Author Topic: Calling all Canadians: Investing in index funds?  (Read 1066 times)

julia

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Calling all Canadians: Investing in index funds?
« on: August 13, 2019, 08:07:59 PM »
Apologies if this question/thread already exists - please direct me if it does.
I'm a 25 yr old Canadian and am currently investing with Edward Jones. He takes about 1.6% of my portfolio on a monthly basis as commission as part of the "guided portfolio" package. I'm wondering if any fellow Canadians invested on their own and how they invested in index funds/vanguard. Or did you stick to stocks?

I'm just lost on how to start investing on my own to avoid outrageous commission fees. I have about 55k invested in stocks and 80k sitting in the bank doing nothing.

Thank you!
« Last Edit: August 13, 2019, 08:12:00 PM by julia »

CharlesBronzee

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Re: Calling all Canadians: Investing in index funds?
« Reply #1 on: August 13, 2019, 08:29:43 PM »
Hello, fellow Canuck!  I strongly recommend passive investing (index funds or ETFs) vs actively managed funds or individual stocks.  There have been many studies done that show over the long term passive investing beats active investing.

There are many books out there to guide you, you can start with  A Random Walk on Wall Street, Wealthy Barber...

As for model portfolios to emulate, check out:

 https://canadiancouchpotato.com/model-portfolios/

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #2 on: August 13, 2019, 09:01:13 PM »
A lot of people are invested with either: Questrade, Interactive brokers, Tangerine, National bank.

The simplest way to ''get rich'' with stocks and investments is using index funds. That is easy to buy, and take care of yourself, and what you will read about in the Couchpotato website.

Your advisor is unlikely to be worth the 1.6% he is taking off your investments, unless you are the type of person who cannot be trusted with your accounts (i.e. if stocks start to go down, you feel the need to sell, rather than wait it out). Do you know what your invested in with them?

For Questrade , IB, Tangerine or others, you can ask for referrals (Questrade for example is worth about 150$ extra money at your level of investments).

Your simplest solution would be buying ETF and index funds through IB, questrade, or National Bank (no cost for buying/selling ETFs)

I can walk you through how to use Questrade for the low low price of using my referral code :D.

julia

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Re: Calling all Canadians: Investing in index funds?
« Reply #3 on: August 13, 2019, 09:13:05 PM »
Hello, fellow Canuck!  I strongly recommend passive investing (index funds or ETFs) vs actively managed funds or individual stocks.  There have been many studies done that show over the long term passive investing beats active investing.

There are many books out there to guide you, you can start with  A Random Walk on Wall Street, Wealthy Barber...

As for model portfolios to emulate, check out:

 https://canadiancouchpotato.com/model-portfolios/

Thank you very much for the couch potato link!


I can walk you through how to use Questrade for the low low price of using my referral code :D.

If I open up through questrade - I will use your link for sure. Can we chat privately? Is there a chat or IM function on this forum?

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #4 on: August 13, 2019, 09:34:50 PM »
Message sent (In the ''My Messages'' portion)

https://www.milliondollarjourney.com/a-simple-low-cost-diversified-etf-portfolio.htm

Here are some examples of portfolios that will allow you to be diversified throughout the world.
« Last Edit: August 13, 2019, 09:36:56 PM by Lews Therin »

yow

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Re: Calling all Canadians: Investing in index funds?
« Reply #5 on: August 14, 2019, 03:24:59 AM »
Looks like lews Therin has you covered here with some solid advice.

Good luck getting yourself up and running. You will probably wonder why you ever invested with and advisor once you get setup to do it yourself.

BSL18

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Re: Calling all Canadians: Investing in index funds?
« Reply #6 on: August 14, 2019, 06:28:38 AM »
I currently have both National Bank and Wealthsimple accounts. I do like the hands-off way of Wealthsimple (especially since they improved the tax performance of their accounts), but if you want to be in charge Questrade or National Bank are the way to go. As Lews said, stick to ETFs, and wait... Simple receipe. Another option would be to just dump everything in VGRO with Questrade or NBC, and again... wait. Save a lot and watch it grow.

julia

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Re: Calling all Canadians: Investing in index funds?
« Reply #7 on: August 14, 2019, 03:31:42 PM »
I currently have both National Bank and Wealthsimple accounts. I do like the hands-off way of Wealthsimple (especially since they improved the tax performance of their accounts), but if you want to be in charge Questrade or National Bank are the way to go. As Lews said, stick to ETFs, and wait... Simple receipe. Another option would be to just dump everything in VGRO with Questrade or NBC, and again... wait. Save a lot and watch it grow.

Thanks for your reply! Everyone says "buy ETFs and wait" but I have no idea which ones to buy, how many of each one, etc. I looked at the couch potato websites but I'm not understanding what I'm looking at. Should I get my edward jones advisor to explain it all to me without telling him that I plan on using his teachings to invest on my own?

Blissful Biker

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Re: Calling all Canadians: Investing in index funds?
« Reply #8 on: August 14, 2019, 04:21:01 PM »
I was in your shoes two years ago and this forum set me down the path of being a competent DIY investor, for which I will be forever grateful.

Thanks for your reply! Everyone says "buy ETFs and wait" but I have no idea which ones to buy, how many of each one, etc. I looked at the couch potato websites but I'm not understanding what I'm looking at. Should I get my edward jones advisor to explain it all to me without telling him that I plan on using his teachings to invest on my own?

Your advisor, as lovely as he may be, will work to steer you away from DIY. You can ask him but do not expect much support.

I am with BMO Investorline, which is fine.  I have no complaints but if I was starting from scratch I would use Questrade for the free ETF purchases.

I endorse the suggestion to use a Canadian couch potato portfolio.  Can't go wrong with that.  Either a one fund or three fund ETF portfolio would be great for you.

Step 1 - Set up your accounts at a discount brokerage such as Questrade.  It seems to takes a few weeks to get all the paper work through for your TFSA, RRSP, etc.
Step 2 - Ask your discount brokerage to pull your money across from Edward Jones.  You just give the account numbers and they do all the hard work.
Step 3 - Take the cash now sitting in your accounts and purchase your chosen ETFs based on your selected portfolio.  Here's an example video from Justin Bender on how to do it in Questrade: https://www.pwlcapital.com/build-etf-portfolio-questrade/

Your most important decision will be your asset allocation, ie what percentage of your portfolio do you want in stocks vs bonds.  This depends on your risk appetite.  At your age I personally would go 100% stocks, but many would recommend 75% stocks and 25% bonds for you, which is equally valid.  Only you can decide.

DIY investing with a simple ETF portfolio isn't hard.  You've got this.

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #9 on: August 14, 2019, 05:52:25 PM »
The EJ guy's job depends on him not believing that index trading is better than what he is doing. Studies be damned, he'll stick to "in my experience".

He's not going to tell you you should leave him and go somewhere else.

julia

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Re: Calling all Canadians: Investing in index funds?
« Reply #10 on: August 14, 2019, 07:54:39 PM »


Your most important decision will be your asset allocation, ie what percentage of your portfolio do you want in stocks vs bonds.  This depends on your risk appetite.  At your age I personally would go 100% stocks, but many would recommend 75% stocks and 25% bonds for you, which is equally valid.  Only you can decide.


Thank you for your super helpful reply! I sent you a DM if that's okay. I'd be in mostly stocks with my Edward Jones TFSA if it wasn't for their policy which doesn't allow me to go 100% in stocks.

BSL18

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Re: Calling all Canadians: Investing in index funds?
« Reply #11 on: August 15, 2019, 07:57:12 AM »
Seeing where you're starting from (and I've been there before, that's why I have 2 different accounts), I would actually advise that you take a look at Wealthsimple. They will take some of your stash (I think 0.5%+ ETF MER that you'll pay anyway), but they do all the rebalancing and what I call "maintenance" for you. You basically just choose your risk tolerance (I'm at the maximum, 90/10), and dump money in there. (You can also get 10k$ managed for free, and me too, if you use my referral link ;) ). Then on the side, you can open an account with a broker to start DIYing, with smaller contributions at first. Once you get used to it and feel comfortable enough you can just stop contributing to Wealthsimple and just fuel your broker account (or transfer everything, WS has no fees for that I think).

The MDJ page Lews sent you to has a lot of details, you can also directly check this exact Canadian Couch Potato pdf to have a guide on the proportions you could use: https://cdn.canadiancouchpotato.com/wp-content/uploads/2019/03/CCP-Model-Portfolios-ETFs-2018.pdf

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #12 on: August 15, 2019, 01:39:31 PM »
Wealthsimple is higher costs than simply buying VGRO (which has the same effect)

You don't need ''Robo-advisors'' , Vanguard has already been doing that. I don't recommend going with wealthsimple to have it be ''simpler'', you can easily have a single stock and be totally diversified with VGRO.

That said, you can have lower fees by buying each separately (VCN, XAW) (.07 & .20), and get the taxation optimization bonuses for Canada since you are in the income level that dividends are probably negatively taxed (Every dollar in dividends gives you extra money from your taxes)

BSL18

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Re: Calling all Canadians: Investing in index funds?
« Reply #13 on: August 16, 2019, 05:51:15 AM »
Wealthsimple is higher costs than simply buying VGRO (which has the same effect)

You don't need ''Robo-advisors'' , Vanguard has already been doing that. I don't recommend going with wealthsimple to have it be ''simpler'', you can easily have a single stock and be totally diversified with VGRO.

That said, you can have lower fees by buying each separately (VCN, XAW) (.07 & .20), and get the taxation optimization bonuses for Canada since you are in the income level that dividends are probably negatively taxed (Every dollar in dividends gives you extra money from your taxes)

Yes indeed, that's why I showed the two options. However, depending on your financial culture, I think Wealthsimple can be less intimidating as it is pretty darn close to just buying mutual funds at your local bank. At least that's the reason why I started with Wealthsimple before getting into buying ETFs myself. Also it's nice to just dump money in there every week without having to think about it (unless automated deposits are now available for Vanguard ETFs with Questrade).

You definitely pay for the design of the app/site though, agree on that! So at the end it's to each his own, but if Wealthsimple can get someone into passive investing I don't think it should be discarded. With 135k to invest, Wealthsimple will take 0,4%. Question is: are you willing to pay that fee for hands-off investing or would you rather take care of your stuff yourself.

Can you elaborate on the dividend point?


Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #14 on: August 16, 2019, 06:41:48 AM »
Simply that at OP`s income range, it's worth getting the extra taxes from receiving canadian dividend companies, since the taxation rate is around -7%. (Ontario)

K-ice

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Re: Calling all Canadians: Investing in index funds?
« Reply #15 on: August 16, 2019, 09:00:50 AM »
I agree you can do this alone. Congratulations on already having a good stash.

I have a self directed account with RBC as I felt comfortable sticking with my own bank. But as mentioned, starting from scratch, Questrade is better for no fees.

I also endorse & follow couch potato. I have a mix for myself that can be invested in a tax efficient way. (Ie Canadian dividend stocks in taxable account). You can google “asset location” if you want. But to keep it simple VGRO is a good place to start.




julia

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Re: Calling all Canadians: Investing in index funds?
« Reply #16 on: August 16, 2019, 10:05:54 AM »
Everyone is so helpful, thank you!
There are so many tickers to choose from. How does one go about choosing one over the other?
I'm looking at this right now: https://youngandthrifty.ca/top-seven-etfs-young-canadian-investors/ - Is the table that lists  VCN, XUU, XAW, ZAG, and VBAL a good model portfolio? What does it mean by 'number of holdings' beside each one? Is that synonymous with 'number of shares'?

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #17 on: August 16, 2019, 10:26:40 AM »
Number of holdings is the amount of companies held within the ETF.

VCN and XAW covers the whole world together, (only holding stocks)
VUU is US only, so you'd need canadian, and international excluding US exposure (VUU + VCN + other tickers)
ZAG: Just bonds

VBAL : You'd simply hold this one alone, nothing else, since it holds within in all these funds:
Vanguard US Total Market Index ETF 24.3%
Vanguard Canadian Aggregate Bond Index ETF 23.6
Vanguard FTSE Canada All Cap Index ETF 17.9
Vanguard FTSE Developed All Cap ex North America Index ETF 13.3
Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged 9.3
Vanguard US Aggregate Bond Index ETF CAD-hedged 7.3%
Vanguard FTSE Emerging Markets All Cap Index ETF

But VBAL holds 20% bonds, and you lose some tax optimization by having a total fund holding smaller funds (as the way dividends get taxed has some loss, but we're talking small amount of money)

Examples of normal portfolios would be
A) VCN & XAW & ZAG : Whole world + bonds
B) VCN & XAW: Whole world, very aggressive, no bonds
C) VUU & Vanguard Global ex-us of some kind (With out without bonds depending on how aggressive you want to be)
D) VBAL alone. Semi-Agressive, 80% stock and 20% bonds, never need to rebalance, just buy more forever. (Same thing as buying VGRO)
« Last Edit: August 16, 2019, 10:29:27 AM by Lews Therin »

julia

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Re: Calling all Canadians: Investing in index funds?
« Reply #18 on: August 16, 2019, 10:56:15 AM »
Number of holdings is the amount of companies held within the ETF.

VCN and XAW covers the whole world together, (only holding stocks)
VUU is US only, so you'd need canadian, and international excluding US exposure (VUU + VCN + other tickers)
ZAG: Just bonds

VBAL : You'd simply hold this one alone, nothing else, since it holds within in all these funds:
Vanguard US Total Market Index ETF 24.3%
Vanguard Canadian Aggregate Bond Index ETF 23.6
Vanguard FTSE Canada All Cap Index ETF 17.9
Vanguard FTSE Developed All Cap ex North America Index ETF 13.3
Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged 9.3
Vanguard US Aggregate Bond Index ETF CAD-hedged 7.3%
Vanguard FTSE Emerging Markets All Cap Index ETF

But VBAL holds 20% bonds, and you lose some tax optimization by having a total fund holding smaller funds (as the way dividends get taxed has some loss, but we're talking small amount of money)

Examples of normal portfolios would be
A) VCN & XAW & ZAG : Whole world + bonds
B) VCN & XAW: Whole world, very aggressive, no bonds
C) VUU & Vanguard Global ex-us of some kind (With out without bonds depending on how aggressive you want to be)
D) VBAL alone. Semi-Agressive, 80% stock and 20% bonds, never need to rebalance, just buy more forever. (Same thing as buying VGRO)

Is it wise to only have one ticker (for example VGRO) in my portfolio though? I know that it tracks a huge number of individual stocks but if you bought it in 2018 (it seems to be a new ETF), it seems like there was no growth. Isn't the general minimum average supposed to be 4% growth? Or do I have it all wrong?

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #19 on: August 16, 2019, 11:37:45 AM »
For the past year, the indexes have indeed had no growth. Google the S&P 500, and take a look at the graph.

Average is 4%, but it sure isn't 4% every year. If the index stayed without growth, it means that some companies lost the same amount others won. So stock picking could have worked, or you could've gotten the ones that went down.

Dec. 31, 2018   -4.38%
Dec. 31, 2017   21.83%
Dec. 31, 2016   11.96%
Dec. 31, 2015   1.38%
Dec. 31, 2014   13.69%
Dec. 31, 2013   32.39%
Dec. 31, 2012   16.00%
Dec. 31, 2011   2.11%
Dec. 31, 2010   15.06%
Dec. 31, 2009   26.46%
Dec. 31, 2008   -37.00%

Itrembac

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Re: Calling all Canadians: Investing in index funds?
« Reply #20 on: August 16, 2019, 03:25:41 PM »
I currently have both National Bank and Wealthsimple accounts. I do like the hands-off way of Wealthsimple (especially since they improved the tax performance of their accounts), but if you want to be in charge Questrade or National Bank are the way to go. As Lews said, stick to ETFs, and wait... Simple receipe. Another option would be to just dump everything in VGRO with Questrade or NBC, and again... wait. Save a lot and watch it grow.

Yeah, VGRO and XGRO look to be excellent options if you want to keep it simple. Just new to Canada this year as well I believe.

julia

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Re: Calling all Canadians: Investing in index funds?
« Reply #21 on: August 18, 2019, 02:53:07 PM »
I just thought of this problem which I may be completely wrong about but here it is anyway:
Currently I maxed out my TFSA (there is about 55k in there). But that 55k includes returns (so I invested less than 55k of my own money since that 55k includes the return on my investment). When I transfer from Edward Jones to questrade, can I rebuy 55k worth of investments in a TFSA, or only the yearly amount since my 18th birthday (2012?).

In other words, let's say my yearly contribution limit since I was 18 was 1$ (so I invested 8$ of my own money), but over those years my money grew to 10$. When I sell the 10$ to transfer it into questrade, can I only invest the initial 8$ in my TFSA?

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #22 on: August 18, 2019, 03:08:58 PM »
Every dollar you take out of a tfsa creates 1$ in extra room for the next year. So yes, someone can take out 100k due to gains, and put 100k back in the next year, but when switching from EJ to questrade, it'll go from TFSA to TFSA. It'll remain sheltered and in a cozy tfsa. Your issue doesn't come up in your situation.

julia

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Re: Calling all Canadians: Investing in index funds?
« Reply #23 on: August 18, 2019, 03:42:56 PM »
Every dollar you take out of a tfsa creates 1$ in extra room for the next year. So yes, someone can take out 100k due to gains, and put 100k back in the next year, but when switching from EJ to questrade, it'll go from TFSA to TFSA. It'll remain sheltered and in a cozy tfsa. Your issue doesn't come up in your situation.

Fantastic. So I've been reading up on VGRO and it seems that people are saying that it is too conservative for a 25 year old since 20% is in bonds. Someone went as far to say "you'll never retire if you put everything into VGRO".

Others say that the constant rebalancing costs for 3 tickers instead of 1 are not worth having separate tickers. Then there is the constant debate between XAW paired with VCN vs. XAN paried with XIC.

Thoughts?

Prairie Moustache

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Re: Calling all Canadians: Investing in index funds?
« Reply #24 on: August 18, 2019, 03:57:43 PM »
Every dollar you take out of a tfsa creates 1$ in extra room for the next year. So yes, someone can take out 100k due to gains, and put 100k back in the next year, but when switching from EJ to questrade, it'll go from TFSA to TFSA. It'll remain sheltered and in a cozy tfsa. Your issue doesn't come up in your situation.

Fantastic. So I've been reading up on VGRO and it seems that people are saying that it is too conservative for a 25 year old since 20% is in bonds. Someone went as far to say "you'll never retire if you put everything into VGRO".

Others say that the constant rebalancing costs for 3 tickers instead of 1 are not worth having separate tickers. Then there is the constant debate between XAW paired with VCN vs. XAN paried with XIC.

Thoughts?

I am 26 and did indeed decide to go with using my own mix of individual ETF's to achieve a 90/10 allocation. There's been lots of good discussion on here about allocating your investments for tax efficiency across your RRSP, TFSA and taxable accounts, check out the Canada Tax board. Rebalancing shouldn't be too much of an issue as you can just use contributions to get back to your allocation instead of selling, and it doesn't need to be done that often. The ETF's from the different providers are largely the same as long as you're getting the proper slice of the market pie that you're looking for. Hope that helps!

BSL18

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Re: Calling all Canadians: Investing in index funds?
« Reply #25 on: August 19, 2019, 06:45:19 AM »
Every dollar you take out of a tfsa creates 1$ in extra room for the next year. So yes, someone can take out 100k due to gains, and put 100k back in the next year, but when switching from EJ to questrade, it'll go from TFSA to TFSA. It'll remain sheltered and in a cozy tfsa. Your issue doesn't come up in your situation.

Fantastic. So I've been reading up on VGRO and it seems that people are saying that it is too conservative for a 25 year old since 20% is in bonds. Someone went as far to say "you'll never retire if you put everything into VGRO".

Others say that the constant rebalancing costs for 3 tickers instead of 1 are not worth having separate tickers. Then there is the constant debate between XAW paired with VCN vs. XAN paried with XIC.

Thoughts?

Well, the thing is your stock/bond ratio is function of your investment time frame on one side, but also your risk tolerance on the other. Also, for the last 100 years, I think a 80/20 portfolio actually outperformed the 100% stock portfolio (can't find the source again but some here probably have that bookmarked). You will definitely be able to retire early considering that you're starting on MMM at 25, with a maxed out TFSA and 80k to put to use in a RRSP, if you control your expenses and save a lot. I seriously doubt that going 100% stock would bring you to FIRE any faster than a 80/20 portfolio. Especially at the beginning, what's important is your saving rate, not so much your returns.

Of course, VGRO is fairly recent so it's a bit useless to compare, but if it can help you get a feel of what bonds do: for the last year, the SP500 is up 1.7%, VGRO is up 3.7%.

K-ice

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Re: Calling all Canadians: Investing in index funds?
« Reply #26 on: August 19, 2019, 02:36:12 PM »
I just thought of this problem which I may be completely wrong about but here it is anyway:
Currently I maxed out my TFSA (there is about 55k in there). But that 55k includes returns (so I invested less than 55k of my own money since that 55k includes the return on my investment). When I transfer from Edward Jones to questrade, can I rebuy 55k worth of investments in a TFSA, or only the yearly amount since my 18th birthday (2012?).

In other words, let's say my yearly contribution limit since I was 18 was 1$ (so I invested 8$ of my own money), but over those years my money grew to 10$. When I sell the 10$ to transfer it into questrade, can I only invest the initial 8$ in my TFSA?

I believe this was well explained by Lews but be sure Questrade transfers it within the TSFA umbrella. 

What will happen all within a TFSA is something like the following:

All your TFSA investments in EJ are sold to cash.
The TFSA cash will be moved to Questrade.
Once in a Questrade TFSA invest as you wish.

The investment/money should NEVER leave your TFSA.

Does that make sense?

Prairie Stash

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Re: Calling all Canadians: Investing in index funds?
« Reply #27 on: August 19, 2019, 03:11:12 PM »
At first, it can be overwhelming. Break it into small steps.

1) start a questrade account for TFSA, RRSP and Non-Registered. It makes sense later to have all three, so do the paperwork now.
2) Study Asset allocation while the paperwork is processed.

You have $135,000 in cash and EJ (it doesn't matter what stocks you have). How much RRSP room do you have to work with? That's the failure here, we skipped to what to buy before asking how much space you have?

put the money into the three accounts like this (massive assumptions made, this is a demonstration):
1) TFSA  - a single ETF, all US - $55k
2) Non Taxable - a single ETF - CDN
3) RRSP - Bonds and other leftovers; including CDN and US ETF.
Note: I barely pay attention to ETF anymore, when its time to buy I just look at whatever some other forum members are buying this ear and follow the crowd. Some people really love finding the best ETF, I follow along; even the third best choice is awesome, so I skip the stress.

Its that easy. Your TFSA will hold one ETF, your taxable will hold one and your RRSP will compete the Asset allocation. If the RRSP doesn't have enough room, it gets messy, but that also gets into an even longer winded post. The trick is deciding how much of each type is appropriate for you, if your 90% stock, whats the ratio between CDN and US?

Rebalancing is free at your age and savings rate. You start by dumping the ax into TFSA every year and buying more US ETF (free to buy). Then you dump into your RRSP and Non-Registered and buy whatever you need to achieve the balance. People who rebalance by selling are usually dealing with portfolios that are really large compared to their savings rate. You have a huge SR, you can rebalance by buying, which is free. Otherwise you might spend a whopping $30/year, or 0.03% of a $100,000 portfolio. Rebalancing is one of those things people talk about that's really trivial in cost. It gives us something to debate while we wait for our portfolios to grow, since investing is so easy there's not much to talk about some days.

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #28 on: August 19, 2019, 08:42:57 PM »
Prairie and others: rrsp is negligeable and useless. Small amounts + income levels that don't make it helpful.
« Last Edit: August 20, 2019, 08:31:15 AM by Lews Therin »

Prairie Moustache

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Re: Calling all Canadians: Investing in index funds?
« Reply #29 on: August 20, 2019, 07:41:14 AM »
Prairie and others: rrsp is negligeable and useless. Small amounts + income levels that don'take it helpful.

I didn't catch any income data? Is my male pattern blindness rearing it's head?

HMman

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Re: Calling all Canadians: Investing in index funds?
« Reply #30 on: August 20, 2019, 08:10:29 AM »
Prairie and others: rrsp is negligeable and useless. Small amounts + income levels that don'take it helpful.

I didn't catch any income data? Is my male pattern blindness rearing it's head?

I believe OP was messaging Lews privately, so that information was probably communicated there.

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #31 on: August 20, 2019, 08:31:32 AM »
Prairie and others: rrsp is negligeable and useless. Small amounts + income levels that don'take it helpful.

I didn't catch any income data? Is my male pattern blindness rearing it's head?

I believe OP was messaging Lews privately, so that information was probably communicated there.

HMman wins subtext reading!

Prairie Moustache

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Re: Calling all Canadians: Investing in index funds?
« Reply #32 on: August 20, 2019, 12:32:11 PM »
Prairie and others: rrsp is negligeable and useless. Small amounts + income levels that don'take it helpful.

I didn't catch any income data? Is my male pattern blindness rearing it's head?

I believe OP was messaging Lews privately, so that information was probably communicated there.

HMman wins subtext reading!
Subtext is lost on those still numbing their minds at a desk!

Lews Therin

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Re: Calling all Canadians: Investing in index funds?
« Reply #33 on: August 20, 2019, 12:51:14 PM »
Whats a desk?

Trauma can cause memory loss.

Prairie Stash

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Re: Calling all Canadians: Investing in index funds?
« Reply #34 on: August 21, 2019, 03:00:35 PM »
Negligible RRSP room and lower income isn't enough of an answer. If income is not projected to rise substantially over the next 5 years, saving RRSP room is useless, check the math on growth of the refund vs. bigger later returns. The refund from the first tax bracket, when included into the RRSP, will Grow fast enough (typically) to offset saving the RRSP room for the future (saving it for 10 years will put the person behind, again check the math). If Income is projected to rise in the near future, then wait. Using RRSP refunds at the early stages can snowball NW, early investing often beats delaying.

I understand the arguments for delaying RRSP contributions. They are predicated on having available TFSA room. In this case, the OP has maxed TFSA so the argument is; should the money go towards RRSP or taxable? A smaller RRSP account in Early Retirement can also be tax free, for example if you have $100,000 and withdraw 5% a year, you can still pull a boat load from the taxable account and some from the TFSA to get a decent income of $20-25k without paying taxes.

To get $100k in an RRSP with income under $40k requires $80k of personal contributions (ignoring growth and assuming 25% marginal rate). That's $20k free money, tax free, if you FIRE with lower spending.

On a personal level, my wife never made over $45/year, when we withdraw from her RRSP I expect it to be tax free, but we also got a few thousand in refunds over the years so that was sweet. A small RRSP account is not in the same category as a typical retiree with $500k in RRSP. Ignore RRSP if you want, but in my case we ended up richer, even with a lower income.


https://cdn.canadiancouchpotato.com/wp-content/uploads/2019/03/CCP-Model-Portfolios-ETFs-2018.pdf

Using the aggressive model, 10% bonds, that would be $13,500 in bonds for the RRSP (under $11k in personal contributions, right there we shoot NW up 2% and we haven't done anything). If there is more room, or usefulness in contributing more, put US and Worldwide ETF in there next. The TFSA should hold Non-CDN ETF, that one is easy. The taxable account is the catch all then. In a taxable account, there are some better ETF's to buy for non-CDN ETF, its a pretty rare thing so it's hard to find good articles about it.

If you ultimately conclude RRSP is still a bad fit for you, then its TFSA holds US/worldwide and taxable holds an american ETF, some US/worldwide and then some bonds. You balance your entire portfolio across all account types, NOT in each account type.

If you base your investing choices based on taxes, you will under perform. If you base your allocation based on taxes, you will succeed. Notice how I'm only talking about where to allocate the money, the TFSA/RRSP/taxable discussion is just about how to divide the pot of gold.