless you've got a sweet ass pension or something.

lifejoy

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #9 on: November 05, 2013, 10:44:38 AM »
Ok this is what I'm getting out of this conversation:

-Low MER is key to success. The lower, the better.

-ING is good for real beginners.

-TD would also be a great start, but will be a little more hands on.

Ok! This directs my research. Thanks everyone :) And for the record, I'd like to get some investing on the go, within my RRSP, and then start withdrawing when I'm 65.

EDIT: This has given me some great ideas of what to search even in the MMM forums. Thanks for being so kind and letting me know about things that have definitely been mentioned before! *Runs off to do some reading* :D
« Last Edit: November 05, 2013, 10:49:26 AM by libraryjoy »

daverobev

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #10 on: November 05, 2013, 12:08:03 PM »
Ok, the low MER thing. Yes, the lower the better for competing products - if BMO and RBC provide a mutual fund that tracks *the same index* then you should always go with the lower MER if you can.

But the MAIN thing is to look for funds or ETFs that are *index trackers* and not *managed funds*. With managed funds, people who have no better idea what the market will do than you or I will change what is in a given fund if they think it's clever to do so. A large percentage of the time they lose vs the index tracker. If I had the choice of a 'well recommended managed fund' vs an index tracker and they *both had the same MER* I would STILL choose the index tracker.

Re RRSP vs TFSA - this comes down to your expected tax rate in retirement vs your tax rate now. If you are in the 40% bracket now but will be retiring with a super Mustachian lifestyle say the 10% bracket, RRSP wins - you get 40% *back* right now, and pay 10% later. If you are a low earner now and expect to inherit a load and be in a higher bracket, or expect the brackets to change due to government intervention (could very well happen), then take the TFSA - you've paid the tax already, that's it. Any income is tax free.

In reality it's good to use both.

TGod

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #11 on: November 13, 2013, 11:27:22 AM »
Hi libraryjoy

Just a quick note to you. I just finished setting up TD e-series RRSP and TFSA accounts (I got my hubby off his butt to do it too). Up until then I had just been plugging bi-weekly piddly amounts into my regular RBC mutual fund accounts which had high MER. I could easily have switched them over to index funds, but decided to take advantage of the even lower MER at TD. The process was a tiny pain in the butt and it took me a while to get motivated to do it, but once I'd made the appt with TD to go in and set up accounts it worked out fine.

If you go with TD - make an apt and set up RRSP & TFSA mutual fund accounts, just regular old accounts. I didn't have to deposit any money into a cash account or do an initial deposit or anything. (I've heard this before, but it's for real, the people working in the bank do not know ANYTHING about e-series when I brought it up, it actually just confused them).

 I printed off a Conversion to e-series form from the TD website, added my new account info, attached some void cheques mailed it in and about 3 weeks later got a couple of emails from TD saying my accounts had switched successfully.  I am actually about to phone TD and set myself up for the EasyWeb access and then turn on automatic transfers from my RBC account.  I will then transfer my RBC RRSP money over to my TD account (or hold on that and just transfer it to index funds since there is a $50 fee to transfer) and at the end of the year withdraw my TFSA cash and deposit in TD.

plainjane

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #12 on: November 13, 2013, 04:21:30 PM »
and at the end of the year withdraw my TFSA cash and deposit in TD.

Be very careful in how you do the withdrawal & deposit of your TFSA, you don't want to get slammed with any of the various tax penalties.

sleepyguy

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #13 on: November 14, 2013, 09:32:01 AM »
Ah a fellow Canadian,

Well to 'dumb' it down.  Generally decent choices for starting out is TD eSeries or ING Direct Steetwise Funds.  With a larger account eSeries will have lower fees.

Ask yourself what your risk threshold is and timeline... from your avatar picture you look like a kid j/k... so i'm assuming 20+yrs investment period.

Generally rule is Bonds allocation same as age... I prefer 1/2 age but whatever.  And basically you pick up cheap MER indexes that fit the allocations.  So let's say you are 25yrs old.  Allocation would be something like this.  Assume this is RRSP, because if TSFA you may not want to hold US or International stuff in there because of the withholding tax.

25% Bonds Index
25% US Index
25% Can Index
25% Int Index

Then you rebalance the totals once a year or just keep it as it and deposit more into what is off balance.

Now you ask, why this instead of generic advisor mutual funds... it's the MER ie low fees.  Let's say you have a 500k portfolio... 3% MER vs let's say an index with .5% MER.  You get the idea.  PM me if you want more details.

Hello :)

I invested into mutual funds at RBC, and the rate of return over the course of a year was only 1.7%. I now have $2,000 saved up, which should expand my options.

What would you suggest? GICs? Go to TD and use their e-index fund thingys? I'd love to be pointed in the right direction. Canadian couch potato makes my head hurt, so if you can dumb it down for me, I'd really appreciate it :)

Thanks!
« Last Edit: November 14, 2013, 09:38:36 AM by sleepyguy »

Aloysius_Poutine

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Re: Hey Canadians! 1.7% is not enough! Got any ideas for me?
« Reply #14 on: November 15, 2013, 08:12:07 AM »
Another vote for TDeSeries. It took a trip to the bank to set up, but it's been super easy since.

Make sure you max out your TFSA before piling into RRSPs (unless you're looking for tax savings right now).