ETFs and Tax question

Back in Waterloo in like 2006, we had a finance professor tell us ideal allocations at some random talk he had (I wasn't in business/finance/afm/math) - this is way outdated. I'll try to find the lecture on my MS Office Mac (which recorded audio with notes) and report back with a summary when I have time/remember.

Pre-2008 era:
RRSP - stuff in bonds and REITs - these are taxed as interest anyway - which you'll be hit with when retiring, but at least you can defer the compounding and the most grievous of taxation at the full marginal rate.
Stocks go bareback in a taxable because cap gains is cheaper than interest taxes (half the marginal rate), dividend tax credit makes it cheaper than interest as well (somewhere between cap gains and full-on interest).

Now: TFSA didn't exist yet in 2006 because we didn't get a government that thought it might be a good idea for people to privately save. Bonds actually used to yield something pre-2008. So now in post-2008 modern times, my approach was 100% equities in every account. US stuff in USD in RRSP/LIRA to avoid dividend withholding taxes. TFSA/RESP it doesn't matter if you're getting TSX or NYSE stuff, because it's not covered under the tax treaty to prevent foreign dividend withholding taxes from Uncle Sam. I'd rather pay taxes to Uncle Sam, so I put US assets in the TFSA/RESP as well.

I leave my interest-bearing stuff bareback in my taxables because I didn't see the point in sheltering what was low-yield for the longest time (it is also the minority of my assets) - this may change soon as the BoC/Fed ratchet up rates. But for now, stock the **** out of everything. I prefer to shelter compounding assets (and dividends). Having started investing in 2009, I grew up with the cash is trash mindset because it can be inflated away, but stocks can have a bubble pop. So I try to have a bit of everything, I put the higher yielding stocks in my sheltered/registered accounts and it even spills out into my taxable.

If you must own fixed-income, Canada is convenient as there is no FX conversion and foreign withholding taxes (and full-marginal rate taxes by our gov).

You can either listen to me (unemployed bum that is for some reason in the investment forum) or the PhD in finance teaching at Waterloo. Up to you lol.

Here is a couple of good explanations:

Finiki: Tax Efficient Investing

Canadian Portfolio Manager: Asset Location – Part 1: Key Concepts

Here is another one from PWL Capital.
https://www.pwlcapital.com/wp-content/u ... tainty.pdf

Read Section 2.2 for the Optimization Results. They say optimum results obtained with FI in RRSP, International Equity in TFSA and everything that does not fit in those accounts in Taxable. They did some sensitivity analysis and found the average value add from optimization drops with lower tax rates.

Deepwater wrote: ↑ Here is another one from PWL Capital.
https://www.pwlcapital.com/wp-content/u ... tainty.pdf

Read Section 2.2 for the Optimization Results. They say optimum results obtained with FI in RRSP, International Equity in TFSA and everything that does not fit in those accounts in Taxable. They did some sensitivity analysis and found the average value add from optimization drops with lower tax rates.

Good article, I like his Rational Reminder podcast.

Yeah, I don't hold fixed income nor anything Canadian lol, so I guess my setup makes sense...