Author Topic: Investments return 2017 (Canadian Mustachian)  (Read 10194 times)

RichMoose

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #50 on: December 19, 2017, 03:28:51 PM »
XUU.TO does the same job at 0.07% MER. While it's a bit more expensive, to me it's hardly worth the hassle of DLR/DLR.U or the cost of waiting to buy.

Since that's a wrapper for sub-ETFs aren't you going to pay MERs at both levels which makes it more expensive than 0.07%?

It shouldn't be. The listed MER (not just management fee) is 0.07%. That number is supposed to include taxes and fees on underlying holdings.

max9505672

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #51 on: December 19, 2017, 03:30:18 PM »
XUU.TO does the same job at 0.07% MER. While it's a bit more expensive, to me it's hardly worth the hassle of DLR/DLR.U or the cost of waiting to buy.

Since that's a wrapper for sub-ETFs aren't you going to pay MERs at both levels which makes it more expensive than 0.07%?

It shouldn't be. The listed MER (not just management fee) is 0.07%. That number is supposed to include taxes and fees on underlying holdings.
What would be the difference between VUN.TO and XUU.TO besided MER?

I don't see any major difference :

VUN:
http://quote.morningstar.ca/quicktakes/ETF/etf_ca.aspx?t=VUN&culture=en-CA&region=CAN

XUU:
http://quote.morningstar.ca/quicktakes/etf/etf_ca.aspx?t=XUU&region=CAN&culture=en-CA
« Last Edit: December 19, 2017, 03:32:14 PM by max9505672 »

daverobev

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #52 on: December 19, 2017, 03:48:21 PM »
XUU.TO does the same job at 0.07% MER. While it's a bit more expensive, to me it's hardly worth the hassle of DLR/DLR.U or the cost of waiting to buy.

Since that's a wrapper for sub-ETFs aren't you going to pay MERs at both levels which makes it more expensive than 0.07%?

It shouldn't be. The listed MER (not just management fee) is 0.07%. That number is supposed to include taxes and fees on underlying holdings.
What would be the difference between VUN.TO and XUU.TO besided MER?

I don't see any major difference :

VUN:
http://quote.morningstar.ca/quicktakes/ETF/etf_ca.aspx?t=VUN&culture=en-CA&region=CAN

XUU:
http://quote.morningstar.ca/quicktakes/etf/etf_ca.aspx?t=XUU&region=CAN&culture=en-CA

VUN.TO holds VTI; XUU.TO holds ~60% S&P500, ~30% total US, and the rest split between mid and small cap. You'd have to do a breakdown of VTI to see if those allocations 'match'. Most of the 'total US' will be in the S&P500.

You could do tax loss harvesting, selling one and buying the other; they are not 'identical'. But if you want US exposure they are both no doubt absolutely fine.

anisotropy

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #53 on: December 19, 2017, 05:28:46 PM »
The thing is I am a little worried about the USD stuff I own. I own it through VTI ETF. And in order to buy USD ETF for Canadians you have to get USD (either by doing Norbert Gambit or another way). But in order for Norbert Gambit to be worth it (to absorb the fees), you have to transfer a substantial amount of $, so, personally, I am not able to regularly buy US stuff which kind of exposes me to exchange rate between both currencies when I buy the US stuff (for example once/year).

Isn't against popular MMM philosophy of being often to reduce the ''market timing'' impact?

You can buy VUN in CAD [same underlying stocks as VTI] with regular small additions then once you have a big chunk of VUN you can sell it and do Norbert's Gambit to buy VTI. That way you are invested all the time and not trying to lump sum once a year.
Yes, that's what I do, I am still waiting to have enough to buy VTI again.

So basically, the logic would be that if I regularly by VUN (which is US market in CAD), I would buy it at different USD-CAD exchange rate. But then when I sell it to buy VTI,  I am not dependent of that day's exchange rate?

(I'm sorry, I got to admit I have a hard time understanding the impact of exchange rate)

Personally, I feel it might be better if you completely skip the "conversion" from VUN into VTI. I understand they are in your RRSP and therefore the cost is minimal but increased trading frequency could hurt you in terms of spread. In reality, even in the best case of carrying out a Norbert's you would still lose a bit of money every time (not to mention when the day comes and you want to use the money but would need to convert back to cad again). Yes the appreciating CAD vs USD caused on drag on the returns this year, but a hedged etf would have "fixed" most of the issue, ie, VUS. It is just my opinion and entirely up to you.

Also, like other posters have already mentioned, over long periods of time the currency variation will largely be a wash, which is the case if you compare monthly raw s&p returns (SP) vs SP+exchange rate dating back to the 70s.

Regarding bonds, I noticed you switched from 10% to 0%, which is fine as long as you are comfortable with it. It is my opinion and experience that bonds do have a place in most portfolios, even 10% allocation would do wonders in reducing volatilities to achieve higher risk adjusted returns.

edit: lol I even wrote down RRSP yet the 15% completely escaped me, thanks for pointing that out, daverobev. Hedging is not perfect, but VUS has the same mer as VUN.
« Last Edit: December 19, 2017, 05:45:17 PM by anisotropy »

daverobev

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #54 on: December 19, 2017, 05:34:46 PM »
The thing is I am a little worried about the USD stuff I own. I own it through VTI ETF. And in order to buy USD ETF for Canadians you have to get USD (either by doing Norbert Gambit or another way). But in order for Norbert Gambit to be worth it (to absorb the fees), you have to transfer a substantial amount of $, so, personally, I am not able to regularly buy US stuff which kind of exposes me to exchange rate between both currencies when I buy the US stuff (for example once/year).

Isn't against popular MMM philosophy of being often to reduce the ''market timing'' impact?

You can buy VUN in CAD [same underlying stocks as VTI] with regular small additions then once you have a big chunk of VUN you can sell it and do Norbert's Gambit to buy VTI. That way you are invested all the time and not trying to lump sum once a year.
Yes, that's what I do, I am still waiting to have enough to buy VTI again.

So basically, the logic would be that if I regularly by VUN (which is US market in CAD), I would buy it at different USD-CAD exchange rate. But then when I sell it to buy VTI,  I am not dependent of that day's exchange rate?

(I'm sorry, I got to admit I have a hard time understanding the impact of exchange rate)

Personally, I feel it might be better if you completely skip the "conversion" from VUN into VTI. I understand they are in your RRSP and therefore the cost is minimal but increased trading frequency could hurt you in terms of spread. In reality, even in the best case of carrying out a Norbert's you would still lose a bit of money every time (not to mention when the day comes and you want to use the money but would need to convert back to cad again).  Yes the appreciating CAD vs USD caused on drag on the returns this year, but a hedged etf would have "fixed" most of the issue, ie, VUS. It is just my opinion and entirely up to you.

Also, like other posters have already mentioned, over long periods of time the currency variation will largely be a wash, which is the case if you compare monthly raw s&p returns (SP) vs SP+exchange rate dating back to the 70s.

Regarding bonds, I noticed you switched from 10% to 0%, which is fine as long as you are comfortable with it. It is my opinion and experience that bonds do have a place in most portfolios, even 10% allocation would do wonders in reducing volatilities to achieve higher risk adjusted returns.

Just say you have $250k CAD invested in US stuff. 2% dividends = $5k a year. 15% of that lost = $750.

With Questrade, doing Norbert's Gambit costs you $5. You buy DLR, journal, sell DLR.U, then buy your VTI.

Lots of people have 50% of their investments in US stuff. Even on $100k, the difference is $300 of drag.

Hedging currencies is not good, generally. It is expensive in from what I have read, not always effective.

Buying VUN.TO until you have a nice fat chunk and then moving it over to VTI is just fine. In an RRSP. Not worth it anywhere else.

max9505672

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #55 on: December 19, 2017, 06:38:17 PM »
The thing is I am a little worried about the USD stuff I own. I own it through VTI ETF. And in order to buy USD ETF for Canadians you have to get USD (either by doing Norbert Gambit or another way). But in order for Norbert Gambit to be worth it (to absorb the fees), you have to transfer a substantial amount of $, so, personally, I am not able to regularly buy US stuff which kind of exposes me to exchange rate between both currencies when I buy the US stuff (for example once/year).

Isn't against popular MMM philosophy of being often to reduce the ''market timing'' impact?

You can buy VUN in CAD [same underlying stocks as VTI] with regular small additions then once you have a big chunk of VUN you can sell it and do Norbert's Gambit to buy VTI. That way you are invested all the time and not trying to lump sum once a year.
Yes, that's what I do, I am still waiting to have enough to buy VTI again.

So basically, the logic would be that if I regularly by VUN (which is US market in CAD), I would buy it at different USD-CAD exchange rate. But then when I sell it to buy VTI,  I am not dependent of that day's exchange rate?

(I'm sorry, I got to admit I have a hard time understanding the impact of exchange rate)

Personally, I feel it might be better if you completely skip the "conversion" from VUN into VTI. I understand they are in your RRSP and therefore the cost is minimal but increased trading frequency could hurt you in terms of spread. In reality, even in the best case of carrying out a Norbert's you would still lose a bit of money every time (not to mention when the day comes and you want to use the money but would need to convert back to cad again).  Yes the appreciating CAD vs USD caused on drag on the returns this year, but a hedged etf would have "fixed" most of the issue, ie, VUS. It is just my opinion and entirely up to you.

Also, like other posters have already mentioned, over long periods of time the currency variation will largely be a wash, which is the case if you compare monthly raw s&p returns (SP) vs SP+exchange rate dating back to the 70s.

Regarding bonds, I noticed you switched from 10% to 0%, which is fine as long as you are comfortable with it. It is my opinion and experience that bonds do have a place in most portfolios, even 10% allocation would do wonders in reducing volatilities to achieve higher risk adjusted returns.

Just say you have $250k CAD invested in US stuff. 2% dividends = $5k a year. 15% of that lost = $750.

With Questrade, doing Norbert's Gambit costs you $5. You buy DLR, journal, sell DLR.U, then buy your VTI.

Lots of people have 50% of their investments in US stuff. Even on $100k, the difference is $300 of drag.

Hedging currencies is not good, generally. It is expensive in from what I have read, not always effective.

Buying VUN.TO until you have a nice fat chunk and then moving it over to VTI is just fine. In an RRSP. Not worth it anywhere else.
What's the 15% again? Dividends taxes for CAD in RRSP vs. USD in RRSP?

Sun Hat

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #56 on: December 19, 2017, 07:14:19 PM »
I'm curious as to whether your returns picked up in the past few months. I bought similar funds at a similar time this spring, and have had quite nice returns since your last update in August.

max9505672

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #57 on: December 20, 2017, 07:21:38 AM »
I'm curious as to whether your returns picked up in the past few months. I bought similar funds at a similar time this spring, and have had quite nice returns since your last update in August.
Yes they have!

Margin YTD -  3.17% (began later in the year)
TFSA YTD -  10.56%
RRSP YTD -  10.93%
Total YTD - 9.16%*

*I simply add all the contributions I've made up to now and compare to my actual investments value, and, since I reinsvest all my dividends, it takes them into account also.

The main reasons why I don't see higher numbers closer to 20% as many people on the forum have seen is because the CAD$ gained a lot of value this year and I also bought the majority of my shares in the end of February/beginning of March, when the market had a little bump. The results would have been a lot better if, for example, I had bought the same shares January 1st.

But still, since September, it's been very good!

What about you Sun hat?
« Last Edit: December 20, 2017, 08:06:33 AM by max9505672 »

daverobev

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #58 on: December 20, 2017, 08:23:17 AM »
What's the 15% again? Dividends taxes for CAD in RRSP vs. USD in RRSP?

US 'withholds' 30% on dividends when paid to foreigners, which can be reduced by filing a W-8BEN depending on your country of residence or I guess by the brokerage doing something similar on your behalf, or by being inside a retirement account.

In Canada, the withholding rate (which is actually the taxation rate... the amount is deducted from your dividends before you see them) is 15%. Inside an RRSP, it is 0.

If you hold a 'wrapper' ETF - something that is a Canadian ETF that holds a US ETF, such as VUN.TO, the US doesn't 'know' the money is in a retirement account, so 15% is still withheld. Ergo, in an RRSP, you lose 15% of your dividends if you hold VUN.TO, but not if you hold VTI.

In an unregistered account it doesn't matter assuming you pay tax to the CRA, because you can claim the foreign tax paid - there is a double taxation treaty in place.

Lews Therin

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #59 on: December 20, 2017, 10:23:06 AM »
I'm curious as to whether your returns picked up in the past few months. I bought similar funds at a similar time this spring, and have had quite nice returns since your last update in August.
Yes they have!

Margin YTD -  3.17% (began later in the year)
TFSA YTD -  10.56%
RRSP YTD -  10.93%
Total YTD - 9.16%*

You also have to take into account the the fact that you had less money in the beginning, so the YTD is a little different than simply checking how much you have now - total contributions.

*I simply add all the contributions I've made up to now and compare to my actual investments value, and, since I reinsvest all my dividends, it takes them into account also.

The main reasons why I don't see higher numbers closer to 20% as many people on the forum have seen is because the CAD$ gained a lot of value this year and I also bought the majority of my shares in the end of February/beginning of March, when the market had a little bump. The results would have been a lot better if, for example, I had bought the same shares January 1st.

But still, since September, it's been very good!

What about you Sun hat?

max9505672

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #60 on: December 20, 2017, 10:24:58 AM »
You also have to take into account the the fact that you had less money in the beginning, so the YTD is a little different than simply checking how much you have now - total contributions.
Not sure I understand what you mean?

Lews Therin

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #61 on: December 20, 2017, 10:31:48 AM »
If for half the year you had 50k, and went up 5K that's 10% increase. If you then add 15k throughout the year, the math gets blurry, since you have to calculate the increases % while you had 50k, then calculate the increase from when you had 65k. It`s small details, but you might end up having higher than 10% if you kept increasing your contributions.

Beginning: 50k - End of year - 75k (let's say you added 15k mid-year to make math simple)
Mid year: 55k (10%) + 15k = 70
End of year: 75k (7.14%)

Total = 17.14% YTD
Calculated the other way: 75 - 65 (total - gains) = 10k gain on 65k = 15.38%. And that's for a simple example. It could make a difference throughout the year if you are still contributing.

max9505672

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #62 on: December 20, 2017, 10:51:12 AM »
Calculated the other way: 75 - 65 (total - gainsinvestments) = 10k gain on 65k = 15.38%. And that's for a simple example. It could make a difference throughout the year if you are still contributing.
Yes that's how I calculated it.

If for half the year you had 50k, and went up 5K that's 10% increase. If you then add 15k throughout the year, the math gets blurry, since you have to calculate the increases % while you had 50k, then calculate the increase from when you had 65k. It`s small details, but you might end up having higher than 10% if you kept increasing your contributions.

Beginning: 50k - End of year - 75k (let's say you added 15k mid-year to make math simple)
Mid year: 55k (10%) + 15k = 70
End of year: 75k (7.14%)

Total = 17.14% YTD
I don't get the 7.14%, sorry..

Lews Therin

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #63 on: December 20, 2017, 12:48:34 PM »
Because mid-year you've already gotten 10% return on your money. The rest of the year, when you had 65k invested, you received 5k, which is 7.14%. So your contributions received 17.14% rather than the 15% that you would calculate (since you had a smaller amount invested earlier in the year). The way you calculated it, it's as if you had the highest amount of money invested at all times.

max9505672

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #64 on: December 20, 2017, 01:05:38 PM »
Because mid-year you've already gotten 10% return on your money. The rest of the year, when you had 65k invested, you received 5k, which is 7.14%. So your contributions received 17.14% rather than the 15% that you would calculate (since you had a smaller amount invested earlier in the year). The way you calculated it, it's as if you had the highest amount of money invested at all times.
Do you use Questrade? Do you know if this is how they calculate the ''Investment Returns'' they show in the charts? I know those don't take into account the dividends, but would they take into account what you are explaining here (which is still not clear to - feel free to contact me in PM if you want, I don't want to loose everybody in the thread :P)?

Here are the differences between the ''Investment Return'' I get directly from Questrade vs. my calculation

Margin : 5.8% vs. 3.17%
TFSA : 10.4% vs. 10.56%
RRSP : 10.7% vs. 10.93%

Lews Therin

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #65 on: December 20, 2017, 01:16:24 PM »
Yes that is what Questrade is calculating.

Sun Hat

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Re: Investments return 2017 (Canadian Mustachian)
« Reply #66 on: December 20, 2017, 03:57:05 PM »

Yes they have!

Margin YTD -  3.17% (began later in the year)
TFSA YTD -  10.56%
RRSP YTD -  10.93%
Total YTD - 9.16%*

But still, since September, it's been very good!

What about you Sun hat?

I sold my mutual funds and bought ETFs in the spring, with a few purchases since. I use TD Direct Investing, and have yet to figure out how to get it to show me an overall rate of return across accounts for more than a 1 month period, so I can't say what my overall return was, though probably 9% ish (I could do math, but am not inclined at the moment).

ZCN +4.22%
XAW +7.91%
VTI +14.31%
VCN +4.50%
VFV +12.05%