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Couch potato investing for the last 12 years - tracking my progress

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  • Jul 19th, 2018 9:48 am
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Member
Feb 5, 2017
291 posts
176 upvotes
golfcraze wrote:
Jul 12th, 2017 12:25 pm
Crazy how the rise in the Canadian dollar is killing my xaw.to investment. I probably should of bought the a currency hedged etf when I bought into the couch potato portfolio. The CAD was pretty low when I started. :(
Well it was a buying opportunity ! Bought another 50K of XAW right at the bottom yesterday. Had already 550K of it.
Member
User avatar
Jul 10, 2007
347 posts
227 upvotes
Edmonton
alexcalvado wrote:
Jul 13th, 2017 7:18 am
Well it was a buying opportunity ! Bought another 50K of XAW right at the bottom yesterday. Had already 550K of it.
Nice! I'm exactly opposite of you. Bought around the peak. Bought around 500K. So I'm down around 16K even tho most markets are at ATH. I know it's for long term investing....but it still hurts. Lol.
Deal Expert
Feb 29, 2008
18834 posts
2067 upvotes
Montreal
golfcraze wrote:
Jul 12th, 2017 12:25 pm
Crazy how the rise in the Canadian dollar is killing my xaw.to investment. I probably should of bought the a currency hedged etf when I bought into the couch potato portfolio. The CAD was pretty low when I started. :(
Hindsight is 20 20. All my US and. Int'l holdings exploded in value after 2015. For every looser there is a winner.
Member
User avatar
May 3, 2015
245 posts
87 upvotes
Toronto, ON
mr_raider wrote:
Jul 13th, 2017 5:57 pm
Hindsight is 20 20. All my US and. Int'l holdings exploded in value after 2015. For every looser there is a winner.
Don't you mean a tighter? Face With Stuck-out Tongue And Tightly-closed EyesWinking Face
Jr. Member
Dec 16, 2012
108 posts
21 upvotes
Richmond Hill, ON
Hi Germack,

Finished reading/skimming through the entire thread and just want to thank you for sharing your journey and all your advice.

Just to clarify, why do you suggest to have bonds in an RRSP? Is it because equities typically have higher gains and they're better off sheltered? I'm only investing in TFSA as I'm no where near maxing it out. Just want to know for the future.

I am 23 and living with parents. Can't decide if I'll rent or buy when I move out as I live in the GTA. Only investments are a TFSA balanced portfolio (40% ZAG, 20% VCN, 20% XUU, 16% XEF, 4% XEC). I'll be opening an RRSP likely when the next tax season comes around.
Member
Nov 4, 2015
353 posts
142 upvotes
Ontario
portraitofruin wrote:
Jul 16th, 2017 10:23 pm
Just to clarify, why do you suggest to have bonds in an RRSP? Is it because equities typically have higher gains and they're better off sheltered? I'm only investing in TFSA as I'm no where near maxing it out. Just want to know for the future.
Interest income has the least favourable tax treatment so you should just shelter that. Capital gains (only 50% is taxed) and dividends (dividend tax credit) have more favourable tax treatments so if you had to pay tax on one or the other, it's better to pay it on equity.

However, if you had US investments as well then you may want to consider putting them in your RRSP. There are some tax treaty rules too regarding US equities and withholding tax that might make holding them in an RRSP better than a TFSA so maybe someone else can chime in on that or you can do a quick Google search since I don't know it off the top of my head.
Deal Guru
Sep 2, 2008
10275 posts
640 upvotes
braveblade wrote:
Jul 7th, 2017 6:17 pm
Great job OP! I have a question and I'm sorry if similar question has been asked before:

I have been on Tangerine's balanced portfolio for TFSA. I just had a newborn so I think it's perfect time for me to switch to ETF for both TFSA and RESP. My plan is to open both ETF TFSA and ETF RESP with Questrade using CCP's balanced ETF portfolio: 40% in ZAG, 20% in VCN, and 40% in XAW. The total amount of these 2 will be > $15000 so I do not need to pay the $50/yr fee for RESP. I have 0 knowledge on either ETF or index funds but always want to try and learn. What are your opinion on my approach as a novice investor? Thanks!
Can you explain the $50/yr fee bit? I also have a newborn (on the way) and looking to start resp. Currently have TFSA ETFs.
Deal Expert
Feb 29, 2008
18834 posts
2067 upvotes
Montreal
MikeZ13 wrote:
Jul 14th, 2017 10:18 am
Don't you mean a tighter? Face With Stuck-out Tongue And Tightly-closed EyesWinking Face
No. Loose like wizard's sleeve.
Deal Expert
Feb 29, 2008
18834 posts
2067 upvotes
Montreal
portraitofruin wrote:
Jul 16th, 2017 10:23 pm
Hi Germack,

Finished reading/skimming through the entire thread and just want to thank you for sharing your journey and all your advice.

Just to clarify, why do you suggest to have bonds in an RRSP? Is it because equities typically have higher gains and they're better off sheltered? I'm only investing in TFSA as I'm no where near maxing it out. Just want to know for the future.

I am 23 and living with parents. Can't decide if I'll rent or buy when I move out as I live in the GTA. Only investments are a TFSA balanced portfolio (40% ZAG, 20% VCN, 20% XUU, 16% XEF, 4% XEC). I'll be opening an RRSP likely when the next tax season comes around.
One caveat is that allocation rules (TFSA, vs RRSP vs Personal) only apply if you have more invested than the max in the two registered accounts. Until you fill up or your RRSP and TFSA, not a dime should be held unregistered. TFSA vs RRSP contributions should be guided by mostly future income and cash flow considerations, rather than optimizing with holding taxes, since that is minor.
Newbie
Nov 9, 2014
26 posts
9 upvotes
Alberta
petecool wrote:
Jul 12th, 2017 1:34 pm
Hedging is not perfect, there are situations where it doesn't quite work as expected - but hedging always costs you whenever it benefits you or not. Over a long period of time, the cost of hedging should be greater than it's benefits.
You're buying more stocks per invested dollar today than you were a few months ago, that's how I see it.

CCP has many articles with more details on his website, here's a few articles where he discusses hedging:

http://canadiancouchpotato.com/2016/03/ ... -currency/
http://canadiancouchpotato.com/2015/02/ ... the-hedge/
Could someone kindly explain how the rise in Canadian Dollar affects non-hedged ETFs more clearly? I didn't really understand that article too well lol. I know my XAW etf went down quite a bit recently as well.
Newbie
Jun 6, 2012
38 posts
24 upvotes
Calgary, AB
GucciCharms wrote:
Jul 17th, 2017 11:09 am
Could someone kindly explain how the rise in Canadian Dollar affects non-hedged ETFs more clearly? I didn't really understand that article too well lol. I know my XAW etf went down quite a bit recently as well.
When you buy XAW, you buy stocks that are denominated in USD, GBP, JPY, EUR, AUD, etc, etc. You buy them in CAD but they are still priced individually in their home currency.

Here's an example... I will use an USA example because it's simpler; XAW is the same but with many more currencies in the mix!

Day 1, you by 10000$ of a Canadian US Stocks ETF, unhedged in Canadian dollars., exchange rate is at par.
10000$ CAD buys you 10000$ of US stocks

Day 2, the stocks value didn't move (to make it simpler!), but the exchange rate has changed to 0.75 CAD for 1 USD.
Since the stocks' value didn't change, you still hold 10000$ of US stocks
However, it's now worth 13333.33 CAD (10000$USD / 0.75)
You still hold the same thing, but it's value in your local currency has changed.
(If you bought 10000$CAD of the US ETF today, it would be worth 7500$USD)

Day 3, the US stocks are still worth the same, exchange is back to par
You still hold 10000$USD of US stocks, with the exchange rate change, it's worth 10000$ CAD again
(ETF bought on day 2 is now worth 7500$CAD)

Did you lose or win anything? It all depends on when you buy and when you sell! The exchange rate when you retire and sell some funds will probably be different from today.
With XAW and the big array of currencies its stocks are based in, it's definitely not as neat to demonstrate, all the currencies move in different ways compared to CAD, every day. The same effect applies, though.

The CCP way will say, since it's impossible to predict forex movements, timing the market by buying hedged or unhedged based on the value of CAD is pointless. However the fees for hedged funds are always there - the costs of hedging are not shown in the MER as far as I can tell - they are buying currency futures to cover the variations if I remember right. As such CCP suggests no hedged funds.

Over a long period of time, sometimes you buy when it's more favorable, sometimes less, it pretty much evens out in the end. Plus that volatility/variability can be used to rebalance to your advantage.
There are still lots of people/institutions who buy hedged funds, XSP (S&P500 hedged to CAD) has 4 billion of assets under management!

It's definitely not a straightforward topic...
Newbie
Nov 9, 2014
26 posts
9 upvotes
Alberta
petecool wrote:
Jul 17th, 2017 4:17 pm
When you buy XAW, you buy stocks that are denominated in USD, GBP, JPY, EUR, AUD, etc, etc. You buy them in CAD but they are still priced individually in their home currency.

Here's an example... I will use an USA example because it's simpler; XAW is the same but with many more currencies in the mix!

Day 1, you by 10000$ of a Canadian US Stocks ETF, unhedged in Canadian dollars., exchange rate is at par.
10000$ CAD buys you 10000$ of US stocks

Day 2, the stocks value didn't move (to make it simpler!), but the exchange rate has changed to 0.75 CAD for 1 USD.
Since the stocks' value didn't change, you still hold 10000$ of US stocks
However, it's now worth 13333.33 CAD (10000$USD / 0.75)
You still hold the same thing, but it's value in your local currency has changed.
(If you bought 10000$CAD of the US ETF today, it would be worth 7500$USD)

Day 3, the US stocks are still worth the same, exchange is back to par
You still hold 10000$USD of US stocks, with the exchange rate change, it's worth 10000$ CAD again
(ETF bought on day 2 is now worth 7500$CAD)

Did you lose or win anything? It all depends on when you buy and when you sell! The exchange rate when you retire and sell some funds will probably be different from today.
With XAW and the big array of currencies its stocks are based in, it's definitely not as neat to demonstrate, all the currencies move in different ways compared to CAD, every day. The same effect applies, though.

The CCP way will say, since it's impossible to predict forex movements, timing the market by buying hedged or unhedged based on the value of CAD is pointless. However the fees for hedged funds are always there - the costs of hedging are not shown in the MER as far as I can tell - they are buying currency futures to cover the variations if I remember right. As such CCP suggests no hedged funds.

Over a long period of time, sometimes you buy when it's more favorable, sometimes less, it pretty much evens out in the end. Plus that volatility/variability can be used to rebalance to your advantage.
There are still lots of people/institutions who buy hedged funds, XSP (S&P500 hedged to CAD) has 4 billion of assets under management!

It's definitely not a straightforward topic...
Wow great explanation.

Thanks for the insight and clarity, greatly appreciate it!
Member
Feb 5, 2017
291 posts
176 upvotes
... and this is why it is right now a good time to buy more of XAW.
Last similar level of CAD against US$ was in april of last year.
Jr. Member
Jan 25, 2012
187 posts
62 upvotes
NORTH YORK
portraitofruin wrote:
Jul 16th, 2017 10:23 pm
Hi Germack,

Finished reading/skimming through the entire thread and just want to thank you for sharing your journey and all your advice.

Just to clarify, why do you suggest to have bonds in an RRSP? Is it because equities typically have higher gains and they're better off sheltered? I'm only investing in TFSA as I'm no where near maxing it out. Just want to know for the future.

I am 23 and living with parents. Can't decide if I'll rent or buy when I move out as I live in the GTA. Only investments are a TFSA balanced portfolio (40% ZAG, 20% VCN, 20% XUU, 16% XEF, 4% XEC). I'll be opening an RRSP likely when the next tax season comes around.
TFSA annual contribution room is "static" if you haven't sold any... you max it out annually and that's about the most you can do. However, when you decide to sell (lets assume everything), you regain the contribution room for next year, and the re-contribution allowance is now no longer limited by annual contribution amount, but your total balance. So the idea is you put the highest risk holdings in your TFSA, so that in the long run it has the most growth. You effectively get a larger tax sheltered amount when you start to sell and reap your gains.

http://www.millennial-revolution.com/in ... vestments/
Jr. Member
Dec 16, 2012
108 posts
21 upvotes
Richmond Hill, ON
shiangsta wrote:
Jul 19th, 2017 1:37 pm
TFSA annual contribution room is "static" if you haven't sold any... you max it out annually and that's about the most you can do. However, when you decide to sell (lets assume everything), you regain the contribution room for next year, and the re-contribution allowance is now no longer limited by annual contribution amount, but your total balance. So the idea is you put the highest risk holdings in your TFSA, so that in the long run it has the most growth. You effectively get a larger tax sheltered amount when you start to sell and reap your gains.

http://www.millennial-revolution.com/in ... vestments/
Most helpful answer, thank you. I'm still confused about one aspect. Let's say I bought shares of a company that amounted to $1000 in my TFSA. I then panic-sold it at a $500 loss and leave the proceeds as cash. Is my contribution room affected? Or do I lose $500 contribution room when I actually pull the cash out of the account?

(Yes, this example has led me to index investing and the numbers are much worse than shown.)

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