Canada - Sticking with a 3 fund portfolio

[potvin]

Hello MMM,

I currently have a 3 fund portfolio consisting of XAW/VCN/ZAG ( compliments to CCP ). I've recently maxed out my TFSA & RRSP contribution limits for this year and just opened a non-registered account.

Unfortunately my father has passed away recently.  He left me an inheritance which I intend on investing fully.

I hope I can keep this 3 fund model and still do OK in the future.  I've been reading on splitting it into a 5 fund with US holdings. I'd rather not do that right now as it's been quite stressful and I just want to put the money away and move on with my life.

Would it be crazy to stick to the 3 fund model for the sake of simplicity? I could possibly look into more advanced portfolios in the future, just hoping I can keep things simple for now and still end up OK.

Thanks MMM community.

[Tyler]

Hi Potvin.  I'm very sorry to hear about the passing of your father.

There's absolutely nothing wrong with simply keeping your three-fund portfolio.  The only thing holding me back from telling you to go ahead and invest the new money fully is your comment about wanting to split it into a 5-fund portfolio in the future.  As you probably know, selling stock and bond funds to buy new funds will likely incur a tax hit (assuming the money is in a taxable account).  Adding substantial new money is a unique opportunity to diversify into new funds without such a penalty if you're truly interested in that.

Personally, I would recommend holding off for a month or two before investing the new money.  Making investing decisions during an emotional time is very difficult, and there's no need to rush. 

Once you feel OK to think about different options, you may also enjoy this:  https://portfoliocharts.com/canadian-portfolios/

[potvin]

Hi Potvin.  I'm very sorry to hear about the passing of your father.

There's absolutely nothing wrong with simply keeping your three-fund portfolio.  The only thing holding me back from telling you to go ahead and invest the new money fully is your comment about wanting to split it into a 5-fund portfolio in the future.  As you probably know, selling stock and bond funds to buy new funds will likely incur a tax hit (assuming the money is in a taxable account).  Adding substantial new money is a unique opportunity to diversify into new funds without such a penalty if you're truly interested in that.

Personally, I would recommend holding off for a month or two before investing the new money.  Making investing decisions during an emotional time is very difficult, and there's no need to rush. 

Once you feel OK to think about different options, you may also enjoy this:  https://portfoliocharts.com/canadian-portfolios/

Thanks for the support Tyler.

I may just stick with the 3 fund approach. It's simple and allows me to stop tinkering with different strategies ( which may end up hurting my investments in the end ).

[Tyler]

Thanks for the support Tyler.

I may just stick with the 3 fund approach. It's simple and allows me to stop tinkering with different strategies ( which may end up hurting my investments in the end ).

Sounds like a good plan to me.  :)

[sieben]

Hi Potvin,

Sorry for your loss!

If this is something that is causing you some stress/discomfort in your life I can't see any reason to go away from a simple three fund portfolio.

You have some really good, low cost ETFs in your portfolio already and any future savings on fees/tax-efficiency would be minimal (although it could add up depending on the size of your portfolio).

Simplicity is almost always better, and your peace of mind is worth a lot :)
If you're happy with where you are at there is really no point in tinkering.

I follow this approach when helping my family with their portfolios. They could squeeze a few more dollars by adding complexity but for them it's simpler and less scary to have as few funds as possible.

[potvin]

Hi Potvin,

Sorry for your loss!

If this is something that is causing you some stress/discomfort in your life I can't see any reason to go away from a simple three fund portfolio.

You have some really good, low cost ETFs in your portfolio already and any future savings on fees/tax-efficiency would be minimal (although it could add up depending on the size of your portfolio).

Simplicity is almost always better, and your peace of mind is worth a lot :)
If you're happy with where you are at there is really no point in tinkering.

I follow this approach when helping my family with their portfolios. They could squeeze a few more dollars by adding complexity but for them it's simpler and less scary to have as few funds as possible.

Thanks Sieben, your reassurance is extremely helpful.

Have a great day :)