Author Topic: Should I use a Canadian robo-advisor? If so, which one?  (Read 49258 times)

GreatLaker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #200 on: May 06, 2017, 04:06:18 PM »
Why do you have fixed income in registered accounts?  I would have thought that to take advantage of tax protection it would be best to put fast growing (ie equity) investments in registered accounts.  And pay only a little tax on the slow growing fixed income holdings in taxable accounts. 

Excellent question. The onging debate is whether to tax-shelter investments that have high tax rates or high projected growth rates. Traditional thinking often repeated on financial forums is to shelter investments that have high tax rates, i.e. fixed income, bonds & GICs.

As usual Dan&Justin ran the numbers. They asked the question:
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Do Bonds Still Belong in an RRSP?
It has long been conventional wisdom that bonds should be held in RRSPs wherever possible, since interest income is fully taxable. Once you run out of contribution room, equities can go in a non-registered account, because Canadian dividends and capital gains are taxed more favorably. But is this idea still valid?

And answered:
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Let’s start by admitting the optimal asset location can only be known in retrospect. We can make assumptions about stock returns and bond yields, but these change over the years. The amount of tax you ultimately pay also depends on when you decide to realize capital gains. So it’s not possible to do an analysis that produces a definitive answer. However, Justin and I wanted to use some real historical returns rather than relying on assumptions.

While it would have been preferable to hold bonds in an RRSP during the last decade, we can’t draw any sweeping conclusions from our findings. Bond yields are much lower today than they were in 2003, and the situation might have changed. Going forward, is holding bonds in an RRSP still the right asset location strategy?

Again, no one can know this in advance. But investors need to make a decision, and we believe it still makes sense to follow the conventional wisdom and keep bonds in an RRSP and equities (when necessary) in a taxable account.

And for bonds especially:
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Premium bonds are particularly tax-inefficient. The period we examined would actually have been a relatively good time to hold bonds in a non-registered account. Bond ETFs today are far more likely to hold premium bonds, which are exceptionally tax-inefficient and should generally not be held in non-registered accounts.

You can read the gory details in the blog post and white paper:
http://canadiancouchpotato.com/2014/04/24/do-bonds-still-belong-in-an-rrsp/
https://www.pwlcapital.com/pwl/media/pwl-media/PDF-files/Justin%20Bender%20Assets/2014/PWL_Bender-Bortolotti_Asset-Location-for-Taxable-Investors_v02_hyperlinked.pdf?ext=.pdf

So the answer is a wishy-washy bonds still make sense in an RRSP for many investors but a strong case cannot be made either way and it depends on the individual investor and future investment returns and tax rates.

Also the Canadian dividend tax credit means that the tax rate on dividends is actually negative on taxable income up to $46k in ON, AB, and BC. Once they pay off the mortgage, stop saving for retirement, don't have to pay CPP and EI premiums and get the kids off the payroll, many retirees can easily live on that income level.


Quote
$800 is a new pair of skis, or a new set of mtn bike wheels, every single year. 

$800 bucks for mountain bike wheels?!? Note even a whole bike? How anti-mustachian of you. I should not talk though. I used to have a part time j*b in a ski and bike shop to fund my equipment addictions.


Quote
So I agree with Heckler and will take the Norbert Gambit's plunge. 
I have heard that BMO and RBC are easy for gambitting and TD is hard, so I have not gone there.

In case you get bored or have insomnia there is a 48 page NG thread on FWF:
http://www.financialwisdomforum.org/forum/viewtopic.php?f=29&t=198

And since you must be wondering "Who is Norbert?", here is a link to the website of the man behind the eponymously named gambit: http://www.libra-investments.com/pr02.htm
« Last Edit: May 06, 2017, 04:09:19 PM by GreatLaker »

Heckler

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #201 on: May 06, 2017, 07:25:03 PM »
Quote
$800 bucks for mountain bike wheels?!? Note even a whole bike? How anti-mustachian of you. I should not talk though. I used to have a part time j*b in a ski and bike shop to fund my equipment addictions.




Lol, We ride $5200 carbon mountain bikes that actually make us a few hundred per year.  Ancient Chinese secret! 😸
« Last Edit: May 06, 2017, 08:17:57 PM by Heckler »

FrugalFan

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #202 on: May 06, 2017, 07:48:15 PM »
This is such a great thread for Canadians investing! Blissful Biker, I went through this entire process about 1.5 years ago, including reading Millionaire Teacher, which like you, really did help convince me that investing in index ETF's would be better than using our financial advisor. When I found out our MER's and the fact that all of our funds had delayed sales charges, I was pretty ticked! But I bit the bullet and transferred everything over to Questrade and couldn't be happier. I will say that I love being able to buy even one share at a time from dividend payments without trading fees and would recommend it to everyone. I like to get my money working for us as soon as possible, and I actually enjoy the buying process! It only takes a day or two to transfer funds from my TD account to Questrade, and they will reimburse transfer fees. Seems better than all these workarounds to wait to accumulate funds to reduce trading fees. We've got quite a bit invested in our taxable account but I'm obviously not doing ACB correctly, so I will need to learn more about it.

Le Barbu, I'm a longtime reader of Million Dollar Journey where I first learned about the Smith Manoeuvre and am considering this as we are moving soon and have accumulated substantial equity in our current house. But where does one get a 2.25% HELOC rate? Most of the ones with re-advancable mortgages I see are prime + 0.5%.

Use a HELOC for 200k$ and buy more VCN (1 trade). Take a 5 years variable rate @ 2.25% wich is deductible against your income for a net 1.5% (less than inflation rate). It's called Smith Manœuvre and Million Dollar Journey will tell you the way to do this.


Le Barbu

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #203 on: May 06, 2017, 09:09:27 PM »
This is such a great thread for Canadians investing! Blissful Biker, I went through this entire process about 1.5 years ago, including reading Millionaire Teacher, which like you, really did help convince me that investing in index ETF's would be better than using our financial advisor. When I found out our MER's and the fact that all of our funds had delayed sales charges, I was pretty ticked! But I bit the bullet and transferred everything over to Questrade and couldn't be happier. I will say that I love being able to buy even one share at a time from dividend payments without trading fees and would recommend it to everyone. I like to get my money working for us as soon as possible, and I actually enjoy the buying process! It only takes a day or two to transfer funds from my TD account to Questrade, and they will reimburse transfer fees. Seems better than all these workarounds to wait to accumulate funds to reduce trading fees. We've got quite a bit invested in our taxable account but I'm obviously not doing ACB correctly, so I will need to learn more about it.

Le Barbu, I'm a longtime reader of Million Dollar Journey where I first learned about the Smith Manoeuvre and am considering this as we are moving soon and have accumulated substantial equity in our current house. But where does one get a 2.25% HELOC rate? Most of the ones with re-advancable mortgages I see are prime + 0.5%.

Use a HELOC for 200k$ and buy more VCN (1 trade). Take a 5 years variable rate @ 2.25% wich is deductible against your income for a net 1.5% (less than inflation rate). It's called Smith Manœuvre and Million Dollar Journey will tell you the way to do this.

My re-advancable HELOC is also @ prime + 0.5% now. But, if you pull à substantial ammount, 150k$ in my case, it worth to convert a segment of the HELOC in a reinbursment schedual (mortgage like) then you have acces to the same rates as mortgages and 2.35% is the best variable rate you can get now. I did started my SM Jan'15 and converted in Nov'15 @ 2.05% variable instead of 3.2%

On top of that, I use the remaining room of the HELOC to "capitalise" the interests of the other segment. In fact, the re-advacable part pays for P + I of the amortized one.

Get use to track your acb before going any further with SM! CRA is watching you...
« Last Edit: May 07, 2017, 01:15:09 PM by Le Barbu »

Blissful Biker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #204 on: May 07, 2017, 12:44:04 PM »
I returned from a lovely yoga class this AM to find my kids making pancakes for me.  How great.  They are developing a taste for pop music so we dance around the kitchen and I teach them my fabulous dance moves.   So fun.  And better me than my husband...he has no moves.  :)  So a good start to another great day.

I wasn't the teacher today.  I only teach the weekly Karma class (free with donation to charity) as a volunteer.  I don't want to compete with the lovely young ladies in town who are striving to make a living teaching yoga.  I want them to be wildly successful.  Teaching the Karma class is good for my soul and also allows me to attend the other classes for free which is good for my pocketbook.  Everybody wins.

Interestingly, if you look at Benders portfolios vs CCP portfolios and compare the two, the only real apples for apples comparison is the 60/40 portfolio. The results are mixed, it doesn't give Bender a clear edge. I'm actually a little surprised myself because I only chose XAW.TO for simplicity but I expected a clear edge to a 5 ETF portfolio.

1 Year Return: CCP wins by 0.29%
3 Year Return: CCP wins by 0.12%
5 Year Return: Bender wins by 0.01%
10 Year Return: Bender wins by 0.12%
20 Year Return: CCP wins by 0.11%

MER average is the same at 0.14% for both.
Standard deviation gives the win to CCP.

In a nutshell, your only real gain is with the withholding tax on US index within your RRSP.

Simple and brilliant comparison and conclusion, Mr. Rich Moose.  Le Barbu's comparison of the 2 equity funds vs 8 equity funds supports the same conclusion.  Portfolio simplicity does not sacrifice returns.   This is a welcome piece of news. 

I have been thinking more about Norberts Gambit.  It would require a more complex portfolio and even among the group of experienced investors on this thread who I have learned to trust and respect only half of you use it.  Perhaps it is not for me, yet.  I am leaning towards reverting to the original 3 fund CPP plan.   

Of the 6 registered accounts that we are moving from BMO to IL, the funds have only disappeared from online banking for one of the RRSPs.  None of the funds have shown up yet in IL.  The process is surprisingly slow for being in the digital age.  So I still have a week before I need to firmly commit to a portfolio.

GreatLaker - thanks for your excellent explanation on why it makes normally sense to hold bonds in RRSPs as opposed to taxable accounts.  We do not yet have taxable investments but that day is getting closer and I am stockpiling knowledge.

This is such a great thread for Canadians investing! Blissful Biker, I went through this entire process about 1.5 years ago, including reading Millionaire Teacher, which like you, really did help convince me that investing in index ETF's would be better than using our financial advisor. When I found out our MER's and the fact that all of our funds had delayed sales charges, I was pretty ticked! But I bit the bullet and transferred everything over to Questrade and couldn't be happier. I will say that I love being able to buy even one share at a time from dividend payments without trading fees and would recommend it to everyone. I like to get my money working for us as soon as possible, and I actually enjoy the buying process! It only takes a day or two to transfer funds from my TD account to Questrade, and they will reimburse transfer fees. Seems better than all these workarounds to wait to accumulate funds to reduce trading fees. We've got quite a bit invested in our taxable account but I'm obviously not doing ACB correctly, so I will need to learn more about it.

Le Barbu, I'm a longtime reader of Million Dollar Journey where I first learned about the Smith Manoeuvre and am considering this as we are moving soon and have accumulated substantial equity in our current house. But where does one get a 2.25% HELOC rate? Most of the ones with re-advancable mortgages I see are prime + 0.5%.

Use a HELOC for 200k$ and buy more VCN (1 trade). Take a 5 years variable rate @ 2.25% wich is deductible against your income for a net 1.5% (less than inflation rate). It's called Smith Manœuvre and Million Dollar Journey will tell you the way to do this.

Welcome Travelling Biologist!  I just searched the library catalogue for a Million Dollar Journey book and came up dry.  A google search led me to http://www.milliondollarjourney.com.  Are you and Le Barbu referring to the website, or is there a book?  Looks like good material on the website.

Quote
$800 bucks for mountain bike wheels?!? Not even a whole bike? How anti-mustachian of you. I should not talk though. I used to have a part time j*b in a ski and bike shop to fund my equipment addictions.
Lol, We ride $5200 carbon mountain bikes that actually make us a few hundred per year.  Ancient Chinese secret! 😸

I need this ancient Chinese secret!  We were fortunate to have nearly a decade of free bikes each spring from the team sponsors.  Even when I dropped out of the race scene to have babies I still got screaming deals through my husbands sponsors.  My favorite mtn bike is worth $8K and we paid $2K.  It is such a sweet ride.  In the current pairing of me and my bike, I am by far the limiting factor, for which I obviously blame my kids.  :)    We take really good care of the bikes to make sure they last a long time.  Our racing (and free bikes) days are behind us but we will forever love good quality bikes.  Disclaimer - bike racing is certainly not the direct path to financial freedom but it was an enjoyable detour.

This week I need to develop a plan for the $120K in RESPs.  IL confirmed that they obtain the government grant on our behalf and I have submitted the paper work to transfer the funds to IL.   Withdrawals could start in 5.5 years and last for 5 or 6 years.  Perhaps the Balanced or Cautious CPP portfolio:http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-ETFs-2016.pdf.   Any advice or opinions? 

Thanks again. 

GreatLaker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #205 on: May 07, 2017, 06:53:21 PM »
Lol, We ride $5200 carbon mountain bikes that actually make us a few hundred per year.  Ancient Chinese secret! 😸

I need this ancient Chinese secret!  We were fortunate to have nearly a decade of free bikes each spring from the team sponsors.  Even when I dropped out of the race scene to have babies I still got screaming deals through my husbands sponsors.  My favorite mtn bike is worth $8K and we paid $2K.  It is such a sweet ride.  In the current pairing of me and my bike, I am by far the limiting factor, for which I obviously blame my kids.  :)    We take really good care of the bikes to make sure they last a long time.  Our racing (and free bikes) days are behind us but we will forever love good quality bikes.  Disclaimer - bike racing is certainly not the direct path to financial freedom but it was an enjoyable detour.

If you don't mind saying, what type of bikes do you ride?

I have a Fat Chance mountain bike. It was a sweet ride in its time but I doubt any young'uns here ever heard of it.
(Steel is Real)


This week I need to develop a plan for the $120K in RESPs.  IL confirmed that they obtain the government grant on our behalf and I have submitted the paper work to transfer the funds to IL.   Withdrawals could start in 5.5 years and last for 5 or 6 years.  Perhaps the Balanced or Cautious CPP portfolio:http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-ETFs-2016.pdf.   Any advice or opinions? 

Do you really want money you need for the kid's education in stocks, or even long-term bonds? Here is a chart of VAB over the past 5 years.


Le Barbu

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #206 on: May 07, 2017, 07:53:25 PM »
All of the RESP, 105k$ now, is in a Canadian stock index funds. If it was invested in a balanced funds or a target date funds, it would worth no more than 80k$. Plan to pull out this money in 4 years from now but will probably not "need" it. So much good school options for cheap around here! Honestly, we contributed to get the grants and shelter the stash from taxes. My biggest concern is not volatility but being able to draw everything without penalty. I think that up to 20k$/year there is no problems. I may recommend my kids to open a TFSA and begin to top it full every single year!

Blissful Biker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #207 on: May 07, 2017, 09:42:38 PM »
Lol, We ride $5200 carbon mountain bikes that actually make us a few hundred per year.  Ancient Chinese secret! 😸

I need this ancient Chinese secret!

If you don't mind saying, what type of bikes do you ride?

I have a Fat Chance mountain bike. It was a sweet ride in its time but I doubt any young'uns here ever heard of it.
(Steel is Real)

Most of our bikes are from the Specialized S-Works series.  My beautiful mtn bike is a Safire.  It is my all time favourite bike but Specialized doesn't make them anymore.  Which is all the more reason to make sure she lasts forever.   I attached a photo.  How do you imbed an image?  My kids ride hand me down S-Works Stumpjumpers and really have no idea how lucky they are.  I don't think the dog fully appreciates his awesome lifestyle either.   But I do, I appreciate it enough for all of us.

A Fat Chance bike - very indy, you hipster.  Been getting some spring riding in? 


I see GreatLaker and Le Barbu have polar opposite opinions on the RESP asset allocation.  Which on the surface may not seem helpful but I really like seeing you guys disagree.  I am learning there are no hard and fast rules that I need to memorize.  Just understand your objectives and risks and use good judgement. 

Blissful Biker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #208 on: May 07, 2017, 10:06:13 PM »
All of the RESP, 105k$ now, is in a Canadian stock index funds. If it was invested in a balanced funds or a target date funds, it would worth no more than 80k$. Plan to pull out this money in 4 years from now but will probably not "need" it. So much good school options for cheap around here! Honestly, we contributed to get the grants and shelter the stash from taxes. My biggest concern is not volatility but being able to draw everything without penalty. I think that up to 20k$/year there is no problems. I may recommend my kids to open a TFSA and begin to top it full every single year!

Does the Quebec provincial government contribute more to post secondary education than the other provinces?  Will your kids live at home?  I figure we need $160K to cover $20K/year for 2 kids for 4 years each.  I'll encourage them to expand beyond a 1st degree, but that would be on their own dime.  I like the TFSA idea.  I just looked it up and see they are eligible to start contributing at age 18.  I too am going to encourage my kids to top it up every year. 

100% stocks feels too risky for the time frame.  I think I'll dial that down a bit.  GreatLaker seems to recommend GICs or equivalent.  That feels too conservative.  I need to find a balance in there somewhere.

Heckler

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #209 on: May 07, 2017, 10:07:09 PM »
That VAB price chart is misleading.  Look up total return to include interest payments and get the real picture.


http://canadiancouchpotato.com/2017/04/26/bond-basics-2-why-your-etf-isnt-losing-money/



Heckler

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #210 on: May 07, 2017, 10:08:39 PM »
« Last Edit: May 07, 2017, 10:14:14 PM by Heckler »

Heckler

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #211 on: May 07, 2017, 10:21:16 PM »
Quote
steel is real

And Ti is fly.   Titus Fireline Titanium 29er hardtail is my long term ride. 

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #212 on: May 08, 2017, 05:36:31 AM »
So much good information here!  I'm just starting out but it's great to see Canadian specific details.  I just started with the CCC recommended Tangerine funds till I have enough and feel comfortable starting questrade.  Thanks everyone!

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #213 on: May 08, 2017, 07:39:18 AM »
The robbers stole my Brodie and my kid's Specialized. I continue to feel strongly that police should prioritize not according to value of item stolen -ignoring the bikes in favour of the ATVs and boats- but according to proportion of family's net worth. Bike theft is a harder blow on some of us, and we won't be buying shiny again until we have a very different life.

I do RESPs with the same reasoning as Le Barbu. I don't plan for kid to use them as RESPs, but to roll them into whatever other useful option (e.g., RDSP if that's an option). The govt matches were great. If he chooses post-secondary, we'll pursue grants.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #214 on: May 08, 2017, 07:43:48 AM »
All of the RESP, 105k$ now, is in a Canadian stock index funds. If it was invested in a balanced funds or a target date funds, it would worth no more than 80k$. Plan to pull out this money in 4 years from now but will probably not "need" it. So much good school options for cheap around here! Honestly, we contributed to get the grants and shelter the stash from taxes. My biggest concern is not volatility but being able to draw everything without penalty. I think that up to 20k$/year there is no problems. I may recommend my kids to open a TFSA and begin to top it full every single year!

Does the Quebec provincial government contribute more to post secondary education than the other provinces?  Will your kids live at home?  I figure we need $160K to cover $20K/year for 2 kids for 4 years each.  I'll encourage them to expand beyond a 1st degree, but that would be on their own dime.  I like the TFSA idea.  I just looked it up and see they are eligible to start contributing at age 18.  I too am going to encourage my kids to top it up every year. 

100% stocks feels too risky for the time frame.  I think I'll dial that down a bit.  GreatLaker seems to recommend GICs or equivalent.  That feels too conservative.  I need to find a balance in there somewhere.

Quebec have dirt cheap education costs. If kids decide to stay home while studying, real aditional fees will be <5k$/year (conservative). We have a lot of options close to home, public transit is accessible and easy, especially for schools. It's been 12 years our living cost didnt change, first it was kindergarden, then hockey, next will be post-secondary school. At the end, its a wash, so be it!

The difference between me and GreatLaker, I consider myself as an investor vs lender. Investor own producing assets (i.e. stocks) and lenders own debts (i.e. bonds). Asside that, both options are valid, depends who you are!

I went through majors downturns and know my confidence level, so dont worry for me!

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #215 on: May 08, 2017, 10:31:53 AM »
BlissfulBiker, in your position I would go with a 60/40 portfolio of XAW and VSB. It's super easy to manage and diversified. If you kids start uni during a bad stock market year pull their income from VSB. If they start in good markets pull from XAW. You pretty much can't go wrong.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #216 on: May 08, 2017, 11:33:19 AM »
BlissfulBiker, in your position I would go with a 60/40 portfolio of XAW and VSB. It's super easy to manage and diversified. If you kids start uni during a bad stock market year pull their income from VSB. If they start in good markets pull from XAW. You pretty much can't go wrong.

+1 for VSB

If I decide to own bonds someday, I prefer short bonds, they brings what you need, stability!

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #217 on: May 08, 2017, 07:43:49 PM »
First off I wont hold it against you for riding Specialized....they are a rare breed on Vancouver Island
We are a world of Giant Trek Pivot Yeti DeVinci Kona and Knolly :)

I am happy that you appreciate the simplicity of a minimal portfolio
I couldn't be happier with VAB VCN and VXC (we have US and INT when it can all be in one)
Dan now changed from VXC to XAW though recently for his model ETF portfolios at CCP


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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #218 on: May 08, 2017, 07:56:34 PM »
We used to scrape the I and Z off our Specialized helmets so it said "SPECIAL ED". I imagine your sponsor would not have liked that.


BlissfulBiker, in your position I would go with a 60/40 portfolio of XAW and VSB. It's super easy to manage and diversified. If you kids start uni during a bad stock market year pull their income from VSB. If they start in good markets pull from XAW. You pretty much can't go wrong.

^^^This. It's not about risk tolerance or investing vs. lending. Nothing wrong with risky assets in a RESP while in savings mode. But when you start spending and you need to withdraw 20% of a portfolio each year to fund education, return of capital is more important than return on capital. So as the withdrawal phase approaches, consider de-risking the portfolio.

XAW+VSB is a good choice, or similar with iShares short term bond fund XSQ. The duration of VAB is much longer than a university education; it could be adversely affected by a quick spike in interest rates.

Or if you want greater certainty of returns combine a 5-year GIC ladder with a short term bond ETF. The ETF gives flexibility with part of the funds, while the GIC ladder ensures specific funds become available each year, while also getting the best 5-year rates. That's what I would do. If interested check with BMO to see if they allow purchase of GICs in RESPs.
http://www.finiki.org/wiki/Fixed_income_ladder

For a real world example, consider an equity investor with 100% in the S&P500, funding kids education over 5 years. Starting with US$100k at the beginning of 2008, the market dropped 40% that year. So when you need to make your first withdrawal, you have $60k left, then you make your withdrawal and you only have $40k left. The market recovered 24% in 2009 (but it takes a 66% increase to recover a 40% decline), so you have $50k, then withdraw that year's $20k and you are down to $30k with 3 years left. Or similarly, the S&P500 dropped 9% in 2000, 12% in 2001, and 22% in 2002. So after your withdrawal for the 3rd year you only have $13k left. Then it went up 25% in 2003, leaving $16k for the last 2 years. Both examples would have run out of money before 5 years. Those are real world numbers from 2 crashes within a decade.

Then you have to try and smile at the kids across the dinner table as they excitedly tell you about their plans for the upcoming school year. Markets can crash faster than me on a steep muddy hill. And they take longer to recover. When you need money, return of investment is more important than return on investment.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #219 on: May 08, 2017, 08:25:59 PM »
Now, what if I do not need the RESP money to fund your kids education? My sons are already aware that their grand-parents retirement money have shrinked by inflation because they owned GICs for safety purposes...

The key is, as usual, minimise expenses, invest as much as possible, pay low fees & taxes, gets all the grants available, stay liquid & solvent, keep calm. This is the way I manage my money for the last 20 years and I have no regrets.

GreatLaker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #220 on: May 08, 2017, 08:51:18 PM »
Now, what if I do not need the RESP money to fund your kids education? My sons are already aware that their grand-parents retirement money have shrinked by inflation because they owned GICs for safety purposes...

My comments were directed at Blissful Biker who does plan to start using the money within 5 or so years. You are not in the same position and have your plan already in place. 2 or 3 % inflation won't do much damage to a GIC portfolio over 5 years. On the other hand spending down an RESP over 5 years means 20% annual withdrawals. Selling that much in a bear market is really corrosive to a portfolio.

Horses for courses. :)

Blissful Biker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #221 on: May 08, 2017, 10:05:49 PM »
VSB might be your RESP answer

https://www.vanguardcanada.ca/individual/mvc/loadImage?country=can&docId=249

Find total return here: 

https://www.vanguardcanada.ca/advisors/mvc/detail/etf/overview?portId=9553##performance

Plan to hold bonds fir longer than thier duration.

Thanks.  Please tell me more.  Why plan to hold bonds for longer than their duration?  I assume this is why you are recommending VSB (Vanguard Short-Term Bond ETF) as opposed to VAB or ZAG (Aggreate Bond ETFs) that are used in the couch potato portfolios.

BlissfulBiker, in your position I would go with a 60/40 portfolio of XAW and VSB. It's super easy to manage and diversified. If you kids start uni during a bad stock market year pull their income from VSB. If they start in good markets pull from XAW. You pretty much can't go wrong.

I like this.  It sounds simple, less risky than 100% equities, but still provides an opportunity for the portfolio to grow.  I might take it to 50/50 as opposed to 60/40.    GreatLaker has earned his financial stripes and caution the hard way and I agree it is time to start being more conservative.  I notice there are no Canadian equities in a XAW / VSB split.  I assume this is for simplicity.

Historically I have been very aggressive with the RESP, investing it in "aggressive growth funds" and it has paid off.  At our meeting our ex-BMO advisor gave me the figures on what the cumulative RESP contributions have been so I can take over tracking.  In 13 years we have contributed $60K and the other $60K has come from earnings.  I was impressed.  And that means we still have $40K of contribution room before we hit the $100K max ($50K / child lifetime limit).

In a couple of years, I could dial down the risk again and look at GIC ladders.  Thanks for the article on ladders GreatLaker.

We used to scrape the I and Z off our Specialized helmets so it said "SPECIAL ED". I imagine your sponsor would not have liked that.

XAW+VSB is a good choice, or similar with iShares short term bond fund XSQ. The duration of VAB is much longer than a university education; it could be adversely affected by a quick spike in interest rates.

Markets can crash faster than me on a steep muddy hill. And they take longer to recover. When you need money, return of investment is more important than return on investment.
 
Really, how can I take advice from someone with a SPECIAL ED helmet?  ;)

First off I wont hold it against you for riding Specialized....they are a rare breed on Vancouver Island
We are a world of Giant Trek Pivot Yeti DeVinci Kona and Knolly :)

I am happy that you appreciate the simplicity of a minimal portfolio
I couldn't be happier with VAB VCN and VXC (we have US and INT when it can all be in one)
Dan now changed from VXC to XAW though recently for his model ETF portfolios at CCP

Thanks Stasher.  Glad to hear you weigh in on the side of simplicity.   I truly love my Saphire, but at some point our fleet of Specialized bikes will wear out and I'll likely get a Yeti Beti.  I am hoping that is many years and many happy rides away.

So much good information here!  I'm just starting out but it's great to see Canadian specific details.  I just started with the CCC recommended Tangerine funds till I have enough and feel comfortable starting questrade.  Thanks everyone!

Welcome.  I am glad you can also benefit from the terrific advice I am getting.  Feel free to chime in with questions.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #222 on: May 08, 2017, 11:25:17 PM »
Dan explains it much better than I.  I'm just passing on his knowledge.

http://canadiancouchpotato.com/2011/07/07/holding-your-bond-fund-for-the-duration/

VAB - 10 year duration in my RSP for long term
VSB - 3 year duration as a $21k big emergency fund in my easily (no taxes or fees) accessible TFSA. 
« Last Edit: May 08, 2017, 11:28:42 PM by Heckler »

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #223 on: May 09, 2017, 04:56:26 AM »
Now, what if I do not need the RESP money to fund your kids education? My sons are already aware that their grand-parents retirement money have shrinked by inflation because they owned GICs for safety purposes...

My comments were directed at Blissful Biker who does plan to start using the money within 5 or so years. You are not in the same position and have your plan already in place. 2 or 3 % inflation won't do much damage to a GIC portfolio over 5 years. On the other hand spending down an RESP over 5 years means 20% annual withdrawals. Selling that much in a bear market is really corrosive to a portfolio.

Horses for courses. :)

Well said GreatLaker, I imagine it's just to hard for me to think about a mustachian in the early 40´s, 1.5M$ NW wich more than 1M$ is invested, now debt and still planning to work for 5-7 years to be so conservative. I would agree for a normal person but still struggle for one of MMM comunity...

GreatLaker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #224 on: May 09, 2017, 07:36:32 AM »
Well said GreatLaker, I imagine it's just to hard for me to think about a mustachian in the early 40´s, 1.5M$ NW wich more than 1M$ is invested, now debt and still planning to work for 5-7 years to be so conservative. I would agree for a normal person but still struggle for one of MMM comunity...
Good points... The way I look at it, investors with mandatory spending like education or home down payment should ask 2 questions:
1) How would another market crash like 2000 or 2008 affect my ability to meet my near term spending needs?
2) How would my ability to meet my immediate goals be affected by keeping that money in less risky assets?
1 could be huge, 2 probably not so much.

Edit: revised #2 for better clarity.
« Last Edit: May 09, 2017, 07:46:21 AM by GreatLaker »

Le Barbu

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #225 on: May 09, 2017, 08:20:39 AM »
Well said GreatLaker, I imagine it's just to hard for me to think about a mustachian in the early 40´s, 1.5M$ NW wich more than 1M$ is invested, now debt and still planning to work for 5-7 years to be so conservative. I would agree for a normal person but still struggle for one of MMM comunity...
Good points... The way I look at it, investors with mandatory spending like education or home down payment should ask 2 questions:
1) How would another market crash like 2000 or 2008 affect my ability to meet my near term spending needs?
2) How would my ability to meet my immediate goals be affected by keeping that money in less risky assets?
1 could be huge, 2 probably not so much.

Edit: revised #2 for better clarity.

In my own situation, wich could differ from others as OP, I would react differently if a crash happen at the same time than mandatory expenses. As for the schooling fees, our now mid-class incomes would be a perfect situation for pulling big student loans, they could be repaid when RESP recover 5-10 years latter. One friends of mine, wich did not need their student loan money, just invested for all the years the loans were no interest, his parents told him how to manage money. This guy was millionnaire at 30y.o. but not being very mustachian, he probably need 5-10M$ to fund his lifestyle...

Last year, I quit a high income job mid-summer. Our youngest son just started a tooth job wich cost few thousands. The plan was to pay once a month for 2 years, no fees. In december, I decided to pay the entire bill to get the max refund for medical expenses when filling our income taxes 3 months later. Our 2016 lower income was an opportunity to get more!

This is why I usualy keep +/-10k$ cash in HISA, 30k$ CC, 50k$ LOC and 25k$ HELOC available anytime, wich is enough of a buffer for my nerves and needs.

That said, your advices are exactly what a good financial advisor would give, minus fees!

Saskatchewstachian

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #226 on: May 09, 2017, 10:26:37 AM »
Wow great information in this thread. Thanks Le Barbu, GreatLaker and Heckler for all of the information and good job Blissful Biker on the conversion to self directed!

Following the thread for even more words of wisdom from the group!

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #227 on: May 09, 2017, 11:00:24 AM »
Saskatchewstachian: Love the avatar!!

Saskatchewstachian

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #228 on: May 09, 2017, 11:26:30 AM »
Thanks, figured it was fitting for a hunter from the prairies. I've also commented over at your blog before but I don't think it had any sort of avatar on my post there.

Blissful Biker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #229 on: May 09, 2017, 07:38:59 PM »
Dan explains it much better than I.  I'm just passing on his knowledge.

http://canadiancouchpotato.com/2011/07/07/holding-your-bond-fund-for-the-duration/

VAB - 10 year duration in my RSP for long term
VSB - 3 year duration as a $21k big emergency fund in my easily (no taxes or fees) accessible TFSA.

Ahh.  Great article.  Thanks. I am trying to work my way through the CCP website but I still have a ways to go.  I burned through the podcasts quickly.  Sitting at a computer is not as enjoyable as being out in the woods with the dog and a podcast. :)  But the reading is interesting.  I am loving learning and the articles are well written.

The article referenced differentiates between bond maturity and duration.  On the VSB fact sheet https://www.vanguardcanada.ca/advisors/mvc/detail/etf/overview?portId=9553##overview, it shows a average maturity of 3.0 years and an average duration of 2.8 years.  Maturity is easy enough to understand as the weighted average term to maturity.  So VBS is comprised essentially of 3 year bonds. 

Duration is a tougher concept.  The article describes it as a measure of sensitivity to interest rate swings.  If I understand Dan, if the interest rates increased one percent. a bond fund with a duration of 2.8 could drop 2.8% in value in a year.    By that logic, it would seem a smaller duration is always better.  Agreed?

The debate between Le Barbu and GreatLaker has made me consider what the consequences would be if the RESPs lost value.  I work part time a bit longer, which would not be terrible, or the boys pick up some student loans, which again would not be terrible.  I paid my own way through engineering school and it made me frugal, resilient and independent.  So with statistics in my favour, being that the odds of market increases exceeding market losses, I am willing to take some market risk in the RESPs. A split between VSB and XAW sounds like a good plan.

Saskatchwestachian - Welcome!

Jooniflorisplo - Sorry to hear about your bikes being stolen.  That is crummy. 

I put the $6K tax return in my husbands TFSA and have tried twice to buy XAW with it with out success.  I am able to successfully create orders but they are not filled and then expire at the end of the day.  The Justin Bender InvestorLine EFT video https://www.pwlcapital.com/en/Advisor/Toronto/Toronto-Team/Blog/Justin-Bender/October-2016/How-to-Build-an-ETF-Portfolio-at-BMO-InvestorLine explained that you should select a maximum price that you will pay that is just a few cents over the ask price and have the offer good only for the day.

Using todays XAW numbers, IL shows a Bid price of $24.40 and an Ask price of $24.47.  I am not quite sure what the difference between those two numbers are, but I figured I should set my limit above the highest one so I set it at $24.49.  No luck.  The order still hasn't been processed and will shortly expire.  Drat.  What do you think?  Raise my offer?  Is that why it is not being filled?

No more movement on the bulk of the funds.  The funds are still showing in BMO online banking except for one RRSP.  Nothing has shown up yet in IL.  Continuing to wait and learn.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #230 on: May 09, 2017, 08:13:48 PM »
Quote from: Blissful Biker
The article referenced differentiates between bond maturity and duration.  On the VSB fact sheet https://www.vanguardcanada.ca/advisors/mvc/detail/etf/overview?portId=9553##overview, it shows a average maturity of 3.0 years and an average duration of 2.8 years.  Maturity is easy enough to understand as the weighted average term to maturity.  So VBS is comprised essentially of 3 year bonds.

Duration is a tougher concept.  The article describes it as a measure of sensitivity to interest rate swings.  If I understand Dan, if the interest rates increased one percent. a bond fund with a duration of 2.8 could drop 2.8% in value in a year.    By that logic, it would seem a smaller duration is always better.  Agreed?

VSB holds bonds with a 1 to 5 year duration, so 3 is the average.

Short duration bonds are better for maximum negative correlation to stocks and in rising interest rate environments. However, because they are safer their yield is also lower which translates to lower returns over long time frames and in falling interest rate environments when comparing to longer term bonds.

I personally feel VSB is good for your RESP situation because the drawdowns on RESPs are so huge during fulltime education.

Quote from: Blissful Biker
Using todays XAW numbers, IL shows a Bid price of $24.40 and an Ask price of $24.47.  I am not quite sure what the difference between those two numbers are, but I figured I should set my limit above the highest one so I set it at $24.49.  No luck.  The order still hasn't been processed and will shortly expire.  Drat.  What do you think?  Raise my offer?  Is that why it is not being filled?

Strange! It should have filled without a problem because XAW closed the day $24.42 which is well under your bid and there was decent volume. I would call IL to find out whats going on because that shouldnt have happened. And don't take "raise your bid" as an answer!

Le Barbu

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #231 on: May 09, 2017, 08:23:08 PM »
Strange, XAW spent most of the trading hours below 24.49$ today...

GreatLaker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #232 on: May 09, 2017, 09:30:55 PM »
Quote
By that logic, it would seem a smaller duration is always better.  Agreed?

If only it were that easy. Longer GICs have higher returns than shorter ones, as a reward for locking up your money. Similar with bonds, longer maturity bonds have higher yields (for bonds with the same risk level and credit quality), but they are more volatile. Look at the price chart of XBB (aggregate bond) vs XSB (short term bonds). I used these instead of VAB/VSB because they have more history.
https://www.blackrock.com/ca/individual/en/products/239493/
https://www.blackrock.com/ca/individual/en/products/239491/
Click on the small chart on those links and a bigger chart will open up.

So if you want stability, go short term, if you want better returns, go long term. That's why the article says hold your bonds for the duration. If you hold them long enough, the interest payments will offset any price drop caused by a rise in interest rates. That's why VAB is recommended for long-term portfolios.

Maturity is just how long until a bond matures and repays its principal. Duration is a more obtuse concept. Duration is a measure of how long it takes to get back the price of a bond, considering the present value of its interest payments and the principal. So it is shorter than the maturity. And the higher the interest rate, the shorter the duration. A 5 year bond with a 10% annual interest payment will have a shorter duration than a 5 year bond with a 2% annual interest payment. Higher interest payments mean you get your money back faster. But that's not too critical for investing. Just know that higher duration = more volatility but also higher return for the same credit quality.

Strange that your order did not fill. Consider bid/ask like buying a house. If you offer (bid) what the seller is asking they should take your offer. So buyers were willing to pay $24.40, but sellers wanted $24.47. A buy order at or above ask should fill. A sell order at or below bid should fill. But say the ask is $24.47 and you put in a buy order at $24.50, your order should still fill at $24.47 assuming there are enough shares offered to fill it.

You can go to TMXMoney to see the last 25 orders and prices with a slight delay. You might even see your own order after it fills (with seller as BMO).
https://web.tmxmoney.com/quote.php?qm_symbol=XAW
Maybe there was some weirdness at BMO or with your order.

OK, finance class is over. Who wants to go for drinks after class?

Goldielocks

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #233 on: May 10, 2017, 02:50:39 PM »
All of the RESP, 105k$ now, is in a Canadian stock index funds. If it was invested in a balanced funds or a target date funds, it would worth no more than 80k$. Plan to pull out this money in 4 years from now but will probably not "need" it. So much good school options for cheap around here! Honestly, we contributed to get the grants and shelter the stash from taxes. My biggest concern is not volatility but being able to draw everything without penalty. I think that up to 20k$/year there is no problems. I may recommend my kids to open a TFSA and begin to top it full every single year!

Does the Quebec provincial government contribute more to post secondary education than the other provinces?  Will your kids live at home?  I figure we need $160K to cover $20K/year for 2 kids for 4 years each.  I'll encourage them to expand beyond a 1st degree, but that would be on their own dime.  I like the TFSA idea.  I just looked it up and see they are eligible to start contributing at age 18.  I too am going to encourage my kids to top it up every year. 

100% stocks feels too risky for the time frame.  I think I'll dial that down a bit.  GreatLaker seems to recommend GICs or equivalent.  That feels too conservative.  I need to find a balance in there somewhere.

Blissful Biker -- For the amount needed for post secondary, $16k-$19k/yr per kid in BC is what is needed today, for a live in residence top school.

But, then you subtract your tax credits, the kids' own contributions, scholarships (if any), and the fact that you personally don't cut your kids off at age 19.  (e.g., you will have money to give during the ages 19-22 and don't need all of it in advance).

Quebec  - not sure the limits, but Federal RESPs are 20% top up, up to $7200 max per kid.   30% or 40% are for lower income families too, plus free money if you qualify for national child supplement.   (income tested).  Many provinces have $500 or more extra money for RESP's too, so check yours.

Why to have fixed income in registered funds?
First.  Decide  IF you want to have fixed income in your asset mix.   
THEN, If the answer is "yes", you choose where to put it.:
     RRSPs are the best place because of tax deferred growth.  But if it grows exceptionally large, you pay more taxes when you withdraw it.
     Keep TFSA's for your fast growing options, as it is not only tax deferred, but no tax on the growth at all.   See the difference?   
    If you had it in a non-registered account, you would pay the most tax, every year, no tax benefits.  This is only a good choice if you are in a very low/ no tax bracket, otherwise RRSP is best place for any fixed income that you choose to have.

Goldielocks

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #234 on: May 10, 2017, 02:54:59 PM »
Well said GreatLaker, I imagine it's just to hard for me to think about a mustachian in the early 40´s, 1.5M$ NW wich more than 1M$ is invested, now debt and still planning to work for 5-7 years to be so conservative. I would agree for a normal person but still struggle for one of MMM comunity...
Good points... The way I look at it, investors with mandatory spending like education or home down payment should ask 2 questions:
1) How would another market crash like 2000 or 2008 affect my ability to meet my near term spending needs?
2) How would my ability to meet my immediate goals be affected by keeping that money in less risky assets?
1 could be huge, 2 probably not so much.

Edit: revised #2 for better clarity.

Nice answer!

After having burned myself financially previously, by keeping my short term money in equities then having to sell when it was down (20% or more), I have learned my lesson, and i begin to lock in my money to a fixed or cash basis within 4 years of needing it.  (gradually sell when there is an uptick in the market).

Blissful Biker

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #235 on: May 10, 2017, 04:50:15 PM »
Mystery solved.  I called IL today to ask why yesterday's order didn't fill.  He looked it up and we talked through it.  I made the order mid afternoon yesterday which seems like a perfectly civilized time to be making trades.  But apparently not.  It turns out that markets close at 1PM PST so when I set the duration of the buy request to one day, that day was today and the order was filled this AM at $24.41.  So all is well and I am a little smarter.

Some good news, the funds from one of the RRSPs made it over to IL, so I now have an account balance of $380K.  When I called IL about yesterday's failed trade I put my account number in the automated answering service and then a live human picked up after two rings.  A bright, knowledgable human with an excellent command of the English language.  A coincidence?     When the whole $1.1M makes it across I wonder what will happen, a pick up in half a ring by the VP?  :)

So tomorrow when the market opens (which happens to be 6:30AM PST) I will be able to make my first big dollar purchases of ETFs.  Very exciting!

Blissful Biker -- For the amount needed for post secondary, $16k-$19k/yr per kid in BC is what is needed today, for a live in residence top school.

But, then you subtract your tax credits, the kids' own contributions, scholarships (if any), and the fact that you personally don't cut your kids off at age 19.  (e.g., you will have money to give during the ages 19-22 and don't need all of it in advance).

Why to have fixed income in registered funds?
First.  Decide  IF you want to have fixed income in your asset mix.   
THEN, If the answer is "yes", you choose where to put it.:
     RRSPs are the best place because of tax deferred growth.  But if it grows exceptionally large, you pay more taxes when you withdraw it.
     Keep TFSA's for your fast growing options, as it is not only tax deferred, but no tax on the growth at all.   See the difference?   
    If you had it in a non-registered account, you would pay the most tax, every year, no tax benefits.  This is only a good choice if you are in a very low/ no tax bracket, otherwise RRSP is best place for any fixed income that you choose to have.

Thanks.  My neighbour tracks the costs of his kids at UBC and it came out to $19K/kid/year so I rounded to $20K and that was the extent of my research.  Glad to hear it is conservative.  You mention that the number can be reduced by tax credits.  How does that work?  With costs being covered by RESP funds withdrawn and taxed in the kids names, why would I receive tax credits? 

As for the fixed income, agreed, I am going to put bonds primarily in my RRSP as it is larger than my husbands RRSP + spousal RRSP and I am trying to even them out.  So I'll let his grow quicker by loading with equities.

OK, finance class is over. Who wants to go for drinks after class?

I am in!  Thanks for another great lesson.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #236 on: May 10, 2017, 11:19:53 PM »
Holy fuck, 20k a year per kid???  That's nuts. Im pretty sure I went to UWO living at home for 4k.


Oh yeah, BB - plan your orders and make them at 7-8 AM PST and I like to make them valid for a week, not a day and also at ask price, not below.  BMO will charge two commissions if an order is partially filled one day, then totally filled the next day, and also partially fill an order and close it if you ask for one day of validity.


I would be patient and buy one ETF per day - get it right.

Saskatchewstachian

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #237 on: May 11, 2017, 07:32:51 AM »
Holy fuck, 20k a year per kid???  That's nuts. Im pretty sure I went to UWO living at home for 4k.


Just wanted to chime in on the 20k/yr figure as I am only a couple years out of uni and have been tracking every cent spent since about 2012.

                                Tuition      Rent        Food+ Spending
Year 1                        $5,332   $4,800   $18,000
Year 2                        $3,946   $4,800   $18,000
Year 3                        $6,900   $4,800   $18,000
Internship                  $7,124   $4,800   $18,000
Year 4                         $5,901   $4,800   $18,000
Total =                     $29,203   $24000     $90,000    = $143,203

That tuition is for an engineering degree heavy on labs and therefore increased tuition costs. It also has more credit units and classes overall than a standard Art's degree.

These costs are for living off campus, sharing a condo with 2 other people and includes spending on gas, booze, food, clothing, textbooks, etc.

The only way I can see the full 160k is:
A) a premium applied to the living costs and food costs due to living in residence;
B) the parents is supporting the child outside of direct school costs as well by including a living stipend;
C) The child is going for a dual degree which may take 6+ years;
D) Zero scholarships were granted over the duration of the degree.

Hope this helps!



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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #238 on: May 11, 2017, 07:39:56 AM »
Mystery solved.  I called IL today to ask why yesterday's order didn't fill.  He looked it up and we talked through it.  I made the order mid afternoon yesterday which seems like a perfectly civilized time to be making trades.  But apparently not.  It turns out that markets close at 1PM PST so when I set the duration of the buy request to one day, that day was today and the order was filled this AM at $24.41.  So all is well and I am a little smarter.

Doh! Time zone difference so obvious now that it's been explained.

joonifloofeefloo

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #239 on: May 11, 2017, 09:13:41 AM »
The tuition and rent costs rock. That $18k/yr in food and entertainment MMM kids will hopefully skip! I'd be mortified if I learned I'd done all this hard work to save only for my kid to blow it that way, eek. That's why I won't give him that :)

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #240 on: May 11, 2017, 09:23:02 AM »
The tuition and rent costs rock. That $18k/yr in food and entertainment MMM kids will hopefully skip! I'd be mortified if I learned I'd done all this hard work to save only for my kid to blow it that way, eek. That's why I won't give him that :)

Agreed, by living at home the 24k of rent disappears, and i'm sure the other living expenses would go wayyyy down. Yes college students are still going to attend beer nights and need to buy books but many of the other items will drop or be absorbed into the parents budget. i.e. cleaning supplies for the students household, tanks of propane for the bbq, all the other random stuff that add up while living away from home.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #241 on: May 11, 2017, 09:48:42 AM »
The tuition and rent costs rock. That $18k/yr in food and entertainment MMM kids will hopefully skip! I'd be mortified if I learned I'd done all this hard work to save only for my kid to blow it that way, eek. That's why I won't give him that :)

Agreed, by living at home the 24k of rent disappears, and i'm sure the other living expenses would go wayyyy down. Yes college students are still going to attend beer nights and need to buy books but many of the other items will drop or be absorbed into the parents budget. i.e. cleaning supplies for the students household, tanks of propane for the bbq, all the other random stuff that add up while living away from home.

This is exactly why I budget 5k$/year to be "normal" extra cost for 5-6 years for a total from 25-30k$

Tuition, books, public transit pass, these are costs I will pay for. Beer, springbreak, electronic gadgets, car, are what kids will have to find money else where. When I consider they manage money fairly well, I may consider them getting the remaining stash in RESP...

joonifloofeefloo

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #242 on: May 11, 2017, 09:59:43 AM »
Agreed, by living at home the 24k of rent disappears, and i'm sure the other living expenses would go wayyyy down. Yes college students are still going to attend beer nights and need to buy books but many of the other items will drop or be absorbed into the parents budget. i.e. cleaning supplies for the students household, tanks of propane for the bbq, all the other random stuff that add up while living away from home.

My hope is that by the time Kid has had 15 years of MMM-style training, he won't overspend on beer nights, etc.

The rent amount was excellent. The only concerning line was $18k on "food and other." That's not an amount we'd want to reduce by absorbing it into a parent's spending. It's just an extremely high amount to spend, for anyone, in any circumstance. i.e., We're one adult and one teen and our entire monthly spending (housing, food, entertainment, household supplies, vehicle, etc) is ~$1400/mo. So, half that for one student, plus tuition (mostly grants), and the RESP needs are quite low.

Saskatchewstachian

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #243 on: May 11, 2017, 11:15:41 AM »
Agreed, by living at home the 24k of rent disappears, and i'm sure the other living expenses would go wayyyy down. Yes college students are still going to attend beer nights and need to buy books but many of the other items will drop or be absorbed into the parents budget. i.e. cleaning supplies for the students household, tanks of propane for the bbq, all the other random stuff that add up while living away from home.

My hope is that by the time Kid has had 15 years of MMM-style training, he won't overspend on beer nights, etc.

The rent amount was excellent. The only concerning line was $18k on "food and other." That's not an amount we'd want to reduce by absorbing it into a parent's spending. It's just an extremely high amount to spend, for anyone, in any circumstance. i.e., We're one adult and one teen and our entire monthly spending (housing, food, entertainment, household supplies, vehicle, etc) is ~$1400/mo. So, half that for one student, plus tuition (mostly grants), and the RESP needs are quite low.

Although I would have to disagree that 18k is a lot for anyone to spend in any circumstances, I do have to say that I am continuously impressed by mustachians. $1400/month works out to $16800 per year. For a family of two the federal Low Income Cut Off is $29,700. not only are you living frugally based on income but you are living on just 56% of what is classified as low income. Well done to you!

And my apologies Blissful Biker, I will stop hijacking the thread with University cost talk :)

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #244 on: May 11, 2017, 12:51:20 PM »
I have been soaking in the advice and reading but today is the day the rubber hits the road.  I need to commit to an asset allocation and start buying large chunks of ETFs.  Another RRSP and a TFSA account came across today so I now have $700K in IL to spend.

I have been debating between the CPP 3 fund 25% bond portfolio  ( https://cdn.canadianportfoliomanagerblog.com/wp-content/up) or Justin's 5 fund 20% bond portfolio (http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-ETFs-2016.pd).  Both are great options.  I dont think I could go wrong with either.  Mr. Rich Moose demonstrated that at 60/40 the 3 fund and 5 fund performed essentially the same.  Le Barbu showed that increasing the number of funds showed slight improvements in performance with the biggest gains coming from splitting out US equities.  Justin Bender recommends the 5 fund approach for larger accounts and the 3 fund approach for smaller accounts. 

I have landed on using Justin's 5 fund 20% bond portfolio with a plan to take that up to 30% bonds within 5 years.  20% bonds still gives me enough $$ to buy stocks cheap if they drop and it comes time to re balance.  And having the house paid off makes me comfortable with an aggressive asset allocation.  The re-balancing of 5 funds is a bit more work than 3 but I do not mind.  I don't think it will be hard.

Justin provides a portfolio rebalancing tool on his blog and I have populated my plan.    Please take a look and see what you think.  To balance flexibility and simplicity I have tried to keep 2 funds per account and each fund spread over 2 accounts.  I loaded the TFSAs with the riskier equities and my RRSP with the bonds (to let my husband's catch up).  The RESP is of course excluded.

Oh yeah, BB - plan your orders and make them at 7-8 AM PST and I like to make them valid for a week, not a day and also at ask price, not below.  BMO will charge two commissions if an order is partially filled one day, then totally filled the next day, and also partially fill an order and close it if you ask for one day of validity.


I would be patient and buy one ETF per day - get it right.

Thanks Heckler.  Why keep it valid for a week?

I am nervous about the timing of the purchases.  The markets are pretty much at an all time high.  I have never paid too much attention to market fluctuations but I have also never spent a million in a week.  Ackh!  And Moodys downgraded the Canadian banks yesterday.  Eeek.

Saskatchewstachian - your costs surprised me.  I also hope my boys choose a STEM degree and they will have to move away to get it. 

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #245 on: May 11, 2017, 01:48:40 PM »
I am nervous about the timing of the purchases.  The markets are pretty much at an all time high.  I have never paid too much attention to market fluctuations but I have also never spent a million in a week.  Ackh!  And Moodys downgraded the Canadian banks yesterday.  Eeek.

Welcome to self-directed investing! :)

Make your purchases and stick to your plan knowing it is a good one.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #246 on: May 11, 2017, 03:11:44 PM »
Drat.  Work got in the way and the markets have closed for the day.  Tomorrow I'll start making the big buys.  On the bright side that gives me a chance to get feedback on the plan I attached this AM.

I am nervous about the timing of the purchases.  The markets are pretty much at an all time high.  I have never paid too much attention to market fluctuations but I have also never spent a million in a week.  Ackh!  And Moodys downgraded the Canadian banks yesterday.  Eeek.

Welcome to self-directed investing! :)

Make your purchases and stick to your plan knowing it is a good one.

Thanks.  It feels hair raising today, but once I have all the money invested I plan to largely ignore the markets for another year.

The tuition and rent costs rock. That $18k/yr in food and entertainment MMM kids will hopefully skip! I'd be mortified if I learned I'd done all this hard work to save only for my kid to blow it that way, eek. That's why I won't give him that :)

Agreed, by living at home the 24k of rent disappears, and i'm sure the other living expenses would go wayyyy down. Yes college students are still going to attend beer nights and need to buy books but many of the other items will drop or be absorbed into the parents budget. i.e. cleaning supplies for the students household, tanks of propane for the bbq, all the other random stuff that add up while living away from home.

This is exactly why I budget 5k$/year to be "normal" extra cost for 5-6 years for a total from 25-30k$

Tuition, books, public transit pass, these are costs I will pay for. Beer, springbreak, electronic gadgets, car, are what kids will have to find money else where. When I consider they manage money fairly well, I may consider them getting the remaining stash in RESP...

Having the kids cover discretionary expenses is a good plan.  A taste of real life.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #247 on: May 11, 2017, 03:28:54 PM »
I am incredibly impressed with how you've tackled all of this Blissful Biker! Way to go with the hard conversations with the advisor and learning so much in so little time.

It's doubtful that you could go wrong with either Asset Allocation but am quite new to this as well (have read a ton but am investing much much smaller amounts than you right now).

It's got to be terrifying to put all that money in at one time, but with your well thought-out plan and the diligence to stick to it if the market does go down you will do so much better than your advisor could have. Money in as a lump sum beats a dollar cost averaging over 65% of the time, so it's scary to throw it in but I would be making the same decision and then trying not to watch the market daily (I fail at this basically every day..)

joonifloofeefloo

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #248 on: May 11, 2017, 09:07:46 PM »
$1400/month works out to $16800 per year. For a family of two the federal Low Income Cut Off is $29,700. not only are you living frugally based on income but you are living on just 56% of what is classified as low income. Well done to you!

Thanks, Saskatchewstachian :)     Yeah, I started out frugal, then went high for a few years, then slashed it all back down. We live quite luxuriously, too! Our rent may need to increase soon-ish, but we'll be able to keep the rest down with our upcoming move.

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Re: Should I use a Canadian robo-advisor? If so, which one?
« Reply #249 on: May 12, 2017, 04:29:27 AM »
Thanks Heckler.  Why keep it valid for a week?

I am nervous about the timing of the purchases.  The markets are pretty much at an all time high.  I have never paid too much attention to market fluctuations but I have also never spent a million in a week.
[/quote]

Still interested to Norbert-Gambit? 3x more trade + currency convertion to factor in! Look like you made the good choice!

Set your order early and valid for the day only. Just a few cents higher like you already did and wait until it's filled, usually immediatly.

Remember your money was already invested, you are just realocating funds!