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ETF Portfolio Advice

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  • Apr 5th, 2019 4:35 pm
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Jan 26, 2010
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Milton

ETF Portfolio Advice

Hey guys,
For the past few years I've been 100% in stocks (SU, BNS, etc), last couple of years I dabbled in MJ and did OK. Thinking of simplifying my portfolios into 100% ETFs and holding long with the occasional rebalancing. I'm familiar with the couch potato portfolio, and also read several threads here about other ETFs. Lots to digest. So here's what I've come up with, any advice/tweaks would be appreciated.

PapaQBear
  • Margin: VCN, XIC
  • TFSA: HMMJ, VFV
  • RRSP: CDZ, ZWB
  • LIRA: XRE (only $20k in this account)
PapaQBear's wife
  • TFSA: XAW, VFV
  • RRSP: XRE, XEI
PapaQBear's business account
  • Margin USD: IHF, VNQ
  • Margin CAD: XGRO, XUU
Koodo Prepaid, Public Mobile, Conch shells, Tin cans
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I think it would help if you put some reasoning behind your choices. For example, why hold both VCN & XIC in Margin if they're almost the same ETFs? Why have VFV in addition to XAW and XUU in addition to XGRO? To overweigh the US equities portion? What's the overall Target Asset Allocation %ages and how do you plan to keep balancing it out between multiple accounts? I'm not gonna question XEI as it's hopefully a leftover holding from when you knew nothing about investing.. :)
[OP]
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Milton
freilona wrote: I think it would help if you put some reasoning behind your choices. For example, why hold both VCN & XIC in Margin if they're almost the same ETFs? Why have VFV in addition to XAW and XUU in addition to XGRO? To overweigh the US equities portion? What's the overall Target Asset Allocation %ages and how do you plan to keep balancing it out between multiple accounts? I'm not gonna question XEI as it's hopefully a leftover holding from when you knew nothing about investing.. :)
Good questions. I tried looking at the asset allocations, yield, MER, etc, and came up with this, but yes there is overlap.

I'm basically looking for something similar to the Aggressive couch potato portfolio, but not sure if that has to be across all accounts, or a single account.

I had planned to balance within the same account, instead of over the entire portfolio, but I don't know if that's wise or not.

Basically I'm a complete noob here as I've done 100% stocks only.
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Milton
I should add that my selections are a work in progress and I'm still sifting through them. It seems like every article I read suggests totally different ETFs and it's quite a bit to comb through. I guess it depends on risk tolerance, asset allocation, etc., but was looking for something simple to set and forget. Maybe the answer is the Aggressive couch potato portfolio (10% ZAG, 30% VCN, 60% XAW).
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Good to see a fellow Miltonion! I started with 100% stocks just like you did and found it took too much of my time so switched over to ETFs. Based on your thread, it appears you're comfortable with volatility and don't plan on needing the money for a while. I don't really have advice apart from saying that there is no such thing as a perfect portfolio and it's like a bar of soap in that the more you touch it, the smaller it gets. There are so many different opinions on which ETFs are the "best" but you'll be old and grey by the time you decide on one. So don't think about it too much, just make a plan and stick with it no matter what happens. And it goes without saying, make sure you're minimizing tax implications and be careful with using margin.

My personal target allocation is 30% VFV (US), 20% ZCN (Canada), 30% Int'l (XEC and XEF) and 10% technology (QQQ, heavily weighted to US companies and increases my US exposure). The US market has traditionally outperformed, hence my higher weighting to it. I keep a 10% cash or bond reserve which I allocate to stocks during down markets and rebalance when any ETF position moves by +- 20% (wide tolerance band, I know).
[OP]
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Milton
JoelK22976 wrote: Good to see a fellow Miltonion! I started with 100% stocks just like you did and found it took too much of my time so switched over to ETFs. Based on your thread, it appears you're comfortable with volatility and don't plan on needing the money for a while. I don't really have advice apart from saying that there is no such thing as a perfect portfolio and it's like a bar of soap in that the more you touch it, the smaller it gets. There are so many different opinions on which ETFs are the "best" but you'll be old and grey by the time you decide on one. So don't think about it too much, just make a plan and stick with it no matter what happens. And it goes without saying, make sure you're minimizing tax implications and be careful with using margin.

My personal target allocation is 30% VFV (US), 20% ZCN (Canada), 30% Int'l (XEC and XEF) and 10% technology (QQQ, heavily weighted to US companies and increases my US exposure). The US market has traditionally outperformed, hence my higher weighting to it. I keep a 10% cash or bond reserve which I allocate to stocks during down markets and rebalance when any ETF position moves by +- 20% (wide tolerance band, I know).
Thanks for the tips! Will look at the tickers you mentioned. Since posting the thread this morning, I went through the ETFs allocation and saw that there was a lot of duplication in my selection. Your picks will definitely help out. Thanks again.
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My husband and I switched from mutual funds to individual stocks and ETFs 5 years ago. I’ve been reducing the number of stocks in the last couple of years, planning to be all ETFs by the year end. Our target asset allocation also overweight in the US:

10% GICs
10% Bonds
- 5% Canadian Bonds
- 5% US Bonds (ZIC)
5% Preferreds

10% Canadian

21.5% Developed
8.5% Emerging

35% US

I do treat our portfolio as one and rebalance across 6 accounts (2 RRSPs, Spousal RRSP, 2 TFSAs and Margin) We keep our group pension plans self-balanced separately. Our DIY portfolio currently has the following allocations across accounts (not including remaining stocks):

RRSPs: VTI, XEF, IEMG, ZPR, ZIC/ZCM, GICs, individual bonds
TFSAs: XAW, XMD, ZPR / VFV, XEF, ZCN
Taxable: HXT

VTI and IEMG (US denominated ETFs for Total US stock market and Emerging markets) in RRSPs to avoid FWT (there’s a separate thread about it if you ever decide to complicate your life further with tax efficient allocations :)) When I started setting up my husband’s TFSA, XAW didn’t exist, and he didn’t want small caps and emerging markets, so I keep buying VFV + XEF for him instead. XMD in my TFSA was supposed to complement HXT in the non-reg. Every decision had a (good) reason at the time it was made, yet if I were to start over - I’d probably just go with ZCN + XAW for equities to simplify rebalancing and avoid CAD to USD conversion hassle (few Norbert Gambits a year are getting tiring after a while - especially if we’ll need to convert the money back to CAD when withdrawing in retirement.. :))

Personally, I’d recommend choosing XIC or ZCN over VCN because they’re capped (no stock can be more than 10% of their holdings - remember Nortel? :)) REITs already are a part of any TSX ETF, and if you have a house - think if you really want to overweigh your Canadian holdings in real estate (I mean, do you really need XRE - in 2 accounts?) [Upd. Scratch that: And honestly, please do some googling on XEI (unless you don’t mind paying someone to return some of your own money as RoC distributions to maintain a high yield illusion :))]
Last edited by freilona on Apr 3rd, 2019 9:49 pm, edited 1 time in total.
[OP]
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Milton
freilona wrote: My husband and I switched from mutual funds to individual stocks and ETFs 5 years ago. I’ve been reducing the number of stocks in the last couple of years, planning to be all ETFs by the year end. Our target asset allocation also overweight in the US:

10% GICs
10% Bonds
- 5% Canadian Bonds
- 5% US Bonds (ZIC)
5% Preferreds

10% Canadian

21.5% Developed
8.5% Emerging

35% US

I do treat our portfolio as one and rebalance across 6 accounts (2 RRSPs, Spousal RRSP, 2 TFSAs and Margin) We keep our group pension plans self-balanced separately. Our DIY portfolio currently has the following allocations across accounts (not including remaining stocks):

RRSPs: VTI, XEF, IEMG, ZPR, ZIC/ZCM, GICs, individual bonds
TFSAs: XAW, XMD, ZPR / VFV, XEF, ZCN
Taxable: HXT

VTI and IEMG (US denominated ETFs for Total US stock market and Emerging markets) in RRSPs to avoid FWT (there’s a separate thread about it if you ever decide to complicate your life further with tax efficient allocations :)) When I started setting up my husband’s TFSA, XAW didn’t exist, and he didn’t want small caps and emerging markets, so I keep buying VFV + XEF for him instead. XMD in my TFSA was supposed to complement HXT in the non-reg. Every decision had a (good) reason at the time it was made, yet if I were to start over - I’d probably just go with ZCN + XAW for equities to simplify rebalancing and avoid CAD to USD conversion hassle (few Norbert Gambits a year are getting tiring after a while - especially if we’ll need to convert the money back to CAD when withdrawing in retirement.. :))

Personally, I’d recommend choosing XIC or ZCN over VCN because they’re capped (no stock can be more than 10% of their holdings - remember Nortel? :)) REITs already are a part of any TSX ETF, and if you have a house - think if you really want to overweigh your Canadian holdings in real estate (I mean, do you really need XRE - in 2 accounts?) And honestly, please do some googling on XEI (unless you don’t mind paying someone to return some of your own money as RoC distributions to maintain a high yield illusion :))
Thanks freilona! I got my homework cut out for me, thanks muchly for the guidance.
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freilona wrote: My husband and I switched from mutual funds to individual stocks and ETFs 5 years ago. I’ve been reducing the number of stocks in the last couple of years, planning to be all ETFs by the year end. Our target asset allocation also overweight in the US:

10% GICs
10% Bonds
- 5% Canadian Bonds
- 5% US Bonds (ZIC)
5% Preferreds

10% Canadian

21.5% Developed
8.5% Emerging

35% US

I do treat our portfolio as one and rebalance across 6 accounts (2 RRSPs, Spousal RRSP, 2 TFSAs and Margin) We keep our group pension plans self-balanced separately. Our DIY portfolio currently has the following allocations across accounts (not including remaining stocks):

RRSPs: VTI, XEF, IEMG, ZPR, ZIC/ZCM, GICs, individual bonds
TFSAs: XAW, XMD, ZPR / VFV, XEF, ZCN
Taxable: HXT

VTI and IEMG (US denominated ETFs for Total US stock market and Emerging markets) in RRSPs to avoid FWT (there’s a separate thread about it if you ever decide to complicate your life further with tax efficient allocations :)) When I started setting up my husband’s TFSA, XAW didn’t exist, and he didn’t want small caps and emerging markets, so I keep buying VFV + XEF for him instead. XMD in my TFSA was supposed to complement HXT in the non-reg. Every decision had a (good) reason at the time it was made, yet if I were to start over - I’d probably just go with ZCN + XAW for equities to simplify rebalancing and avoid CAD to USD conversion hassle (few Norbert Gambits a year are getting tiring after a while - especially if we’ll need to convert the money back to CAD when withdrawing in retirement.. :))

Personally, I’d recommend choosing XIC or ZCN over VCN because they’re capped (no stock can be more than 10% of their holdings - remember Nortel? :)) REITs already are a part of any TSX ETF, and if you have a house - think if you really want to overweigh your Canadian holdings in real estate (I mean, do you really need XRE - in 2 accounts?) And honestly, please do some googling on XEI (unless you don’t mind paying someone to return some of your own money as RoC distributions to maintain a high yield illusion :))
Hey freilona, how's it going?

This comment sparked my interest --- are you sure you're talking about the right ETF?

I looked it up --- https://www.blackrock.com/ca/individual ... -en-ca.pdf

There were RoC distributions of $0.10 in 2015 and 2016, but none in 2017 or 2018.

XEI is an ETF that I'm vaguely looking at, but unlikely, to buy in my margin account.
Leaning much more toward XDIV --- I like the yield of 5%, MER of 0.11%, instant diversification.
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freilona wrote: Taxable: HXT
Your HXT swap, do you plan to keep it in your taxable account if the tax benefits are removed in the next budget?
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John47 wrote: Hey freilona, how's it going?

This comment sparked my interest --- are you sure you're talking about the right ETF?

I looked it up --- https://www.blackrock.com/ca/individual ... -en-ca.pdf

There were RoC distributions of $0.10 in 2015 and 2016, but none in 2017 or 2018.

XEI is an ETF that I'm vaguely looking at, but unlikely, to buy in my margin account.
Leaning much more toward XDIV --- I like the yield of 5%, MER of 0.11%, instant diversification.
Yeah that’s what I remember about it - was criticized for RoC a few years ago (on another forum I think) Didn’t look up the latest distributions, sorry :) And, in general, don’t trust any ETFs with higher than “current average” yield, but you’re right, it’s a different story.. :)
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wilyam wrote: Your HXT swap, do you plan to keep it in your taxable account if the tax benefits are removed in the next budget?
Haven’t decided yet, want to see what the decision is. If they request just to pay taxes on dividends - most likely will keep it. But will consider replacing it with individual stocks regardless when we have 100K+ in it (currently less than 50) It was such a convenient no-brainer choice for taxable accounts.. sigh What about you? :)
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freilona wrote: Haven’t decided yet, want to see what the decision is. If they request just to pay taxes on dividends - most likely will keep it. But will consider replacing it with individual stocks regardless when we have 100K+ in it (currently less than 50) It was such a convenient no-brainer choice for taxable accounts.. sigh What about you? :)
I have a large inheritance going through probate right now, a bit chunk of which will have to be put in a taxable account. i always assumed I would put it in a swap like HXT for the same reasons you did, but now I'll be looking for something else.
Last edited by wilyam on Apr 3rd, 2019 9:56 pm, edited 2 times in total.
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wilyam wrote: I have a large inheritance going through probate right now, a bit chunk of which will have to be put in a taxable account. i always assumed I would put it in a swap like HXT for the same reasons you did, but now I'll be looking for something else.
What other options are you considering?
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John47 wrote: What other options are you considering?
Leaning toward a mixture of VTI and VXUS.
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PapaQBear wrote: Maybe the answer is the Aggressive couch potato portfolio (10% ZAG, 30% VCN, 60% XAW).
VMO provides the aggression without the rebalancing. Short lifespan there though and their stated benchmark doesn't make sense. Combined with VVO as a buffer could turn out well. Just discovered these two guys looking for a new vehicle I need.
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eldeejay wrote: VMO provides the aggression without the rebalancing. Short lifespan there though and their stated benchmark doesn't make sense. Combined with VVO as a buffer could turn out well. Just discovered these two guys looking for a new vehicle I need.
I disagree with your recommendations.

Doesn't makes sense to me to recommend very specific, relatively high-fee, 'smart beta' type ETFs to someone who is obviously a beginner.
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Does anyone own Vanguard S&P 500 ETF (VOO) ?

Warren Buffet recommended this and has good reviews. Low MER. Looks good.

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