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duplicating WealthSimple portfolio in Margin account?

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  • Apr 1st, 2019 4:28 pm
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Jan 9, 2010
1239 posts
697 upvotes
Edmonton

duplicating WealthSimple portfolio in Margin account?

I'd like to duplicate the Wealthsimple Growth portfolio in our margin account (we're maxed out on other account types such as TFSA, RSP, etc, and have a fair chunk of money that we want to invest). Because it's in our margin account, we want to minimize the tax implications of any distributions, while still going with low-fee ETFs. My wife is 57 years old and I'm 47.

The portfolio holds ETFs in various sectors (EAFE, emerging markets, US, Canada, bonds, etc). I see a number of ETFs that we could buy for each of these from the various ETF companies. My impression, though (and this is where I'm hoping for some guidance) is that the Horizons ETFs would be best for margin accounts because they don't do any distributions (and seem to have lower MERs that some of the other comparable ETFs from Vanguard, iShares, etc). Is that correct?

My proposed portfolio is as follows:
15% XEF (EAFE)
10% XEC (Emerging markets)
22.5% HXT (TSX equities)
20% HXS (US equities--S&P 500)
12.5% XSH (short-term Canada corporate bonds)
7.5% HBB (mid-term Canada government bonds
12.5% XSP (CAD-hedged S&P 500)

I'm open to (constructive) critiques of this proposed portfolio. Thanks!
4 replies
Member
Sep 9, 2012
372 posts
120 upvotes
TORONTO
How much do you expect to save by doing this, instead of going with WealthSimple directly?
Deal Addict
User avatar
Jan 9, 2010
1239 posts
697 upvotes
Edmonton
TorontoDavid wrote: How much do you expect to save by doing this, instead of going with WealthSimple directly?
Excellent question. I'm estimating it would cost us around $800-$1,000 a year to go with WS directly. Not an insignificant amount over ten years. Also, by investing it in our RBC Direct Investing account, we can quickly liquidate and transfer (within minutes) if need be, rather than having to wait for proceeds from any WS account to get to our bank account should the need ever arise.
Member
Sep 9, 2012
372 posts
120 upvotes
TORONTO
The first question that pops out at me is how you plan to maintain the weightings when the market inevitably shifts.
For instance, will you sell one ETF to rebalance another, thereby incurring multiple commission costs?

I'm indifferent to saying whether you should do it or not, but I think there's a lot to consider re: a true cost difference between the two scenarios, and what 'rules' you'd apply when rebalancing (such as frequency, tolerance for the delta from the target, whether you intend to only buy new shares via new deposits to the portfolio, etc.).
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Jan 9, 2010
1239 posts
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Edmonton
Good points. Our plan was to rebalance semi-annually. Since commissions are only $10 apiece, this means we'd spend around $140 a year at most (probably less, given that I'm okay with everything not needing to be perfectly balanced to the last dollar). And yes, new shares would only be purchased via new deposits. The Horizons ETFs don't have distributions as far as I'm aware, and the other non-Horizons ETFs are all DRIP-eligible.

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