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Couch potato investing for the last 18 years - tracking my progress

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Banned
Oct 12, 2017
239 posts
179 upvotes
Germack,

My wife and I are in our mid 20s. We have been inspired by your post and have followed the couch potato model ourselves. We have started about 3 years ago and since then, we've been socking away as much of our earnings as we can.

We have one question. We hope to one day tap into the dividends we earn through our non-registered accounts and live off of it. We were thinking that $1500/month of dividends would be a nice goal to have. We calculated that we would need approximately 1.2 million in our non-registered accounts in order to earn that much of dividends.

We calculated that number as follows:
($1500 * 12 months)/ 1.5% dividend rate = 1.2 million required

Does the above calculation make sense in order to achieve this goal? I came up with 1.5% by assuming that the money would be investing in broad equity etfs (CAD, US, INTL).
Jr. Member
Jan 16, 2009
173 posts
96 upvotes
I believe that right now a plain vanilla ETF tracking the entire TSX (i.e. VCN, XIC, ZCN) kicks out about 2.5% in dividend yield. You may also claim the dividend tax credit.

Broad based US equity ETFs (i.e. VUN, XUU) are at about 1.9%, while international developed ETFs (i.e. XEF, VIU) a juicy 3.0%. The problem is that US and international equity dividends are taxed like interest in non-registered accounts.

Take a peek at this blog post from Justin Bender's website about asset location that I think may explain somethings with regards to the different dividend yields and where to place them for tax advantageous returns.

serious8 wrote: Germack,

My wife and I are in our mid 20s. We have been inspired by your post and have followed the couch potato model ourselves. We have started about 3 years ago and since then, we've been socking away as much of our earnings as we can.

We have one question. We hope to one day tap into the dividends we earn through our non-registered accounts and live off of it. We were thinking that $1500/month of dividends would be a nice goal to have. We calculated that we would need approximately 1.2 million in our non-registered accounts in order to earn that much of dividends.

We calculated that number as follows:
($1500 * 12 months)/ 1.5% dividend rate = 1.2 million required

Does the above calculation make sense in order to achieve this goal? I came up with 1.5% by assuming that the money would be investing in broad equity etfs (CAD, US, INTL).
Deal Addict
Oct 1, 2006
3249 posts
4472 upvotes
Montreal
serious8 wrote: Germack,

My wife and I are in our mid 20s. We have been inspired by your post and have followed the couch potato model ourselves. We have started about 3 years ago and since then, we've been socking away as much of our earnings as we can.

We have one question. We hope to one day tap into the dividends we earn through our non-registered accounts and live off of it. We were thinking that $1500/month of dividends would be a nice goal to have. We calculated that we would need approximately 1.2 million in our non-registered accounts in order to earn that much of dividends.

We calculated that number as follows:
($1500 * 12 months)/ 1.5% dividend rate = 1.2 million required

Does the above calculation make sense in order to achieve this goal? I came up with 1.5% by assuming that the money would be investing in broad equity etfs (CAD, US, INTL).
Hi serious8,

The amount of investments required for ~$1500 dividends per month are much lower. I would estimate you only need around 800k invested in broad equity etfs for this. (Dividend yields: VCN: 2.4%, VTI: 1.8%, VGK: 2.6%, VWO 2.3%, etc.)

Good luck
Deal Addict
Jan 20, 2016
2028 posts
1013 upvotes
Houston, TX
Germack wrote: Hi serious8,

The amount of investments required for ~$1500 dividends per month are much lower. I would estimate you only need around 800k invested in broad equity etfs for this. (Dividend yields: VCN: 2.4%, VTI: 1.8%, VGK: 2.6%, VWO 2.3%, etc.)

Good luck
I'd say ~400k once you'd follow Rodbarc thread. ESPECIALLY if this is in non-reg account (taxation issue)

In case you looking for
tap into the dividends we earn through our non-registered accounts
, ex-Canada equities is NOT the best ones (lower yield, higher taxation)
Make the face great again
Deal Addict
Jan 20, 2016
2028 posts
1013 upvotes
Houston, TX
serious8 wrote: Germack,

My wife and I are in our mid 20s. We have been inspired by your post and have followed the couch potato model ourselves. We have started about 3 years ago and since then, we've been socking away as much of our earnings as we can.

We have one question. We hope to one day tap into the dividends we earn through our non-registered accounts and live off of it. We were thinking that $1500/month of dividends would be a nice goal to have. We calculated that we would need approximately 1.2 million in our non-registered accounts in order to earn that much of dividends.

We calculated that number as follows:
($1500 * 12 months)/ 1.5% dividend rate = 1.2 million required

Does the above calculation make sense in order to achieve this goal? I came up with 1.5% by assuming that the money would be investing in broad equity etfs (CAD, US, INTL).
investing-idea-dividend-growth-1587815/
Make the face great again
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User avatar
Feb 19, 2014
3352 posts
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Langley
Hey everyone.

I was looking at my TD Performance feature and it compares my portfolio to two indexes...

S&P/TSX Comp. TR Index
S&P 500 TR Index

^How do I invest in those indexes? both of those indexes are beating my CPP strategy portfolio.
As of today my performance for the last month are:

Canadian Couch Potato = 3.53%
S&P 500 TR Index = 4.75%
S&P/TSX Comp. TR Index = 4.84%

Both of those indexes are more than 1% higher than my CPP portfolio.

How do I buy those indexes as they seem to be performing way better than my CPP strategy?

Thanks
Deal Addict
Oct 1, 2006
3249 posts
4472 upvotes
Montreal
jellytime wrote: Hey everyone.

I was looking at my TD Performance feature and it compares my portfolio to two indexes...

S&P/TSX Comp. TR Index
S&P 500 TR Index

^How do I invest in those indexes? both of those indexes are beating my CPP strategy portfolio.
As of today my performance for the last month are:

Canadian Couch Potato = 3.53%
S&P 500 TR Index = 4.75%
S&P/TSX Comp. TR Index = 4.84%

Both of those indexes are more than 1% higher than my CPP portfolio.

How do I buy those indexes as they seem to be performing way better than my CPP strategy?

Thanks
Whats your CCP asset allocation? What ETFs/Funds do you use? Whats your YTD performance compared to the indices? 1 month is a very short time period.
Last edited by Germack on Oct 16th, 2017 12:34 pm, edited 2 times in total.
Deal Addict
Jan 20, 2016
2028 posts
1013 upvotes
Houston, TX
jellytime wrote: Hey everyone.

I was looking at my TD Performance feature and it compares my portfolio to two indexes...

S&P/TSX Comp. TR Index
S&P 500 TR Index

^How do I invest in those indexes? both of those indexes are beating my CPP strategy portfolio.
As of today my performance for the last month are:

Canadian Couch Potato = 3.53%
S&P 500 TR Index = 4.75%
S&P/TSX Comp. TR Index = 4.84%

Both of those indexes are more than 1% higher than my CPP portfolio.

How do I buy those indexes as they seem to be performing way better than my CPP strategy?

Thanks
Canadian Couch Potato = 3.53% - in CAD, right?
S&P 500 TR Index = 4.75% - in USD, correct?

If yes, do you still have question "why"?

p.s. aside the obvious caveat of comparing performance of long-time portfolio on 1 month horizon...You're 100% sure you've used exact same start/stop dates for both? +- 1 day could make HUGE difference even on 1y time frame, but diminish over 10+y
Make the face great again
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Feb 19, 2014
3352 posts
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Langley
Germack wrote:
Whats your CCP asset allocation? What ETFs/Funds do you use? Whats your YTD performance compared to the indices? 1 month is a very short time period.
asa1973 wrote:
Canadian Couch Potato = 3.53% - in CAD, right?
S&P 500 TR Index = 4.75% - in USD, correct?

If yes, do you still have question "why"?

p.s. aside the obvious caveat of comparing performance of long-time portfolio on 1 month horizon...You're 100% sure you've used exact same start/stop dates for both? +- 1 day could make HUGE difference even on 1y time frame, but diminish over 10+y
Oops, you're right. I should be looking at a longer time period.

Year to date ROI of my Portfolio is 11.33%
and the S&P TR Indexes are around 7.5%

I guess one month isn't long enough. Nevermind....


But, i'm holding... (approx values)
15% in BMO
20% in TDB908 - NSDQ
20% in TDB900 - CDN
10% in TDB902 - US
20% in TDB909 - CDN Bonds
15% in TDB911 - INTL
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Feb 1, 2012
2214 posts
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Thunder Bay, ON
One big factor that would cause your portfolio to lag the TSX and SP500 indices is your 20% Cdn bond holding. Bonds typically are a safe, low volatility asset class. They add stability to your portfolio and will damp down risk and volatility. If there is an equity crash or bear market bonds will help minimize the drop in your portfolio. But long-term they tend to trail equity returns. Especially now in a rising interest rate environment they may not have good returns.

You need to consider carefully your tolerance for risk and volatility, and your investing timeline. This is a good article on asset allocation:
http://www.finiki.org/wiki/Asset_allocation
When I was young, I was poor. Now, after years of hard work, I'm no longer young.
Deal Fanatic
Jul 23, 2007
5134 posts
4928 upvotes
serious8 wrote: ........ I'm somewhat aware of dividend investing but leaning towards being a couch potato :)
Nothing wrong with that. You have to invest in a way that's both comfortable for you and your wife, and at the same time effective.

I don't know if you've read it, but here's an article in Globeinvestor about a dividend investor who converted to index investing.

Congratulations by the way on starting investing at a young age. The earlier you can get started, the better.
Deal Addict
Oct 1, 2006
3249 posts
4472 upvotes
Montreal
Drew_W wrote: Opening myself up for some critique:

Started out on the CCP model with ZDB/XAW/VCN.

My RRSP currently holds XAW.

My TFSA holds all of the ZDB, some more XAW and a bit of VCN.

My Cash holds the rest of XAW, and most of the VCN.

I still have quite a bit of RRSP room remaining. I want to make a lump sum contribution and the rebalance everything, along with making my portfolio much more aggressive (I went a bit soft on my risk tolerance first go around and would rather see fluctuations in my portfolio rather than a bunch of bonds doing barely anything for me. I'm 33, I have time). Not sure if I should contribute just enough to push me out of the 26% tax bracket (i.e. to lower my income to under $91.8k) or if I should just throw all of it in there. Not sure to what degree ducking tax via RRSP contribution makes sense or whether it's at all a factor in how much to contribute vs just maxing RRSP if I can. It isn't a topic that is widely discussed here.

Open to thoughts on fund choice and allocation between accounts too. Thx.
Sorry I missed your post. Great choice of ETFs. I would just put ZDB into your RRSP and not TFSA.

I would throw everything into your TFSA/RRSP. You can defer claiming your RRSP contributions if you prefer doing so. It all depends on your marginal tax rate.
Member
Jan 23, 2017
245 posts
300 upvotes
serious8 wrote: Thanks for the link! I have actually seen that thread already. I'm somewhat aware of dividend investing but leaning towards being a couch potato :)
Interesting, so instead of picking stocks like the OP has detailed here, you'd like have a low effort ETF portfolio that nets you 1.5% ... what ETFs were you thinking?
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Jan 27, 2015
1037 posts
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Edmonton, AB
serious8 wrote: Germack,

My wife and I are in our mid 20s. We have been inspired by your post and have followed the couch potato model ourselves. We have started about 3 years ago and since then, we've been socking away as much of our earnings as we can.

We have one question. We hope to one day tap into the dividends we earn through our non-registered accounts and live off of it. We were thinking that $1500/month of dividends would be a nice goal to have. We calculated that we would need approximately 1.2 million in our non-registered accounts in order to earn that much of dividends.

We calculated that number as follows:
($1500 * 12 months)/ 1.5% dividend rate = 1.2 million required

Does the above calculation make sense in order to achieve this goal? I came up with 1.5% by assuming that the money would be investing in broad equity etfs (CAD, US, INTL).
If your money grows at 4% real (average) return, and you're only drawing 1.5% per year, what are you going to do with the principal when you guys are really old / pass away?

Never focus on just the dividends, but rather the total return.

4% is the safe withdrawal rate meaning if you have a balanced portfolio, you can withdraw 4% each year (plus inflation) without ever running out of money.
Banned
Oct 12, 2017
239 posts
179 upvotes
imclumzy wrote: Interesting, so instead of picking stocks like the OP has detailed here, you'd like have a low effort ETF portfolio that nets you 1.5% ... what ETFs were you thinking?
33% in CAD (ZCN, XIC), 33% in US (ZSP, The ishares equivalent), 33% in INTL (ZEA, XEF).

Basically standard ETFs. I will add Vanguard into this mix as well. Diversifying across multiple providers...
FinancialFreedom wrote: If your money grows at 4% real (average) return, and you're only drawing 1.5% per year, what are you going to do with the principal when you guys are really old / pass away?

Never focus on just the dividends, but rather the total return.

4% is the safe withdrawal rate meaning if you have a balanced portfolio, you can withdraw 4% each year (plus inflation) without ever running out of money.

We plan to withdraw from the principle once we are in our 50s/60s. We were thinking that life is too short to just save and not enjoy. As such, I was thinking why not use our small amount of dividends to splurge here and there?

Based on our needs, having $1500/month of spending money mostly fulfills our needs to enjoy life without feeling guilty of it. That's where we came up with that number.

By knowing that we get 1500/month in dividends each month, we won't feel guilty spending that amount to enjoy life. :) OP built his wealth in the early years as a cheap student. We are living mostly like cheap students as well right now so the guilt is always there when we do spend.
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Jan 20, 2016
2028 posts
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Houston, TX
imclumzy wrote: Interesting, so instead of picking stocks like the OP has detailed here, you'd like have a low effort ETF portfolio that nets you 1.5% ... what ETFs were you thinking?
https://www.blackrock.com/ca/individual ... -index-etf - 4.9% currently, low effort, but Total Return would be ~50% lower than mentioned DI portfolio...
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Jul 4, 2004
7534 posts
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Germack wrote: Sorry I missed your post. Great choice of ETFs. I would just put ZDB into your RRSP and not TFSA.

I would throw everything into your TFSA/RRSP. You can defer claiming your RRSP contributions if you prefer doing so. It all depends on your marginal tax rate.
Thanks, I didn't know this was possible.

Found this good article explaining it in case anyone else wants a read: http://business.financialpost.com/perso ... -deduction
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Feb 5, 2017
910 posts
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Bonds and other fixed income sources are not only there to reduce the volatility of your portfolio.
If there is a market crash tomorrow and equities drop by 50%, I would not hesitate to sell 50% of my bonds or more and buy equities instead.
Of course, market could crash another 30% the next day, but in the long run (could be a decade!) that 50% off you got will be in your pocket.
In order to do this kind of move, you need to have a long term horizon of investing and think of your money in the stock market as 'play money', not something you will need to live jn the next year or two.
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Mar 10, 2010
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Drew_W wrote: Thanks, I didn't know this was possible.

Found this good article explaining it in case anyone else wants a read: http://business.financialpost.com/perso ... -deduction
I've heard and been thinking about a strategy like this as I will be bumping up a bracket or two within 2-3 years. Does the CRA place any limit on what you can park in your RRSP for future year deductions? Say for example I have ~$50k of RRSP space available, can I drop in $100k and over the next decade only claim the amount I need each year to drop me a bracket? Could you then keep money unclaimed in your RRSP indefinitely compounding tax-free?

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