Investing

Couch potato investing for the last 14 years - tracking my progress

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  • Dec 1st, 2020 4:13 pm
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Deal Fanatic
Feb 4, 2015
6110 posts
2573 upvotes
Canada, Eh!!
Folks you have done 99% of the heavy lifting... no need to complicate with various % of different etfs... simple like Germack said.
.......
July 13, 2017 to October 25, 2018: BOC raised rates 5 times and MCAP raised its prime rate next day each time.

2020: BOC dropped rates 3 times and MCAP waited and waited to drop its prime rate to include all 3 drops.
Newbie
Oct 20, 2018
12 posts
Hi everyone, I have been following the Canadian Couch Potato model for the past 4 years, and I'm pretty happy with it. However, my wife and I have our investments spread out across 2 RRSPs, 2 TFSAs, and 2 margin accounts (all with Questrade except for 1 RRSP, which is with RBC Direct Investing), and I sometimes find rebalancing to be time consuming. When I set things up, the total market ETFs from Vanguard weren't available, so I chose 5 ETFs: 1 each for bonds, US, Canada, International, and emerging.

Here's my target allocation:
VAB (bonds) - 28%
HXS (US) - 24%
ZCN (Canada) - 24%
XEF (International) - 19%
XEC (Emerging) - 5%

For tax efficiency and to maximize growth in our TFSAs, I have all of my VAB in an RRSP. By my calculations, our overall MER is 0.21. Anyway, my questions are as follows:

1. For the sake of simplicity, should I sell everything and just buy one of the total market funds like VGRO?
2. Or should I keep bonds and equities separate, i.e., buy VAB and VEQT, so I can maintain the tax advantage of having bonds in my RRSP?
3. Is it worth buying a USD ETF in my RRSP instead of having a Canadian ETF?

Anyway, I think the fees would probably be under $100 to liquidate everything and just buy VGRO or VAB/VEQT (or something similar because i know there are competing funds offered), but maybe there's something I'm overlooking, so I'd like some feedback before I pull the trigger!

My wife and I are in our late 30s, so my timeframe is at least 20 years (probably more like 25). Any thoughts, advice, feedback, etc. would be greatly appreciated!
Deal Addict
Jul 15, 2009
1999 posts
1124 upvotes
mathishard wrote: Hi everyone, I have been following the Canadian Couch Potato model for the past 4 years, and I'm pretty happy with it. However, my wife and I have our investments spread out across 2 RRSPs, 2 TFSAs, and 2 margin accounts (all with Questrade except for 1 RRSP, which is with RBC Direct Investing), and I sometimes find rebalancing to be time consuming. When I set things up, the total market ETFs from Vanguard weren't available, so I chose 5 ETFs: 1 each for bonds, US, Canada, International, and emerging.

Here's my target allocation:
VAB (bonds) - 28%
HXS (US) - 24%
ZCN (Canada) - 24%
XEF (International) - 19%
XEC (Emerging) - 5%

For tax efficiency and to maximize growth in our TFSAs, I have all of my VAB in an RRSP. By my calculations, our overall MER is 0.21. Anyway, my questions are as follows:

1. For the sake of simplicity, should I sell everything and just buy one of the total market funds like VGRO?
2. Or should I keep bonds and equities separate, i.e., buy VAB and VEQT, so I can maintain the tax advantage of having bonds in my RRSP?
3. Is it worth buying a USD ETF in my RRSP instead of having a Canadian ETF?

Anyway, I think the fees would probably be under $100 to liquidate everything and just buy VGRO or VAB/VEQT (or something similar because i know there are competing funds offered), but maybe there's something I'm overlooking, so I'd like some feedback before I pull the trigger!

My wife and I are in our late 30s, so my timeframe is at least 20 years (probably more like 25). Any thoughts, advice, feedback, etc. would be greatly appreciated!
1. Only you can decide this since it depends on what price you put on convenience. Figure out how much more it would cost you to go VGRO, and then decide whether you value the simplicity that much. It probably depends on what fraction of your portfolio is non-registered. There's not much tax efficiency to be gained by optimizing between TFSA and RRSP, but if your non-registered portion is relatively big, having your Canadian equity there for the dividend tax credit and HXS can make quite a big difference.

2. If you calculate your asset allocation properly accounting for the taxes payable on RRSP withdrawals, there is no benefit to holding bonds in an RRSP over a TFSA. See https://www.michaeljamesonmoney.com/201 ... tures.html and https://www.michaeljamesonmoney.com/201 ... rrors.html. If you don't account for the taxes payable on RRSP withdrawals, then by putting bonds in your RRSP, you are inadvertently changing your asset allocation slightly away from bonds and towards equities.

3. Having Canadian ETFs in your RRSP instead of US ones costs you about 0.3% of the value of your RRSP each year (2% dividend yield times 15% withholding tax). Having USD ETFs would cost you currency exchange fees when you buy and sell. Evaluate and compare those costs (considering how many years you plan to hold those investments) and if holding Canadian ETFs turns out to cost more, consider whether the convenience of avoiding currency exchange is worth that extra cost.
Newbie
Oct 20, 2018
12 posts
bubak wrote: 1. Only you can decide this since it depends on what price you put on convenience. Figure out how much more it would cost you to go VGRO, and then decide whether you value the simplicity that much. It probably depends on what fraction of your portfolio is non-registered. There's not much tax efficiency to be gained by optimizing between TFSA and RRSP, but if your non-registered portion is relatively big, having your Canadian equity there for the dividend tax credit and HXS can make quite a big difference.

2. If you calculate your asset allocation properly accounting for the taxes payable on RRSP withdrawals, there is no benefit to holding bonds in an RRSP over a TFSA. See https://www.michaeljamesonmoney.com/201 ... tures.html and https://www.michaeljamesonmoney.com/201 ... rrors.html. If you don't account for the taxes payable on RRSP withdrawals, then by putting bonds in your RRSP, you are inadvertently changing your asset allocation slightly away from bonds and towards equities.

3. Having Canadian ETFs in your RRSP instead of US ones costs you about 0.3% of the value of your RRSP each year (2% dividend yield times 15% withholding tax). Having USD ETFs would cost you currency exchange fees when you buy and sell. Evaluate and compare those costs (considering how many years you plan to hold those investments) and if holding Canadian ETFs turns out to cost more, consider whether the convenience of avoiding currency exchange is worth that extra cost.
Thanks, this is very useful! I'll try to write a more thoughtful response when I have a bit more time available, but you've reminded me that I have left out some important information.

1. I have a defined benefits pension, and I don't have much RRSP space. I'll probably contribute around $40k to a spousal RRSP in the next two years, but after that I will only be able to contribute about $3k/year.
2. Our TFSA's are maxed out.
3. My wife was working, but she is no longer able to. We have about $100k in her RRSP, but I feel like there's no point in putting any more of her money in the RRSP because she wouldn't get any meaningful deduction on her contribution.
4. We will be opening an RDSP for my wife next month, but my plan so far is to only contribute enough to maximize the matching amounts available from the government.
5. We're saving about $3k a month, so most of our investments going forward will be in unregistered accounts.

Does this change your feedback at all?
[OP]
Deal Addict
Oct 1, 2006
2156 posts
1762 upvotes
Montreal
Hi Mathishard,

You got very good advice from @bubak. The ETFs you picked are very good. I do not see the need to sell your ETFs and purchase VGRO instead. For new money just invest it in VGRO for simplicity.

I prefer to hold my bonds in my RRSP instead of my TFSA due lower expected returns compared to equities --> lower tax bill in the end.

Since you wife is not working anymore she should not contribute to her RRSP, but you could make a spousal contribution instead. This may help saving taxes later.
Newbie
Oct 28, 2008
62 posts
12 upvotes
Toronto
Vanguard actively managed Mutual Funds - Management Fee - .50 and MER - ?
Global Dividend Fund Series F VIC 200
International Growth Fund Series F VIC 400
Windsor U.S. Value Fund Series F VIC 300

Compare above Mutual Fund with VGRO, VBAL,VCNS Management Fee -,22 + MER .25

Any thoughts or information shared will be appreciated Does it sounds great as couch potato approach
Deal Expert
Jun 30, 2006
18416 posts
6430 upvotes
Toronto
What are the best funds to invest in at the moment with around $20K?
Sr. Member
User avatar
Dec 12, 2005
935 posts
97 upvotes
GTA
hat1811 wrote: Vanguard actively managed Mutual Funds - Management Fee - .50 and MER - ?
Global Dividend Fund Series F VIC 200
International Growth Fund Series F VIC 400
Windsor U.S. Value Fund Series F VIC 300

Compare above Mutual Fund with VGRO, VBAL,VCNS Management Fee -,22 + MER .25

Any thoughts or information shared will be appreciated Does it sounds great as couch potato approach
Those are F-series funds which you won't have access to as an individual investor. If you're purchasing them through an advisor then there will be additional investment fees on the whole portfolio so your overall cost may be closer to 1.5% or higher depending on your portfolio size.

The MER for VGRO/VBAL/VCNS includes the management fee so your overall cost is 0.25%. They are a great option for couch potato investing (or the corresponding iShares equivalent).
Shojin wrote:I like to quote myself.
Deal Addict
Jan 20, 2016
2028 posts
1008 upvotes
Houston, TX
mathishard wrote: Thanks, this is very useful! I'll try to write a more thoughtful response when I have a bit more time available, but you've reminded me that I have left out some important information.

1. I have a defined benefits pension, and I don't have much RRSP space. I'll probably contribute around $40k to a spousal RRSP in the next two years, but after that I will only be able to contribute about $3k/year.
2. Our TFSA's are maxed out.
3. My wife was working, but she is no longer able to. We have about $100k in her RRSP, but I feel like there's no point in putting any more of her money in the RRSP because she wouldn't get any meaningful deduction on her contribution.
4. We will be opening an RDSP for my wife next month, but my plan so far is to only contribute enough to maximize the matching amounts available from the government.
5. We're saving about $3k a month, so most of our investments going forward will be in unregistered accounts.

Does this change your feedback at all?
Just to think about.

As your spouse has zero income, she can retrieve effective zero tax her rrsp and put the proceeds to TFSA now. I'd think about that.

* Effective mean she would be charged tax on rrsp withdrawal by brokerage with reimbursement from CRA on tax filing.
Also it makes sense to you to start doing spousal rrsp...

Unreg account also make sense to have under her name... that's rare moment I'd recommend to read Garth Turner blog specifically about spousal investment....
Make the face great again
Newbie
Mar 1, 2019
11 posts
6 upvotes
I don't have any comments on the mutual funds themselves, but it is possible for an individual investor to buy them, and many other F series funds, using Questrade for a $10 commission.
Last edited by VerticalTab on Mar 2nd, 2019 12:02 pm, edited 1 time in total.
[OP]
Deal Addict
Oct 1, 2006
2156 posts
1762 upvotes
Montreal
Very interesting graph from Ben Carlson. While the stock market can be very volatile in the short term, long-term returns have been relatively stable.
S&P 500 retunrs.jpg
Deal Addict
Sep 13, 2003
1269 posts
104 upvotes
I am curious after reading something. Should we consider safeguarding our investments by resetting allocations for 2019? For simplicity, increasing your fixed and reducing your growth exposures and with expectation to return to original exposure the following year?
Newbie
Jul 8, 2018
44 posts
51 upvotes
sounds like you need vgro or vbal
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Newbie
Dec 27, 2003
47 posts
19 upvotes
Why is everyone recommending VGRO? It doesn't look like it's growing or do people think it's just building up steam?
Sr. Member
User avatar
Jul 25, 2018
784 posts
1236 upvotes
Milton, ON
MartinBlue wrote: Why is everyone recommending VGRO? It doesn't look like it's growing or do people think it's just building up steam?
Good asset allocation in a single ETF for growth-oriented investors that aren't sure where to start and/or can't be bothered to rebalance.

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