Investing

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

  • Last Updated:
  • Jan 18th, 2018 3:30 pm
Tags:
None
[OP]
Deal Addict
Oct 1, 2006
1725 posts
716 upvotes
Montreal
portraitofruin wrote:
Jul 19th, 2017 4:10 pm
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.)
You do not lose contribution room. E.g. if you pull out $500 in 2017 you can contribute an "extra" $500 to your TFSA in the following year (i.e. 2018).
Deal Addict
Jan 22, 2009
2490 posts
567 upvotes
slowtyper wrote:
Jul 17th, 2017 3:32 am
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.
Questrade charges $50/yr fee for RESP account with them if the total balance cross all your account with them is < $15000. This fee is waived once you have at least 15000 cross all accounts you have with them.
Jr. Member
Jan 25, 2012
185 posts
62 upvotes
NORTH YORK
portraitofruin wrote:
Jul 19th, 2017 4:10 pm
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.)
No you would not. Think of your previous contribution room as the floor.
Deal Addict
Dec 3, 2014
1079 posts
193 upvotes
Ontario
QUESTION:

Historically I have not kept ETFs in my TFSA. I have too much cash in my TFSA and am looking to buy some ETFs (XEF and XEC in particular). So my question is:
1. I know to keep US dividends in RRSP where possible;
2. For XEF and XEC how does foreign withholding tax work? Is it stupid to have these in a TFSA?
3. I also have XEF and XEC in my RRSP but I am out of RRSP cash and I want to add to these holdings so I am looking specifically to know what the implications of XEF and XEC are within my TFSA

Thanks in advance.
Deal Addict
User avatar
Aug 4, 2014
1049 posts
208 upvotes
Toronto, ON
XEF & XEC cost the same in TFSA and RRSP - see at the bottom of page 13 there. I hold IEMG in RRSP - and XEF everywhere :)
Deal Addict
User avatar
Sep 1, 2013
1405 posts
318 upvotes
New Tecumseth, ON
llpresident wrote:
Jul 21st, 2017 12:01 pm
QUESTION:

Historically I have not kept ETFs in my TFSA. I have too much cash in my TFSA and am looking to buy some ETFs (XEF and XEC in particular). So my question is:
1. I know to keep US dividends in RRSP where possible;
2. For XEF and XEC how does foreign withholding tax work? Is it stupid to have these in a TFSA?
3. I also have XEF and XEC in my RRSP but I am out of RRSP cash and I want to add to these holdings so I am looking specifically to know what the implications of XEF and XEC are within my TFSA

Thanks in advance.
Nothing wrong with those in a TFSA. The foreign withholding tax is automatically taken out of the distributions, nothing is needed on your part.
Just because you can doesn't mean you should.
Sr. Member
Sep 15, 2006
576 posts
148 upvotes
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.
Good question, I was coming here wondering the same thing.

My next question would be, what do I do to stop the bleeding from my CPP recommended ETF's continuously going down since our dollar has been going up? Is now a good time to buy more? I have holdings in XAW, VCN, ZAG.
Deal Addict
May 31, 2007
4655 posts
1776 upvotes
engman13 wrote:
Jul 24th, 2017 3:02 pm
Good question, I was coming here wondering the same thing.

My next question would be, what do I do to stop the bleeding from my CPP recommended ETF's continuously going down since our dollar has been going up? Is now a good time to buy more? I have holdings in XAW, VCN, ZAG.
You do nothing. You are likely to botch your returns making any changes. Stop checking your investments everyday. You are in it to "ride the wave" for a very long time.

Expect a lower annual return for the next decade, but still the best place to invest and best way to grow your money. Don't expect repeat performance of the last 10 years.

Contribute as you normally do. DCA bi-weekly will remove any market timing or guessing mistakes.

If you are losing sleep over this portfolio being down only 4% from peek (but still up 4% YTD!) the you need more bonds so portfolio is less volatile. Maybe 60-70% bonds if you are that worried.

Also remember there is a stock market crash coming one day. Based on market cycles we are getting mature. Expect your portfolio to drop a lot but recover fast. You do not want to make any knee jerk reactions and have the best allocation for your tolerance BEFORE the crash happens.
Sr. Member
Sep 15, 2006
576 posts
148 upvotes
Jungle wrote:
Jul 24th, 2017 3:16 pm
You do nothing. You are likely to botch your returns making any changes. Stop checking your investments everyday. You are in it to "ride the wave" for a very long time.

Expect a lower annual return for the next decade, but still the best place to invest and best way to grow your money. Don't expect repeat performance of the last 10 years.

Contribute as you normally do. DCA bi-weekly will remove any market timing or guessing mistakes.

If you are losing sleep over this portfolio being down only 4% from peek (but still up 4% YTD!) the you need more bonds so portfolio is less volatile. Maybe 60-70% bonds if you are that worried.

Also remember there is a stock market crash coming one day. Based on market cycles we are getting mature. Expect your portfolio to drop a lot but recover fast. You do not want to make any knee jerk reactions and have the best allocation for your tolerance BEFORE the crash happens.
Fair enough, thanks for the advice.
[OP]
Deal Addict
Oct 1, 2006
1725 posts
716 upvotes
Montreal
Jungle wrote:
Jul 24th, 2017 3:16 pm
You do nothing. You are likely to botch your returns making any changes. Stop checking your investments everyday. You are in it to "ride the wave" for a very long time.

Expect a lower annual return for the next decade, but still the best place to invest and best way to grow your money. Don't expect repeat performance of the last 10 years.

Contribute as you normally do. DCA bi-weekly will remove any market timing or guessing mistakes.

If you are losing sleep over this portfolio being down only 4% from peek (but still up 4% YTD!) the you need more bonds so portfolio is less volatile. Maybe 60-70% bonds if you are that worried.

Also remember there is a stock market crash coming one day. Based on market cycles we are getting mature. Expect your portfolio to drop a lot but recover fast. You do not want to make any knee jerk reactions and have the best allocation for your tolerance BEFORE the crash happens.
Thank you Jungle. Great post!
Newbie
Sep 25, 2007
51 posts
5 upvotes
GTA
Really great post - thoroughly enjoyed the read, Germack. Lots to take in.

I've personally been following the CCP strategy for 2 years and things have been great. However, I've now crossed that threshold into being "maxed" in RRSP/TFSA, and now find myself in the position of having to figure out the transition into ETFs. To top it off, I now need to organize my wife's portfolio - which is much larger than mine.

Currently in TFSA/RRSP I have a mix of 20 bonds / 80% equities (Canadian index, us index, international index). I used RBC's index funds because although they weren't the cheapest, that's where I bank and I felt that the simplicity of getting my feet wet and actually investing versus chasing lower fees and never getting around to it was best.

Now I find myself wondering if I should change the structure of holdings inside my TFSA/RRSP, and how to best set up my wife's, in order to ensure efficient tax structure. My goal is keeping things as simple as possible, so establishing the right foundation seems prudent now. As silly as it sounds now, I never really imagined I'd have these issues when I first learned about the couch potato approach. How quickly things change.

I suppose I could keep purchasing funds in the same basic weighting, both inside and outside of tfsa/rrsp for me and my wife, but I definitely have some figuring to do long term about keeping which funds where in order to ensure efficiency for taxation. Lots to wrap ones head around. Definitely going to read the books you mentioned.
Deal Addict
Sep 13, 2003
1211 posts
85 upvotes
Germack wrote:
Jul 11th, 2017 8:21 pm
Good question. Here is my current asset allocation:

Target Allocation.png


I made the following changes:
- Bond target allocation reduced from 20% to 50k. No new money is invested into bonds. Instead I make extra payments against the mortgage. Both investments are tax free, but after tax returns on extra mortgage payments likely > than returns of bonds.
- The 20% target allocation for bonds got transferred to Canada, USA, International and emerging market equities (+5% for each asset class)

The current goal is to pay down the mortgage within the next 2.5 years. Each year I max my RRSP/TFSA after that everything goes towards extra mortgage payments.
Considering or assuming that you net worth is 1 million, am I correct that your target for bonds is 5%? What is the reason for reducing your bonds?

I'm at the point where I need to adjust my actual allocation

Currently I'm 23% bonds, 15% cdn, 38% us, 19% int'l, 4% reit
I'm thinking of reducing my risk by increasing bonds to 30%, 60% (cad, us, int'l) and 10% reit
Newbie
Feb 11, 2016
76 posts
97 upvotes
I think it's because he compares the bond return with paying down the mortgage. Same return, but the mortgage is more tax efficient so he opted for that.

I'm struggling with the decision myself. There's opinions out there however that when considering paying down your mortgage, you should be comparing to the overall portfolio yield, not only the bond portion.
Deal Addict
Sep 13, 2003
1211 posts
85 upvotes
Oh I see, I never thought to include the mortgage payments. My guess, he is including his mortgage payments as part of the bonds within his portfolio.

Same here.
Deal Addict
May 31, 2007
4655 posts
1776 upvotes
Elendil wrote:
Jul 25th, 2017 12:52 pm
Really great post - thoroughly enjoyed the read, Germack. Lots to take in.

I've personally been following the CCP strategy for 2 years and things have been great. However, I've now crossed that threshold into being "maxed" in RRSP/TFSA, and now find myself in the position of having to figure out the transition into ETFs. To top it off, I now need to organize my wife's portfolio - which is much larger than mine.

Currently in TFSA/RRSP I have a mix of 20 bonds / 80% equities (Canadian index, us index, international index). I used RBC's index funds because although they weren't the cheapest, that's where I bank and I felt that the simplicity of getting my feet wet and actually investing versus chasing lower fees and never getting around to it was best.

Now I find myself wondering if I should change the structure of holdings inside my TFSA/RRSP, and how to best set up my wife's, in order to ensure efficient tax structure. My goal is keeping things as simple as possible, so establishing the right foundation seems prudent now. As silly as it sounds now, I never really imagined I'd have these issues when I first learned about the couch potato approach. How quickly things change.

I suppose I could keep purchasing funds in the same basic weighting, both inside and outside of tfsa/rrsp for me and my wife, but I definitely have some figuring to do long term about keeping which funds where in order to ensure efficiency for taxation. Lots to wrap ones head around. Definitely going to read the books you mentioned.
One thing I never liked was CPP suggestion to make accounts tax efficient and base allocation as "one big portfolio"
I found this to get complicated after 8 accounts (2X RSP, 2X TFSA, 2Xpension, 1X joint non-reg + RESP this just was not simple enough for me. Some problems I ran into

RSP got bigger than I want because CPP white paper said to put USD etf inside it. (tax efficient, right?) Well the s&p500 in CAD went over 4/fold since 2008, so now I have large RSP and TFSA is smaller.
Not sure how this is tax "optimized" but everything balanced would have been so much easier.

Also without all funds in each account, I found it sometimes hard or impossible to rebalance.

and I question the tax savings from doing norbet's gambit and using USD listed ETFS I don't even think is worth it because CAD etf track SO well now and they convert currency for fraction of the cost. I've tried to look at historical returns of USD vs CAD efts, but it's extremely hard to narrow down because not every ETF tracks index perfect every year (but almost and over long period of time)

So this year I finally said "forget it" and finally did what I wanted to do: make each account simple, and balanced. SO much easier to keep track and for making contributions.

This is what I have and suggest (all 25% weighting)

TFSA

XIU
XEF
XUS
XBB

RSP

VTI
VEA
XBB
XIU

RESP has legacy vanguard, I shares, and horizon.

I chose ISHARES because I believe they are the biggest (most AUM) and liquid. I've seen huge spreads on ETFS before that are new(er) to the market. Liquidity is important to me and I don't want the market to be gouging on a huge spread between bid and ask should I have to rebalance one day or during a stock market crash.

I left legacy USD in RSP because I don't wan to pay converting it back right now. But I don't even suggest using USD funds anymore because of the complexity of conversion. (norbert's gambit) and unflattering and uncertain results from doing it over the long run.

I will be done soon to fill the non-reg back up, this is what I'm using to lower distribution tax as it cuts into my CTB:

HXT
HBB
HXS
XEF

Good luck and try to get into those efts I suggested above (TFSA)
Last edited by Jungle on Jul 26th, 2017 12:00 am, edited 1 time in total.

Top

Thread Information

There is currently 1 user viewing this thread. (1 member and 0 guests)

nickwa