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

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  • Nov 16th, 2017 10:40 pm
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Sr. Member
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Apr 16, 2009
876 posts
198 upvotes
Vancouver
Xbowop wrote:
Nov 7th, 2017 11:22 pm
Any thoughts regarding borrowing on margin rather than carrying a mortgage if you're choosing to leverage regardless? For example an interest rate of 2% from IB which is also tax deductible beats any mortgage interest rate out there today.
Borrowing through IB runs the risk if there's ever a margin call and your investments can't cover the loan.

Having a mortgage/HELOC will 99% not have this issue.
Newbie
Feb 11, 2016
71 posts
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DefconZero wrote:
Nov 8th, 2017 12:43 am
Borrowing through IB runs the risk if there's ever a margin call and your investments can't cover the loan.

Having a mortgage/HELOC will 99% not have this issue.
What if your ratio is very safe? Say you have 2 dollars for every dollar you're borrowing. Also you leave your bond allocation in your margin account.

Also you can have heloc ready to top up your margin account if needed.

Feels like you can take enough precautions to avoid a margin call
[OP]
Deal Addict
Oct 1, 2006
1684 posts
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Montreal
I am not a fan of leverage. Too much risk.

A market crash with an 80/20 equity/bonds allocation is already nerve wracking. I can't imagine stomaching a market crash with a leveraged portfolio.
Deal Addict
Jul 23, 2007
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Since I'm always fully invested, no matter what the markets are doing, I like to be able to sleep at night. No leverage for me, thanks.
Deal Addict
Jan 20, 2016
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Houston, TX
Germack wrote:
Nov 9th, 2017 3:30 pm
Interesting article by Larry Swedroe: https://www.advisorperspectives.com/art ... sacred-cow

There are no logical, economic reasons for preferring dividends. Worse, new research reveals just how inefficient a high-dividend strategy can be for taxable investors.
Larry is known for bashing dividends strategy :) he's antivdiv-perma
It's also perpetual topic on Boglehead forum about div vs nondiv

p.s. As being mentioned, it's HIGHLY depends on TAXATION, which is quite DIFFERENT in USA and Canada in terms of div credits for eligible dividends

I'm not an accountant, but on my calculations, dividends income taxed a bit more preferably in Canada, at least in 100-150k yearly (total) income range, and for retired persons as well.

On side note, I could say Canadian div stocks imo better in terms of yield and div growth, while in USA you'd be better in plain index investing
Make the Trudeau drama teacher again!
Deal Addict
Jul 23, 2007
3265 posts
1126 upvotes
An investor has to do what's right for themselves. I invest only in individual Canadian dividend growth stocks in the taxable portfolio. My only regret is that I didn't follow Tom Connolly's lead way back in the 1980's when I started reading newspaper articles about how he invested. Could off, but didn't. I'm sure he's a heck of a lot richer than me, because he always stayed focused. Although I'm nowhere being a tax expert, the dividend tax credit on Canadian equities here in Canada seems to be a big incentive. At least it doesn't seem to have done me any harm. Income keeps growing, the capital gains for Canadian companies in there for the most part seem to be doing the same. Compared to what was happening in the U.S. and Europe during the financial crisis of 2008 to early 2009, this portfolio held up very well. I'm certainly not complaining.

For the RRSP and TFSA I didn't want to invest in exactly the same thing as the taxable account. Since 2010 both accounts have been invested in either TD e-Series funds and/or broad based index ETF's.

All three accounts seem to have co-existed well together for the last seven years, and I've no plans for any major changes.

By the way, anyone who read The Little Book of Common Sense Investing 10th Anniversary Edition will realize that John Bogle just loves his dividends.

As John Bogle has said, "The greatest enemy of a good plan is the perfect plan." Stick to the good plan.
Deal Fanatic
Mar 24, 2008
5166 posts
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Toronto
What is "Could off", do you mean "Could have"?
Illegitimi non carborundum
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Oct 1, 2011
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Stryker wrote:
Nov 9th, 2017 5:29 pm
Although I'm nowhere being a tax expert, the dividend tax credit on Canadian equities here in Canada seems to be a big incentive. At least it doesn't seem to have done me any harm. Income keeps growing, the capital gains for Canadian companies in there for the most part seem to be doing the same. Compared to what was happening in the U.S. and Europe during the financial crisis of 2008 to early 2009, this portfolio held up very well. I'm certainly not complaining.
Yes. Until/unless the tax on dividend income changes drastically. I'd be really annoyed.
Deal Addict
Jul 3, 2006
1129 posts
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Germack wrote:
Jun 6th, 2014 4:19 pm
Hi RFD,

After reading several articles, forums, blogs and academic studies, I came to the conclusion that the best way to invest my money is in a low cost diversified portfolio.

I have been applying this investment strategy for the last 12 years and would like to share my progress with you. With this post I hope to inspire others who are thinking about following a similar approach.

I graduated from university 12 years ago and found a job shortly after graduation. My starting salary was around 60K. A bit more than half of my take home pay was invested each month in a low cost diversified portfolio using TD e-series index funds and ETFs.

My portfolio is a modified Couch Potato Portfolio with the following asset allocation:
- Around 20% of my money is invested in Bonds (Ing Direct)
- Around 10% is invested in Real Estate (XRE)
- Around 17.5% is invested in Canadian equities (XIC, CDZ)
- Around 17.5% is invested in US equities (TD US IND e-series, VTI)
- Around 17.5% is invested in Emerging Market equities (VWO, XEM)
- Around 17.5% is invested in European equities (TD Euro IND e-series, VGK)

I have been sticking to this investing plan for the last 12 years and never attempted to time the market.

I have been tracking my net-worth on a bi-monthly basis for the last 12 years.

Update #1: Networth 01NOV2017.

NW_NOV2017.png


Update #2: Savings vs. investment gains (2010 -2016)

SAvings vs Investment Gains.png
Do you still work? When do you plan on retiring? Are you in the 30s or 40s?
Deal Fanatic
Mar 24, 2008
5166 posts
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J_u_n_i_o_r_3 wrote:
Nov 9th, 2017 9:36 pm
Do you still work? When do you plan on retiring? Are you in the 30s or 40s?
He still works, I believe he is in his 90s.
Illegitimi non carborundum
[OP]
Deal Addict
Oct 1, 2006
1684 posts
649 upvotes
Montreal
Yes, I still work. I like my work so no plans to retire anytime soon, though I would like to start working part time (3-4 days a week) in a few years, if possible. I am in my late 30s.
Deal Addict
Jul 3, 2006
1129 posts
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Germack wrote:
Nov 9th, 2017 9:52 pm
Yes, I still work. I like my work so no plans to retire anytime soon, though I would like to start working part time (3-4 days a week) in a few years, if possible. I am in my late 30s.
not bad what would you say you avg % return is year over year on gains?

Thanks
Deal Addict
Jan 20, 2016
1360 posts
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Houston, TX
Just an example for NET income dividends vs ca.gains for someone retired (67yo, single for sake of simplicity) with 20k CPP, 20k OAS, and 20k in dividends vs 20k in cap.gains
20k in divs
Total taxes, clawbacks, CPP/EI premiums
$6,822


$0
Adjusted taxable income before taxes / before RRSP deduction
$60,000


$0
Adjusted taxable income after taxes / before RRSP deduction
$53,178


$0
Tax savings re RRSPs / Marginal tax rate (see note below)
$0

29.7%

$0

20.1%
Average tax rate based on taxable income
10.09%

Avg tax rate based on adjusted taxable income
11.37%
Now 20k cap.gains
Total taxes, clawbacks, CPP/EI premiums
$7,979



$0
Adjusted taxable income before taxes / before RRSP deduction
$60,000


$0
Adjusted taxable income after taxes / before RRSP deduction
$52,021


$0
Tax savings re RRSPs / Marginal tax rate (see note below)
$0

29.7%

$0

20.1%
Average tax rate based on taxable income
15.96%

0.00%
= total taxes, clawbacks, CPP/EI divided by taxable income
Avg tax rate based on adjusted taxable income
13.30%
1k difference in AFTER tax money (5%) just because of different taxation
In USA, BOTH divs and cap.gains in same conditions would be taxed on 15%, thus for USA investor they do NOT have difference, but for Canadian one it does.

p.s. however, for YEARLY investment income over 60k, cap.gains become more favorable...(that 1.2-1.5M portfolio)
So plan accordingly (it would make sense use DI portfolio for lower-income spouse then) once you reach 1M net worth. lol
Make the Trudeau drama teacher again!
[OP]
Deal Addict
Oct 1, 2006
1684 posts
649 upvotes
Montreal
Wow, the thread has almost 100 up votes. Thanks guys. This makes me very happy :)

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