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

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Jr. Member
Nov 23, 2014
145 posts
33 upvotes
East York, ON
If I have the following
VEE
XUH
VSP
VIU
VCN
VCE

In what order should I put them in my RRSP, TSFA, and regular investment account?
I hear there may be tax advantages/disadvantages due to us withholding tax, capital gains tax, and also some emerging market withholding tax issues.

What goes in my RRSP first?


Also open to buying another similar ETF if it has a lower fee or better tax status. These are all owned in very large amounts so its worth it for me to optimize. I read somewhere VEE has double withholding tax?

Germack wrote: Your asset allocation should depend on your ability, willingness and need to take risk. I can't comment on your ability/willingness, but your need to take risk is very low, because you have already accumulated quite a lot of wealth at a young age. It is unwise in my opinion to take more risk than is needed because the value of additional gains is much less important than the consequences of severe losses.

I prefer to invest all at once, but DCA makes some people sleep better at night.
Deal Addict
Nov 4, 2007
1490 posts
571 upvotes
Toronto
oldspice wrote: If I have the following
VEE
XUH
VSP
VIU
VCN
VCE

In what order should I put them in my RRSP, TSFA, and regular investment account?
I hear there may be tax advantages/disadvantages due to us withholding tax, capital gains tax, and also some emerging market withholding tax issues.

What goes in my RRSP first?


Also open to buying another similar ETF if it has a lower fee or better tax status. These are all owned in very large amounts so its worth it for me to optimize. I read somewhere VEE has double withholding tax?
What you are referring to is Asset Location. Ben Felix has a good video on it:


To summarize, in general:
- Hold Fixed Income in your RRSP
- Hold Canadian Equities in your non-Reg to take advantage of Dividend tax credits
- Hold international in your TFSA
- Hold US Equities in your RRSP (but not before Fixed Income).

When it comes to Foreign Witholding Taxes, it depends on a number of factors, including which currency you are holding your ETFs in. US ETFs held in US dollars (ITOT, VTI) are exempt from foreign withholding taxes when held in an RRSP / RRIF / LIRA. The Canadian Dollar equivalent (XUU, VUN) held in an RRSP / RRIF / LIRA do not get this benefit. In a non-reg account, foreign taxes withheld are recoverable at tax time through your T3 and T5 forms. See the following video:



In your case, I would hold:

VEE - Emerging Markets Equity - TFSA
XUH - US Equity - RRSP
VSP - US Equity - RRSP
VIU - International Equity - TFSA
VCN - Canadian Equity - Non-Reg
VCE - Canadian Equity - Non-Reg

Regarding VEE, it is a wrapped Canadian ETF of it's US counterpart VWO. Depending on the size of that allocation and whether you are comfortable with Norbert's Gambit to exchange CDN to US funds, you may consider VWO instead, since VEE is taxed twice. VWO also has a lower mer. See Justin Bender's video at the 4:20 mark. Justin has equivalent videos for CDN, US and International ETFs and also covers Foreign Withholding Taxes for each.:



A few questions - Why have both VCE and VCN? Why have both XUH and VSP? Do you have any fixed income? 100% equity is pretty high risk.

You may consider the all in one ETF's like VGRO if your portfolio is not huge. Once you get to a certain size, Asset Location for Tax efficiency starts to make a difference, in which case you may want to look at Canadian Portfolio Manager's Ludicrous model portfolio:
-https://www.canadianportfoliomanagerblo ... ortfolios/
-https://cdn.canadianportfoliomanagerblo ... icrous.pdf
Deal Addict
Jul 15, 2009
1953 posts
1071 upvotes
kasm wrote: Regarding VEE, it is a wrapped Canadian ETF of it's US counterpart VWO. Depending on the size of that allocation and whether you are comfortable with Norbert's Gambit to exchange CDN to US funds, you may consider VWO instead, since VEE is taxed twice. VWO also has a lower mer. See Justin Bender's video at the 4:20 mark.
Very nice explanation. Just one thing: if you go for VWO instead of VEE, put it in your RRSP instead of TFSA. The US will charge you withholding tax on it in a TFSA but not in an RRSP.
Deal Addict
Nov 4, 2007
1490 posts
571 upvotes
Toronto
bubak wrote: Very nice explanation. Just one thing: if you go for VWO instead of VEE, put it in your RRSP instead of TFSA. The US will charge you withholding tax on it in a TFSA but not in an RRSP.
Yes, good point.
Jr. Member
Nov 23, 2014
145 posts
33 upvotes
East York, ON
Thanks so much Bubak and Kasm, appreciate it. I watched the videos and understand a bit more, but a bit confused. The portfolio sizes are very large 6+ digits each, so it matters if I set this up correctly to understand the best structure. I have significant fixed income via some other channels already, thanks for checking. I have VCE and VCN and VSP and XUH just to get some small cap exposure, but open to changes. I have the currency hedged VSP and XUH, only because I think the loonie will get better, so once it hits 1.30 again, I will move out of this currency hedged and move in to the non-hedged.

From what I see, you are telling me to get out of VEE and in to VWO, buy it with US dollars directly, because its cheaper and not double taxed. Seems like good enough reasons to do it. So if I do VWO, I will put it in my RRSP to save on withholding tax, correct? When I look at this link here, (search for VEE) it says says VEE and VWO both have 0.31% unrecoverable tax, whether inside a RRSP or if its held in non-reg account. Why not just keep VEE in non-reg account?

I'm still confused about this
- VSP is a Canadian ticker that own a US ETF (VOO) that owns US equities. If I put this in an RRSP, does it help me at all? If I put this in non-registered, can't I claim back any withholding tax because its non-reg?

- XUH is a Canadian ticker that owns US ETF (XUU) that owns US equities? Same situation as above, where is this best placed? Would it not be non-registered account, because of its structure?

- VIU owns international stocks directly. Why would this go in TSFA?
kasm wrote: Yes, good point.
bubak wrote: Very nice explanation. Just one thing: if you go for VWO instead of VEE, put it in your RRSP instead of TFSA. The US will charge you withholding tax on it in a TFSA but not in an RRSP.
Deal Addict
Nov 4, 2007
1490 posts
571 upvotes
Toronto
oldspice wrote: Thanks so much Bubak and Kasm, appreciate it. I watched the videos and understand a bit more, but a bit confused. The portfolio sizes are very large 6+ digits each, so it matters if I set this up correctly to understand the best structure. I have significant fixed income via some other channels already, thanks for checking. I have VCE and VCN and VSP and XUH just to get some small cap exposure, but open to changes. I have the currency hedged VSP and XUH, only because I think the loonie will get better, so once it hits 1.30 again, I will move out of this currency hedged and move in to the non-hedged.

From what I see, you are telling me to get out of VEE and in to VWO, buy it with US dollars directly, because its cheaper and not double taxed. Seems like good enough reasons to do it. So if I do VWO, I will put it in my RRSP to save on withholding tax, correct? When I look at this link here, (search for VEE) it says says VEE and VWO both have 0.31% unrecoverable tax, whether inside a RRSP or if its held in non-reg account. Why not just keep VEE in non-reg account?

I'm still confused about this
- VSP is a Canadian ticker that own a US ETF (VOO) that owns US equities. If I put this in an RRSP, does it help me at all? If I put this in non-registered, can't I claim back any withholding tax because its non-reg?

- XUH is a Canadian ticker that owns US ETF (XUU) that owns US equities? Same situation as above, where is this best placed? Would it not be non-registered account, because of its structure?

- VIU owns international stocks directly. Why would this go in TSFA?
It's difficult to make specific recommendations because we don't know the size of each individual account and how that maps to your asset allocation. The general recommendations outlined by Ben Felix, are just that - general.

To clear up some items:
- Regarding VWO in RRSP vs Non-Reg. Yes, either will give you the same tax advantage. In RRSP taxes are not withheld on dividends when held directly through US$ traded ETFs due to the agreement between Canada and the US. In non-Reg, there is a withoulding tax, but it is recoverable at tax time. Deciding between the two would depend on the size of your RRSP / TFSA / Non-Reg relative to your asset allocation ratios.
- Regarding VSP and VOO, if It is indeed just the Canadian ticker of US ETF (Haven't verified), then yes, it would be similar to the VEE / VWO scenario. Buying the US$ ETF directly would save on taxes. You can hold the US$ ETF directly (VWO / VOO) in either RRSP or Non-Reg with the same tax benefit. Again, it would depend on the size of your RRSP / TFSA / Non-Reg relative to your asset allocation ratios.
- Regarding XUH and XUU. XUU is also a Canadian listed ETF for total US Market, but non-hedged. But same situation applied to above if they simply hold a US$ equivalent vs stocks directly.
- Regarding VIU - put them in TFSA because their yield is typically high and is fully taxable. Also I would say that this is what's leftover at the end. Canadian ETF's go to non-Reg for perferential tax treatment of qualifying Canadian Dividends, US ETF's held in US$ directly should be in RRSP or Non-Reg so you are not double taxed, so that leaves International in TFSA.

This approach takes a bit more work to save a few basis points. For most, an all in one like VGRO would be a simpler approach, but for very large portfolios, it may make sense. For example, If your RRSP is 500K, you will save about 25 Basis points by holding US$ ETFs vs the Canadian equivalent, saving you $1,250 annually. Just make sure you don't lose on the exchange rate.

If you want to see a detailed analysis, check out CPM Blog introducing their "Ludicrous" model, which is essentially what your are trying to do. They compare their "Light", "Ridiculous" and "Ludicrous" models. The "Light" Model is basically the all in one ETFs (VGRO, VBAL, VCNS). The "Ridiculous" model, picks individual ETFs for CDN, US, International, Emerging and Bond, but mirrors them across all accounts (RRSP, TFSA, Non-Reg). The "Ludicrous" model takes "Ridiculous" and adds Asset Location strategies for tax efficiency. The analysis compares the rates of return for 2019. The after tax analysis shows for
- The Light model - 12.30% growth for 2019
- The Ridiculous Model - 12.54% growth for 2019
- The Ludicrous Model - 13.87% growth for 2019
Adding Asset Location strategies for tax efficiency on a $1,000,000 portfolio using the Ludicrous model yielded a difference of $11,476 and $9,780 compared to Light and Ridiculous respectively. See link below:

https://www.canadianportfoliomanagerblo ... ortfolios/
Deal Addict
Jul 15, 2009
1953 posts
1071 upvotes
kasm wrote: It's difficult to make specific recommendations because we don't know the size of each individual account and how that maps to your asset allocation.
Again, a very nice explanation.

Here's one additional useful resource with the facts and numbers, so you can decide these questions for yourself: https://www.pwlcapital.com/resources/fo ... /?ext=.pdf
There's a lot of details, but there's a simpler summary at the end.
Jr. Member
Nov 23, 2014
145 posts
33 upvotes
East York, ON
Thanks, this is what I got from it.

In TSFA, always put international equities. Highest Yield and expected return.
Put CAD equities in non-registered because pref. Canadian dividends, which you lose anywhere else.
Put US stocks in non-reg for withholding tax refund at end of year, or in RRSP if owned directly for withholding tax exemption.
For RRSP, pretty much stick to bonds, or US etfs for withholding tax benefit. Outside of that, CAD equities in RRSP lose pref. div. treatment.
Deal Fanatic
Mar 24, 2008
5996 posts
2258 upvotes
Toronto
oldspice wrote: Thanks, this is what I got from it.

In TSFA, always put international equities. Highest Yield and expected return.
Put CAD equities in non-registered because pref. Canadian dividends, which you lose anywhere else.
Put US stocks in non-reg for withholding tax refund at end of year, or in RRSP if owned directly for withholding tax exemption.
For RRSP, pretty much stick to bonds, or US etfs for withholding tax benefit. Outside of that, CAD equities in RRSP lose pref. div. treatment.
I don't think this recommendation is correct. You'll lose 15% of your dividends to foreign withholding tax.
Illegitimi non carborundum
Jr. Member
Dec 26, 2019
147 posts
82 upvotes
It’s not correct. The refund is to ensure that you don’t get double-taxed by both the US and Canada.
Jr. Member
Nov 23, 2014
145 posts
33 upvotes
East York, ON
ksgill wrote: I don't think this recommendation is correct. You'll lose 15% of your dividends to foreign withholding tax.
So what do you suggest then?
VSP is a Canadian ETF that owns a US ETF.
VEE owns international stocks like in India and hong kong, etc.
Deal Addict
Jul 15, 2009
1953 posts
1071 upvotes
ksgill wrote: I don't think this recommendation is correct. You'll lose 15% of your dividends to foreign withholding tax.
Foreign withholding tax on international equities is usually less than 15%. For example, for XEF, it's 8%. If you put US equity there instead, you lose 15% foreign withholding tax. If you put Canadian equity there, you lose 34.5% of your dividends by losing the dividend tax credit (federal and provincial). Of these three, international equities are the best choice.
Deal Addict
User avatar
Aug 4, 2014
2644 posts
2335 upvotes
Toronto, ON
bubak wrote: For example, for XEF, it's 8%. If you put US equity there instead, you lose 15% foreign withholding tax.
US equities ETFs have been paying less than 2% dividends while outperforming all other markets for years. So yes, you’d save the withholding tax if you buy USD ETFs in RRSP or CAD in the non-reg account, But you’d pay much more in taxes when you eventually sell them in either account, while growth in TFSA is tax-free.
Jr. Member
Nov 23, 2014
145 posts
33 upvotes
East York, ON
bubak wrote: Foreign withholding tax on international equities is usually less than 15%. For example, for XEF, it's 8%. If you put US equity there instead, you lose 15% foreign withholding tax. If you put Canadian equity there, you lose 34.5% of your dividends by losing the dividend tax credit (federal and provincial). Of these three, international equities are the best choice.
Thanks, makes sense. So if you have some room to put in bonds, should they go TSFA or RRSP? I could put international equities in non-reg and then bonds in TSFA or RRSP?

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