I have a very similar portfolio as you (just have VIU/VEE instead of XEF/XEC). If you have enough money to max out your TFSA/RRSP, I'd do:ZER0DAY wrote: ↑ Hi everyone, I have been doing a lot of reading on the CCP idea and index investing in general. I have a couple of questions that I haven't found answers online. I have unused maxed out RRSP and TFSA as well as a non-registered account.
I am looking to use the following funds:
VCN
VUN
XEF
XEC
VAB
But I am unsure which should go in which account.
Also, I see funds like VUN, which seem to just be a wrapper of VTI that trades on the Canadian exchange, why do these exist? and are there any downsides to owning a wrapped fund like that?
Thank you for your help!
1) VAB in RRSP -> low-yield producing (prefer higher growth ETFs in TFSA), bond dividends count as "interest" so are taxed at a higher rate.
2) VCN in non-registered account -> receive a dividend tax credit for holding Canadian companies in a non-registered account.
3) VUN/XEF/XEC in TFSA/RRSP where there's room ->non-registered if no room left
Some people also hold every ETF in each of their accounts so that the allocation is easier to manage (though this is less efficient). If you have enough room to fit it all in your TFSA/RRSP, then put VAB in RRSP and then the rest spread between TFSA/RRSP.
VUN = purchased in Canadian dollars (i.e. don't need to convert funds to USD)
VTI = purchased in USD (i.e. need to convert CAD funds to USD)
Due to agreements between Canada and the US, having VTI in your RRSP means you do not need to pay any withholding taxes that are produced from dividends (as you hold it directly). VUN, you do not hold it directly, so the withholding tax would be taken off automatically before you receive your dividend. Again, its a matter of convenience/ease versus efficiency.
General investing tip: don't underestimate the value of simplicity.