Author Topic: Questions about investing ratios  (Read 4443 times)

dess1313

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Questions about investing ratios
« on: June 26, 2015, 05:39:05 PM »
I am a canadian, aged 30, and just starting my path here.  Been reading books such as the bogleheads guide to investing, millionaire teacher, and still working my way through other books too.  got slightly scorched in the past so i had stayed away from investing.

Based on recommendations by Canadian couch potato, i have decided to start with Tangerine, as i do not have any large sums (yet) to start using services like vanguard for.  https://www.tangerine.ca/en/investing/investment-funds/investment-fund/index.html  Is the funds recommended

So these funds for now will be held in TFSA and a little in RRSP which are are tax reducing accounts up here.  It will be a while before i can max out my TFSA.  And i have tons of room in my RRSP.  I keep reading about the main strategy is to pick a % allotment in bonds and stocks and keep to to that ratio, by either diverting new funds or buying/selling to maintain the ratio

Tangerine funds aren't entirely just stock or bonds though.  There is the balanced income 70bond/30stock, the balanced 40b/60s, balanced growth 25b/75s, and the equity growth which is 100% stocks.  I'm pretty conservative. so the equity growth is off my plate entirely.  Just can't do it.

What i was wondering is does it make sense to keep a ratio of 2/3 balanced income and 1/3 balanced growth?  With one being majority stocks, and one being majority bonds, would this be a good substitute for that?  Or is it going to be all too similar and being shared from the same sources so i'm not really going to get any diversification?  or should i just go for the balanced 40b/60s and keep it all in that?  If i knew a majority of my funds are in bonds, i think i can handle the variations in the market without having a panic attack.  So far over time tangerine seems to be doing well but yes past performance is no guarantee.  https://www.google.com/finance?chdnp=1&chfdeh=0&chdet=1435358446787&chddm=534249&cmpto=MUTF_CA:INI210;MUTF_CA:INI220;MUTF_CA:INI230;MUTF_CA:INI240&cmptdms=0;0;0;0&q=MUTF_CA:INI210,MUTF_CA:INI220,MUTF_CA:INI230,MUTF_CA:INI240&&ei=5tSNVaPRGcOrmAGIxYFQ

Doing the age guideline of age 30 and 30% bonds is just too variable for me.  Using the bogleheads guide, the asset allocation compared to exposure to maximum loss table having only 30% bonds means i could face up to 30% loss in a bad market would make me loose a lot of sleep at night.  http://www.bogleheads.org/wiki/Asset_allocation  Getting closer to 40% or 50% bonds would be more in my comfort range

Jeremy E.

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Re: Questions about investing ratios
« Reply #1 on: June 26, 2015, 06:24:56 PM »
I know canada isn't in europe... but parts of this could be helpful to you
http://jlcollinsnh.com/2014/01/27/stocks-part-xxi-investing-with-vanguard-for-europeans/
I like this next post regarding asset allocations, the key is not to sell when the markets are down
http://www.gocurrycracker.com/path-100-equities/

a1smith

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Re: Questions about investing ratios
« Reply #2 on: June 26, 2015, 06:37:50 PM »
At your age my opinion is that you should have a higher % of stocks.  Ultimately, it is your decision.  Maybe once you have been investing for a while you will become comfortable with a higher stock percentage.

To answer your question on mixing balanced income & growth funds to get desired asset allocation:

To get 40% bonds overall you need 1/3 balanced income and 2/3 balanced growth.
To get 50% bonds overall you need 55.6% balanced income and 44.4% balanced growth.

Here is the formula if you want to choose a different % bonds:
% balanced income = (0.45)*(% bonds) - (0.25)
With these two funds you can vary the bond percentage anywhere from 25% to 70%.

Regarding overlap between funds - I am not familiar with these funds so I can't tell you much.

However, the expense ratios on these funds are high - 1.07% management and 0.05% trading for a total fee of 1.12%  Maybe you want to look into Vanguard - Canada ETF's

Edit - The 5 basis point trading expense ratio (TER) is for Tangerine Equity Growth Portfolio.  Balance Income & Balanced Growth are 1 bp.  Balanced is 2bp.  You can see the TER on page 3 of the PDF files under Fund Facts link.  Here is one of them - Tangerine Balanced Portfolio
« Last Edit: June 27, 2015, 06:30:20 PM by a1smith »

Heckler

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Re: Questions about investing ratios
« Reply #3 on: June 26, 2015, 08:11:48 PM »
Your best path forward is to setup regular contributions to a tax exempt account in any of these low fee allocations, and never look at it again.

My guess is you got slightly burned in 2011, and sold your investments as they were heading down in value.

I've contributed to my RRSP since 1996, not looking at it until two years ago when I started to get disgusted with fees my new work plan was charging.  Guess what?  Im a surprise quarter millionaire at 40.   You cant go wrong with a long term vision and a low fee fund that you don't look at, ignoring the ups and downs.

I didn't know there was a stock market crash in 2008 until a year ago.

Heckler

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Re: Questions about investing ratios
« Reply #4 on: June 26, 2015, 08:15:32 PM »
2/3 balanced income and 1/3 balanced growth is pretty much the same as 100% balanced. Its more a question of when do you need to spend your savings?

Heckler

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Re: Questions about investing ratios
« Reply #5 on: June 26, 2015, 08:21:03 PM »
Until you've got 50k saved up, I think your plan for Tangerine is right.  Above that, transfer into Vanguard ETFs.  (See CCP model portfolios)

dess1313

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Re: Questions about investing ratios
« Reply #6 on: June 26, 2015, 09:18:51 PM »
In mid 2011 i used a highly recommended advisor from friends, and invested a small amount and started contributions monthly.  I didn't understand as much then.  I see my mistakes now.  I was off work in 2012 and needed the money and pulled it.  This was only after burning through my emergency fund already.  I was off work for 5 months and i'm on my own so no other partner to help with bills.  The stock he had put me in back then has never recovered well even to this day since about 2011/2012.  Kind of glad i got out when i did.  Only slightly scotched.  Never lost any big amount, but never gained any either.   I know some who lost lots afterwards.

I would love to try vanguard but i have no big stash of money to start with.  I will only be doing small monthly contributions, and from my limited understanding, vanguard has some yearly fees and/or trading fees, so although i'm paying 1.07% at tangerine there is no other fees.  Good for me starting with $0 and putting in lots of little amounts.  Im not contributing as much as i see others on here doing.   I need to buff up my emergency fund so only will be doing $200/month towards these investments till my Emerg fund gets a bit higher, then later $400/month.  Hopefully more in the future.

I have to work for about another 22 years yet to get my work pension without penalties, but hope to in the future cut to part time early.  I need to do 10 years of fairly heavy savings before i can for sure know what i'll be doing full/part time work related, and at age 30 and single, a lot can change too.  I would like to use my RRSP savings to delay having to take my pension right away, but its so far down the road who knows where i will be.

So my goal is to enjoy life a little, cut the unnecessary shit, but start saving a lot more. My house will be paid off in august so that's part of why i have not started yet.  I wanted to snow ball attack that mortgage first.  Its taken about 3 years but i am finally at the end of it.  It was a big stress for me when i was off work.  Unfortunately its time for a new vehicle otherwise i'd have a higher long term savings rate. My 18 year old car is starting to get tired.

Heckler

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Re: Questions about investing ratios
« Reply #7 on: June 27, 2015, 08:54:54 AM »
Time for a new to you vehicle, right?   Don't waste your money on new.  Find a two year old lease return and save the difference!

You are on the right track to build up a bit of a cash buffer first, but once your mortgage is paid its time to direct that money to your long term savings!

thedayisbrave

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Re: Questions about investing ratios
« Reply #8 on: June 27, 2015, 11:55:35 AM »
I would love to try vanguard but i have no big stash of money to start with.  I will only be doing small monthly contributions, and from my limited understanding, vanguard has some yearly fees and/or trading fees, so although i'm paying 1.07% at tangerine there is no other fees.  Good for me starting with $0 and putting in lots of little amounts. 

If you open an account with Vanguard and buy their mutual funds/ETFs, there are no associated fees.  Buying them is commission free.  The funds have expense ratios ranging from 0.05% to around 0.2% at most - that's a heckuva lot better than 1.07%.

They have a $20 fee per account that is waived when you sign up for paperless statements.

lostamonkey

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Re: Questions about investing ratios
« Reply #9 on: June 27, 2015, 02:19:43 PM »
I would love to try vanguard but i have no big stash of money to start with.  I will only be doing small monthly contributions, and from my limited understanding, vanguard has some yearly fees and/or trading fees, so although i'm paying 1.07% at tangerine there is no other fees.  Good for me starting with $0 and putting in lots of little amounts. 

If you open an account with Vanguard and buy their mutual funds/ETFs, there are no associated fees.  Buying them is commission free.  The funds have expense ratios ranging from 0.05% to around 0.2% at most - that's a heckuva lot better than 1.07%.

They have a $20 fee per account that is waived when you sign up for paperless statements.

Canadians cannot buy from Vanguard directly. We can buy Vanguard ETFs with a self directed investment account and incur the costs associated with that.  The expense ratios are a lot lower than 1.07% and most banks offer free self directed TFSAs. Most self-directed RRSPs with a bank cost about $100/year if you have a very small balance. I think cash accounts also cost $100 per year with a bank if you have a very small balance. If you have a moderate balance, most banks waive their annual fees for the RRSPs and cash accounts. You also have to pay trading commissions which varies per bank but the average is probably $10/trade.

dess1313

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Re: Questions about investing ratios
« Reply #10 on: June 27, 2015, 04:56:31 PM »
Time for a new to you vehicle, right?   Don't waste your money on new.  Find a two year old lease return and save the difference!

You are on the right track to build up a bit of a cash buffer first, but once your mortgage is paid its time to direct that money to your long term savings!

The future savings i am talking about above are coming from my soon to be dead mortgage payment.  It was never a high one.  I bought a fixer uper in the middle of the housing crash.  I could have spent 25 years paying it, but i accelerated it a lot.  And did a ton of OT to pay for my renos on it.  Even then it was lower payments than everyone else's mortgage i see. 

I have a neighbor looking for a car for me, he has a wholesale license and can buy at the dealer auctions.  But i am watching the new sales, since the end of year is coming and there are sometimes good sales on.  Ive seen a few 5 and 8k reduced in October and November and December previously and am looking for those sorts of deals if they come about again.  Kinda like buying a year old vehicle.  I'm not in a rush.  Some of my car savings disappeared to make my mortgage go poof sooner so a few extra months will be nice.


I would love to try vanguard but i have no big stash of money to start with.  I will only be doing small monthly contributions, and from my limited understanding, vanguard has some yearly fees and/or trading fees, so although i'm paying 1.07% at tangerine there is no other fees.  Good for me starting with $0 and putting in lots of little amounts. 

If you open an account with Vanguard and buy their mutual funds/ETFs, there are no associated fees.  Buying them is commission free.  The funds have expense ratios ranging from 0.05% to around 0.2% at most - that's a heckuva lot better than 1.07%.

They have a $20 fee per account that is waived when you sign up for paperless statements.

Canadians cannot buy from Vanguard directly. We can buy Vanguard ETFs with a self directed investment account and incur the costs associated with that.  The expense ratios are a lot lower than 1.07% and most banks offer free self directed TFSAs. Most self-directed RRSPs with a bank cost about $100/year if you have a very small balance. I think cash accounts also cost $100 per year with a bank if you have a very small balance. If you have a moderate balance, most banks waive their annual fees for the RRSPs and cash accounts. You also have to pay trading commissions which varies per bank but the average is probably $10/trade.

Thanks lostamonkey.  i knew there was something more involved up here about it.  I hope to get to that point soon, but putting in 200 dollars and paying a $10 fee doesn't make any sense to me right now.  Soon hopefully if i can stay on track, i'll be able to start looking at that.  So in the future would i be able to buy those vanguard EFTS from any bank, or do only some carry them?  So far i'm banking at tangerine, and CIBC.

lostamonkey

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Re: Questions about investing ratios
« Reply #11 on: June 27, 2015, 05:18:53 PM »
I would love to try vanguard but i have no big stash of money to start with.  I will only be doing small monthly contributions, and from my limited understanding, vanguard has some yearly fees and/or trading fees, so although i'm paying 1.07% at tangerine there is no other fees.  Good for me starting with $0 and putting in lots of little amounts. 

If you open an account with Vanguard and buy their mutual funds/ETFs, there are no associated fees.  Buying them is commission free.  The funds have expense ratios ranging from 0.05% to around 0.2% at most - that's a heckuva lot better than 1.07%.

They have a $20 fee per account that is waived when you sign up for paperless statements.

Canadians cannot buy from Vanguard directly. We can buy Vanguard ETFs with a self directed investment account and incur the costs associated with that.  The expense ratios are a lot lower than 1.07% and most banks offer free self directed TFSAs. Most self-directed RRSPs with a bank cost about $100/year if you have a very small balance. I think cash accounts also cost $100 per year with a bank if you have a very small balance. If you have a moderate balance, most banks waive their annual fees for the RRSPs and cash accounts. You also have to pay trading commissions which varies per bank but the average is probably $10/trade.

Thanks lostamonkey.  i knew there was something more involved up here about it.  I hope to get to that point soon, but putting in 200 dollars and paying a $10 fee doesn't make any sense to me right now.  Soon hopefully if i can stay on track, i'll be able to start looking at that.  So in the future would i be able to buy those vanguard EFTS from any bank, or do only some carry them?  So far i'm banking at tangerine, and CIBC.
[/quote]

ETFs are bought and sold on stock market exchanges such as the TSX. You can get a self directed account with any bank (including CIBC) and buy Vanguard ETFs. You would not need to pay the $200 per year. You likely have $41K worth of TFSA room as does your spouse. You can get a self directed TFSA free from most banks. You will still have to pay the $10 trading fee though. The expense ratio on a lot of Vanguard funds is a full 1% lower than your Tangerine funds which means that you will get a 1% higher return every year.
« Last Edit: June 27, 2015, 05:20:37 PM by lostamonkey »

fb132

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Re: Questions about investing ratios
« Reply #12 on: June 27, 2015, 05:44:21 PM »
Until you've got 50k saved up, I think your plan for Tangerine is right.  Above that, transfer into Vanguard ETFs.  (See CCP model portfolios)
Why do you need 50K$, simply open an account with questrade, once your questrade account is approved you can buy the CCP vanguard ETF reccomendations with no fee's whatsoever. That's what I did and I didn't have 50K$ to invest. They only reccomend needing 50K$ only if you invest with your bank's broker which have expensive fees (for example, RBC Investing charges 9.95$ for every equity trade). Going with Tangerine is not a bad option however, but I just wanted to point out that you can still invest in Vanguard ETF's without having 50K$ to invest.
« Last Edit: June 27, 2015, 05:48:24 PM by fb132 »