Author Topic: Need advice re: alloction of RBC Index Funds in RRSP  (Read 2330 times)

anotherone

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Need advice re: alloction of RBC Index Funds in RRSP
« on: July 18, 2017, 12:19:03 AM »
Just read this article from CanadianCouchPotato:
http://canadiancouchpotato.com/2017/07/07/rbc-revamps-its-index-fund-lineup/

I began investing in the past 18 months (before that I was pounding away at student loans) and despite being a MMM reader, I chose to put my maxed-out RRSP contributions into mutual funds (ugh...). I'm now looking to shift those into a combination of the four index funds mentioned in the above article.

The traditional balanced portfolio mentioned in the article is too conservative for my tastes (fyi, I'm 28):
RBC Canadian Index Fund20%
RBC U.S. Index Fund20%
International Index Currency Neutral Fund20%
RBC Canadian Government Bond Index Fund40%

I was thinking something more along the lines of:
RBC Canadian Index Fund35%
RBC U.S. Index Fund40%
International Index Currency Neutral Fund20%
RBC Canadian Government Bond Index Fund5%


I've only recently started to look into allocation strategies, so any comments on if this is a good breakdown or not would be more than welcome!

Thanks!
« Last Edit: July 18, 2017, 12:59:41 AM by humanemustache »

skeena

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Re: Need advice re: alloction of RBC Index Funds in RRSP
« Reply #1 on: July 18, 2017, 12:58:23 AM »
You seem unhappy with your mutual fund options. There is nothing stopping you from moving your money to another brokerage/firm to invest in cheaper ETF's. The process is really simple - sign up for an account at the other firm, and fill out their RRSP transfer form. They'll take care of the transfer. It should take a few weeks to go through, and there is a brief period when your money won't show in either account - don't worry about this. I do this annually to drain my work RRSP into my Questrade account.

As for your allocation... your descriptions don't indicate which one is for bonds, so I think you have a typo that's confusing me. But I do:
25% Canadian bonds
25% Canadian stocks
50% US/international stocks

All vanguard. And I'm a few years older than you (33)

anotherone

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Re: Need advice re: alloction of RBC Index Funds in RRSP
« Reply #2 on: July 18, 2017, 01:06:47 AM »
Fixed my typo from building the chart and copy/pasting incorrectly. CCP suggests 40% bond, while I'm thinking more like just 5% as I'm pretty tolerant of risk at this stage.

You seem unhappy with your mutual fund options. There is nothing stopping you from moving your money to another brokerage/firm to invest in cheaper ETF's. The process is really simple - sign up for an account at the other firm, and fill out their RRSP transfer form. They'll take care of the transfer. It should take a few weeks to go through, and there is a brief period when your money won't show in either account - don't worry about this. I do this annually to drain my work RRSP into my Questrade account.

Not unhappy, my mutual funds have performed decently since I invested in them, but just not sure the MER is worth it.

Generally I'm happy with RBC, all my banking is with them at this time (chequing, savings, RRSP, TFSA, credit card, LOC). The question, once I've managed to max out my TFSA contributions that accumulated over the years, is whether I stay with them for taxable investments, or go the Questrade account. With either, I would just be investing in Vanguard, so I'd likely just pick whichever has less fees associated.

Le Barbu

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Re: Need advice re: alloction of RBC Index Funds in RRSP
« Reply #3 on: July 18, 2017, 08:07:13 AM »
Need to know your RRSP and TFSA size, annual income and saving rate (at least) to give sounds advices. If accounts are lower than 100k$ each, RBC index funds are just ok, especially if you do regular contributions. If you are young, just forget bonds! 30% Canadian stocks, 40% US and 30% Intl is the way to go. US stocks fits better in RRSP, Intl in TFSA and Canadian in taxable account

anotherone

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Re: Need advice re: alloction of RBC Index Funds in RRSP
« Reply #4 on: July 18, 2017, 11:39:23 AM »
Need to know your RRSP and TFSA size, annual income and saving rate (at least) to give sounds advices. If accounts are lower than 100k$ each, RBC index funds are just ok, especially if you do regular contributions. If you are young, just forget bonds! 30% Canadian stocks, 40% US and 30% Intl is the way to go. US stocks fits better in RRSP, Intl in TFSA and Canadian in taxable account

RRSP = ~45,000
TFSA = ~20,000
annual income = ~85,000
savings rate = ~65%

What makes you say US for RRSP, Int'l for TFSA and Canadian for taxable?

Thanks for the help :)

Le Barbu

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Re: Need advice re: alloction of RBC Index Funds in RRSP
« Reply #5 on: July 18, 2017, 01:12:13 PM »
Need to know your RRSP and TFSA size, annual income and saving rate (at least) to give sounds advices. If accounts are lower than 100k$ each, RBC index funds are just ok, especially if you do regular contributions. If you are young, just forget bonds! 30% Canadian stocks, 40% US and 30% Intl is the way to go. US stocks fits better in RRSP, Intl in TFSA and Canadian in taxable account

RRSP = ~45,000
TFSA = ~20,000
annual income = ~85,000
savings rate = ~65%

What makes you say US for RRSP, Int'l for TFSA and Canadian for taxable?

Thanks for the help :)

Because of tax treatment, especially if someday you switch to ETFs at RBC Direct investing for the US component. To make it very simple at first, I would throw 100% of the TFSA into rbf559, 20k$ of the RRSP into rbf556 and the remaining 25k$ of RRSP into rbf557.

With your income and saving rate, you should be able to max out RRSP and TFSA every single year and even need to open a taxable account. You could open accounts at RBCDI and ask to transfert now, then buy ETFs with actual money and set regular contributions toward index funds mentioned earlier.

Forget bonds and keep a 3 months living expenses in a HISA unless you have a very safe job and no people at your charge!

RichMoose

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Re: Need advice re: alloction of RBC Index Funds in RRSP
« Reply #6 on: July 18, 2017, 01:38:33 PM »
You should be comfortable with volatility risk if you drop to hardly any bonds. For your portfolio size to savings ratio, zero bonds is definitely doable. But before making that leap, think about what you would do if your hard earned money tanked 50% with seemingly no end in sight. Would you continue buying every month? Would you start getting really worried and shift to bonds? Would you run into your local RBC where they would happily sell you GICs?

With 40% bonds your portfolio will only have a max theoretical drop will be maybe 30%.

Also, MERs do matter. Don't be fooled by good recent performance. Chances are you would have done better with Vanguard or iShares Core series ETFs. That lost money is lining RBC pockets instead of your own.

anotherone

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Re: Need advice re: alloction of RBC Index Funds in RRSP
« Reply #7 on: July 19, 2017, 01:06:35 AM »
Need to know your RRSP and TFSA size, annual income and saving rate (at least) to give sounds advices. If accounts are lower than 100k$ each, RBC index funds are just ok, especially if you do regular contributions. If you are young, just forget bonds! 30% Canadian stocks, 40% US and 30% Intl is the way to go. US stocks fits better in RRSP, Intl in TFSA and Canadian in taxable account

RRSP = ~45,000
TFSA = ~20,000
annual income = ~85,000
savings rate = ~65%

What makes you say US for RRSP, Int'l for TFSA and Canadian for taxable?

Thanks for the help :)

Because of tax treatment, especially if someday you switch to ETFs at RBC Direct investing for the US component. To make it very simple at first, I would throw 100% of the TFSA into rbf559, 20k$ of the RRSP into rbf556 and the remaining 25k$ of RRSP into rbf557.

With your income and saving rate, you should be able to max out RRSP and TFSA every single year and even need to open a taxable account. You could open accounts at RBCDI and ask to transfert now, then buy ETFs with actual money and set regular contributions toward index funds mentioned earlier.

Forget bonds and keep a 3 months living expenses in a HISA unless you have a very safe job and no people at your charge!

Looks sensible to me, thanks so much for the suggestion. Seems like an obvious improvement on my current situation. The plan is to max out RRSP and TFSA first and foremost, then either open a RBCDI or Questrade account and use that for Vanguard.

You should be comfortable with volatility risk if you drop to hardly any bonds. For your portfolio size to savings ratio, zero bonds is definitely doable. But before making that leap, think about what you would do if your hard earned money tanked 50% with seemingly no end in sight. Would you continue buying every month? Would you start getting really worried and shift to bonds? Would you run into your local RBC where they would happily sell you GICs?

With 40% bonds your portfolio will only have a max theoretical drop will be maybe 30%.

Also, MERs do matter. Don't be fooled by good recent performance. Chances are you would have done better with Vanguard or iShares Core series ETFs. That lost money is lining RBC pockets instead of your own.

Yeah I think I'm at a point in my life/career where I'm totally comfortable going without bonds, it's all about growth now. I receive a monthly salary and thus do a single lump-sum investment each month, regardless of the market. GICs are not for me, they're for my grandma. And yes, MERs are the main reason I'm going to make this shift, RBC gets enough money from me already, no need for them to take more!

Le Barbu

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Re: Need advice re: alloction of RBC Index Funds in RRSP
« Reply #8 on: July 19, 2017, 05:18:37 AM »
 I see no advantages to open an account at Questrade. Sure, RBCDI trading fees are 9.95$ but my regular contributions go toward index funds I told you earlier. Than, when I hit 5k$ or so, I make a trade. I manage all of our family accounts (7) and trade 5x/year on average. No need to say I would not deal with another broker for -50$! Convenience HAVE a price, especially in my situation because I use my HELOC to invest in my taxable account. YMCV