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

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  • Jun 7th, 2018 7:36 pm
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Deal Fanatic
Mar 24, 2008
5503 posts
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Toronto
raptorsfans wrote:
Oct 27th, 2017 10:59 am
...
I have a $330K mortgage (locked rate at 2.11% until June 2018), and I have $350K cash (currently sitting in a saving account with 2.5% interest rate). Should I pay off the $330K mortgage first, or should I just put the entire $350K saving into the CCP portfolio? My friend told me to pay off the mortgage first before any investment, but my thinking is, if I can easily get more than 2.11% return from my CCP investment, why would I bother paying off my mortgage in a hurry?

What do you think?

Thanks everyone!
Some great suggestions above but I would personally split the money. I would take a 100k and start a CCP portfolio and put the rest into my mortgage upon renewal next year. There are 3 reasons for that:

1) CCP returns aren't guaranteed. High likelyhood of making more than your mortgage rate but it is certainly not guaranteed. The 2.11% actually becomes ~3% once you factor in your marginal income tax rate.

2) It's guaranteed that you wont get this rate upon renewal in June unless BOC drops interest rates instead of raising them (low likelyhood).

3) Peace of mind. You can always invest the money you pay towards your current mortgage payment.

Good luck in whatever you decide as investing/paying off debt are both good options.
Illegitimi non carborundum
Member
Feb 4, 2017
385 posts
241 upvotes
Toronto
raptorsfans wrote:
Oct 27th, 2017 10:59 am
Thanks everyone in this thread. It's been very informative! I'm a newbie on investment, and I'm serioiusly considering the CCP portfolio, but I have a quick question:

I have a $330K mortgage (locked rate at 2.11% until June 2018), and I have $350K cash (currently sitting in a saving account with 2.5% interest rate). Should I pay off the $330K mortgage first, or should I just put the entire $350K saving into the CCP portfolio? My friend told me to pay off the mortgage first before any investment, but my thinking is, if I can easily get more than 2.11% return from my CCP investment, why would I bother paying off my mortgage in a hurry?

What do you think?

Thanks everyone!
I was in the same situation as you a couple years back. My rate was 2.5% for 2 yrs, then 2.95% for the next 2 yrs. I decided to pay off the mortgage instead because I hate having debt. Also, as another poster mentioned, your CCP returns are not guaranteed so if the market drops, your money is lost (temporarily at least). Now, I have maxed out my RSP and TFSA so everything is working out.
Deal Addict
Jul 23, 2007
3414 posts
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My wife and I are also debt averse. Sold the whole taxable portfolio in 1999 in order to have a large down payment on the house we purchased. Personally, I wasn't keen on the idea of a house. Real estate prices hadn't gone anywhere for about a decade previous, and at the time, I didn't mind renting an apartment. I relented for my wife's sake. Turns out she was a great market timer. A year later the stock market started a downward spiral, and house prices started to go up. Paid off the mortgage in about three and a half years with a minor penalty involved. In 2003 started the taxable equity portfolio all over again. Now we both like the house. So far, so good.
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Oct 21, 2009
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Stryker wrote:
Oct 29th, 2017 10:22 am
I relented for my wife's sake.
happy wife, happy life
Deal Addict
Jul 23, 2007
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Bart_ wrote:
Oct 29th, 2017 2:12 pm
happy wife, happy life
Yes, Bart. Since the day we met, thirty four years together and we're both very happy. I wake up every morning thankful for what I have. Can't believe how lucky I am.
Newbie
Oct 28, 2017
13 posts
2 upvotes
Hello everyone,

A great forum with lots to read on. I am a newbie on investment and would like to learn more and hopefully enjoy a financially stable life.

I currently have a TFSA and an RRSP though I do not make as much to contribute to both. I have about 30k in my TFSA but it is making close to nothing. I have been looking at the questrade TFSA account and thinking to opening on and buying ETFs such as XIC (Canadian market), VUN (CND hedged US market), VEE (emerging markets) and ZAG (BMO bonds) etc.
My questions are,
Is there a difference of keeping the money in TFSA or RRSP?
What about holding US traded ETFs vs TSX efts that track the US market?
What about dividend and taxes of holding the money in one account vs the other?

If anyone can shed some light on these would be very helpful and much appreciated

Thank you
Deal Addict
Apr 11, 2009
2580 posts
312 upvotes
raptorsfans wrote:
Oct 27th, 2017 10:59 am
Thanks everyone in this thread. It's been very informative! I'm a newbie on investment, and I'm serioiusly considering the CCP portfolio, but I have a quick question:

I have a $330K mortgage (locked rate at 2.11% until June 2018), and I have $350K cash (currently sitting in a saving account with 2.5% interest rate). Should I pay off the $330K mortgage first, or should I just put the entire $350K saving into the CCP portfolio? My friend told me to pay off the mortgage first before any investment, but my thinking is, if I can easily get more than 2.11% return from my CCP investment, why would I bother paying off my mortgage in a hurry?

What do you think?

Thanks everyone!
think June 2018 is too short a time horizon to put it into a CCP portfolio
i would just keep it in a tangerine savings account (~3%) and discharge it when the time comes.
Jr. Member
Jan 25, 2012
187 posts
62 upvotes
NORTH YORK
Mobhatia91 wrote:
Oct 29th, 2017 2:41 pm
Hello everyone,

A great forum with lots to read on. I am a newbie on investment and would like to learn more and hopefully enjoy a financially stable life.

I currently have a TFSA and an RRSP though I do not make as much to contribute to both. I have about 30k in my TFSA but it is making close to nothing. I have been looking at the questrade TFSA account and thinking to opening on and buying ETFs such as XIC (Canadian market), VUN (CND hedged US market), VEE (emerging markets) and ZAG (BMO bonds) etc.
My questions are,
Is there a difference of keeping the money in TFSA or RRSP?
What about holding US traded ETFs vs TSX efts that track the US market?
What about dividend and taxes of holding the money in one account vs the other?

If anyone can shed some light on these would be very helpful and much appreciated

Thank you
If you are planning to use TFSA and RRSP for retirement, meaning, you don't expect to take this money out in the foreseeable future, then I personally think it's good to contribute to RRSP, then put the tax return into the TFSA. This way you get to grow both portfolios tax free. You still get liquidity with your TFSA as a "rainy day" fund, but if outlook's 10+ years, then just CCP both and sit back + relax.

Some may argue that it depends on how much money you make now, you might want to save your tax-deferring RRSP contribution for when you get paid more... but I think time-in-market is the most important thing. Having two portfolios growing tax free can easily beat the alternative.
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Jun 12, 2010
438 posts
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YVR
Quick question for you CCP gurus regarding tax-efficiency.

Current situation: limited income, (<45k/year), still in school, may be going back to a 4-year program in the coming year(s). Currently have a maxed TFSA with a split CCP portfolio (see below for makeup), and a fair sum of money sitting in an EQbank account at 2.3% interest. Would like to know how to best maneuver some of that money in EQBank into a Margin-based Questrade account, and which ETFs to proceed with (i.e. NA equities/bonds vs int'l) in terms of maximizing tax efficiency.

Current TFSA umbrella:
60% sitting in a Tangerine Balanced Growth Mutual Fund
40% sitting in a Questrade TFSA account with the following breakdown:
  • VAB - what's going on with Canadian bonds? Has it been down across all the Canadian-bond based ETFs?
  • VCN
  • VFV
  • VUN
  • XEC
  • XEF
  • XRE
Back when I was doing quite a bit more research into CCP and ETF investing, the idea of keeping certain types of equities in tax-sheltered accounts vs non-registered came up quite often. Just wondering if there is any updated guidelines to be aware about and if anyone can point me in the right direction?

Thanks!
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May 3, 2015
235 posts
84 upvotes
Mobhatia91 wrote:
Oct 29th, 2017 2:41 pm
Hello everyone,

A great forum with lots to read on. I am a newbie on investment and would like to learn more and hopefully enjoy a financially stable life.

I currently have a TFSA and an RRSP though I do not make as much to contribute to both. I have about 30k in my TFSA but it is making close to nothing. I have been looking at the questrade TFSA account and thinking to opening on and buying ETFs such as XIC (Canadian market), VUN (CND hedged US market), VEE (emerging markets) and ZAG (BMO bonds) etc.
My questions are,
Is there a difference of keeping the money in TFSA or RRSP?
What about holding US traded ETFs vs TSX efts that track the US market?
What about dividend and taxes of holding the money in one account vs the other?

If anyone can shed some light on these would be very helpful and much appreciated

Thank you
Welcome!

1) Yes there is a difference. A quick summary:

TFSA = Any returns that you earn in this account will be tax free once you withdraw it. You can liquidate and withdraw this money at any time with no penalties (less any early withdrawal fees associated with the funds you select). However, whatever you do withdraw, that amount can't be put back into the account until the next calendar year (read up more on TFSAs for clarification on this).

RRSP = Any returns that you earn in this account are tax deferred. That means that as long as its in the RRSP, you are not taxed on your gains. This allows you to have more money available to reinvest and grow your portfolio while it is in the RRSP. The gains that you do make will eventually be taxed when you withdraw them at retirement. Theoretically, your tax bracket will be lower at this time, so you will pay less tax on your gains than if you were in the earning prime of your career. When you contribute to your RRSP, you are eligible to receive a tax refund. You can decide to claim this refund for the tax year you contributed it in, or wait for a later date. You would generally wait for a later date if your salary was really low. With a higher salary, you will receive a better refund. Once you contribute money to your RRSP, you cannot withdraw it before retirement without paying a stiff penalty (with a few exceptions - you can research to see what these are). Therefore, if you could need the money in the foreseeable future, TFSA may be a better route to go.

Since you appear to have a lower income, I'd say start with the TFSA and then go to the RRSP once that is maxed. Though you are missing out on some refunds from RRSP contributions in the short term, you can always get those later (and perhaps with better value if your income increases), and I believe having better access to your cash while on a lower income is the greatest benefit of the TFSA for you.

2) There are tax benefits to holding US Traded ETFs in particular accounts, but since you are just starting, I would wait until you become more familiar with investing to pursue this.

3) Again, I wouldn't worry too much about this for now, especially since you are unable to max both accounts/still becoming more familiar with investing.

The funds you suggest (XIC, VUN, VEE, ZAG) are fine but you are missing an International Fund (e.g., VIU). I would recommend just going with the CCP portfolio for now (VCN, XAW, ZAG). You could sub out VCN for XIC if you really wanted, but these 3 will give you the diversification needed for your portfolio while also keeping it simple. Don't underestimate the benefits of simplicity, especially when learning!

Hope this helps!
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May 3, 2015
235 posts
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frankc92 wrote:
Nov 1st, 2017 10:51 am
Quick question for you CCP gurus regarding tax-efficiency.

Current situation: limited income, (<45k/year), still in school, may be going back to a 4-year program in the coming year(s). Currently have a maxed TFSA with a split CCP portfolio (see below for makeup), and a fair sum of money sitting in an EQbank account at 2.3% interest. Would like to know how to best maneuver some of that money in EQBank into a Margin-based Questrade account, and which ETFs to proceed with (i.e. NA equities/bonds vs int'l) in terms of maximizing tax efficiency.

Current TFSA umbrella:
60% sitting in a Tangerine Balanced Growth Mutual Fund
40% sitting in a Questrade TFSA account with the following breakdown:
  • VAB - what's going on with Canadian bonds? Has it been down across all the Canadian-bond based ETFs?
  • VCN
  • VFV
  • VUN
  • XEC
  • XEF
  • XRE
Back when I was doing quite a bit more research into CCP and ETF investing, the idea of keeping certain types of equities in tax-sheltered accounts vs non-registered came up quite often. Just wondering if there is any updated guidelines to be aware about and if anyone can point me in the right direction?

Thanks!
Two quick questions. Is there a reason you are going to a margin account before going to your RRSP? Also, why do you own both VUN and VFV?

Overall, the main tax benefit related things you need to know:

1) Interest from bonds/REITs are fully taxable at your marginal tax rate, general wisdom is to keep them in a tax sheltered account;
2) Canadian equities held in a margin/non-registered account qualify for the Canadian Dividend Tax Credit. If you are selling something from your TFSA to move to your margin account, you should start with VCN; and
3) A US-listed ETF that holds US stocks (e.g., VTI) will not be charged a foreign witholding tax if held in an RRSP. However, to do this you will need to convert to USD to purchase the ETF (use Norbert's Gambit). VUN and VFV would not qualify for this, so you wouldn't have to worry about moving these into your RRSP (if there is room). Just wanted to flag it as an option for the future.

Where to specifically put each of your securities is hard without knowing how much each makes up of your portfolio.

Some further reading that could help:
1) http://canadiancouchpotato.com/2012/09/ ... explained/

2) http://canadiancouchpotato.com/2016/07/ ... revisited/
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Jun 12, 2010
438 posts
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YVR
MikeZ13 wrote:
Nov 1st, 2017 12:54 pm
Two quick questions. Is there a reason you are going to a margin account before going to your RRSP? Also, why do you own both VUN and VFV?

Overall, the main tax benefit related things you need to know:

1) Interest from bonds/REITs are fully taxable at your marginal tax rate, general wisdom is to keep them in a tax sheltered account;
2) Canadian equities held in a margin/non-registered account qualify for the Canadian Dividend Tax Credit. If you are selling something from your TFSA to move to your margin account, you should start with VCN; and
3) A US-listed ETF that holds US stocks (e.g., VTI) will not be charged a foreign witholding tax if held in an RRSP. However, to do this you will need to convert to USD to purchase the ETF (use Norbert's Gambit). VUN and VFV would not qualify for this, so you wouldn't have to worry about moving these into your RRSP (if there is room). Just wanted to flag it as an option for the future.

Where to specifically put each of your securities is hard without knowing how much each makes up of your portfolio.

Some further reading that could help:
1) http://canadiancouchpotato.com/2012/09/ ... explained/

2) http://canadiancouchpotato.com/2016/07/ ... revisited/
Thanks for the reply Mike. To answer your questions:

1. My US equities make up about 23% of my investment portfolio, with VFV comprising about 40% of the US equities component. I wanted to increase my risk a bit and place a bit of higher emphasis on the S&P 500 index, while mitigating some of that with VUN.
2. Re: RRSP vs margin - great question, and to be honest I'm *not* entirely sure my rationale is correct. I'm expecting a significant jump in income in within the next 5-10 years (i.e. from mid 50s to >150); currently a 25 y/o student. Taking this into consideration, I was under the impression that it would be a good idea to save the contribution room as it carries over. Is this the right train of thought?

The TFSA portfolio breakdown is something along these lines:

VAB: 20%
VCN: ~18.5%
US equities: 23%
XEF: 18.5%
XEC: 10%
XRE: 10%

Will visit those links. Thanks!
Last edited by wiffle on Nov 1st, 2017 2:42 pm, edited 1 time in total.
Deal Addict
Jan 20, 2016
1676 posts
682 upvotes
Houston, TX
frankc92 wrote:
Nov 1st, 2017 10:51 am

[*]VAB - what's going on with Canadian bonds? Has it been down across all the Canadian-bond based ETFs?
Stocks are for income, bonds are for stability (c) DoNotRemeberWho

As for 25yo, I think could we better return-wise to drop bonds completely. Especially buying them in rising rate env.
Yes, you'd have a bit more volatility (not sure what is your bond portion, 20% will not make ride much smoother imo anyway), but returns would be 1-2% YEARLY greater, a BIG difference across 20+ years
P.s. 60% sitting in a Tangerine Balanced Growth Mutual Fund - I'd say you're wasting ~0.8% MER on this. Once you have self-brokerage account and doing ETFs anyway, have 1.x% MER mutual fund is non-optimal, imo
p.s.s. From those two, I'd rather dump Tangerine MF and buy 20%XIC 80%XAW instead, and keep VAB if you need to have bonds to sleep better. Bonds are lesser evil here from long time prospective, imo.

and yes :) I'd replace
VFV
VUN
XEC
XEF
XRE
with single XAW

OK, maybe XRE could go separate if you're fan of fine tuning AA, but I'd rather try to keep it simple
Make the Trudeau drama teacher again!
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Feb 1, 2012
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asa1973 wrote:
Nov 1st, 2017 2:52 pm
Stocks are for income, bonds are for stability (c) DoNotRemeberWho
Stocks let you eat well. Bonds let you sleep well. :)
Invest your time actively and your money passively.
Newbie
Oct 28, 2017
13 posts
2 upvotes
MikeZ13 wrote:
Nov 1st, 2017 12:31 pm
Welcome!

1) Yes there is a difference. A quick summary:

TFSA = Any returns that you earn in this account will be tax free once you withdraw it. You can liquidate and withdraw this money at any time with no penalties (less any early withdrawal fees associated with the funds you select). However, whatever you do withdraw, that amount can't be put back into the account until the next calendar year (read up more on TFSAs for clarification on this).

RRSP = Any returns that you earn in this account are tax deferred. That means that as long as its in the RRSP, you are not taxed on your gains. This allows you to have more money available to reinvest and grow your portfolio while it is in the RRSP. The gains that you do make will eventually be taxed when you withdraw them at retirement. Theoretically, your tax bracket will be lower at this time, so you will pay less tax on your gains than if you were in the earning prime of your career. When you contribute to your RRSP, you are eligible to receive a tax refund. You can decide to claim this refund for the tax year you contributed it in, or wait for a later date. You would generally wait for a later date if your salary was really low. With a higher salary, you will receive a better refund. Once you contribute money to your RRSP, you cannot withdraw it before retirement without paying a stiff penalty (with a few exceptions - you can research to see what these are). Therefore, if you could need the money in the foreseeable future, TFSA may be a better route to go.

Since you appear to have a lower income, I'd say start with the TFSA and then go to the RRSP once that is maxed. Though you are missing out on some refunds from RRSP contributions in the short term, you can always get those later (and perhaps with better value if your income increases), and I believe having better access to your cash while on a lower income is the greatest benefit of the TFSA for you.

2) There are tax benefits to holding US Traded ETFs in particular accounts, but since you are just starting, I would wait until you become more familiar with investing to pursue this.

3) Again, I wouldn't worry too much about this for now, especially since you are unable to max both accounts/still becoming more familiar with investing.

The funds you suggest (XIC, VUN, VEE, ZAG) are fine but you are missing an International Fund (e.g., VIU). I would recommend just going with the CCP portfolio for now (VCN, XAW, ZAG). You could sub out VCN for XIC if you really wanted, but these 3 will give you the diversification needed for your portfolio while also keeping it simple. Don't underestimate the benefits of simplicity, especially when learning!

Hope this helps!
You are a god send. I never thought someone would reply back to my questions. Thank you for answering my questions with so much clarity.

The TRSA point u make makes sense to max it out and then contribute to RRSP. I have been reading up on how the holding tax is differed if you hold money in RRSP. But I like the idea of growing money in my TFSA due to easy access.

I will ask you more eventually when I save more and have a decent bankroll.

Any particular reason you recommend the CCP portfolio? And what about the Vanguard vs iShares? Looking at Morningstar ratings vanguard has had lower ratings and lower total market cap? 3.5 billion vs 550 million?
Any reason for VCN vs XIU?

Thank you and much appreciated!

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