Investing

Needing some investment funds advice

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  • May 6th, 2020 5:20 pm
[OP]
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Feb 8, 2014
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Needing some investment funds advice

A while back i had asked for investing advice, but i never got around to choosing investments. The market went down since then, inadvertent market timing
I am looking at index funds, REITs and dividend investing.

These are my ideas:

Index:
VUS
https://www.vanguardcanada.ca/individua ... /?overview
VCN
https://www.vanguardcanada.ca/individua ... /?overview

REIT:
VRE
https://www.vanguardcanada.ca/individua ... /?overview

Dividend:
VDY
https://www.vanguardcanada.ca/individua ... /?overview
CDZ
https://www.bloomberg.com/quote/CDZ:CN

Are these good funds to choose in their categories or are there better options?
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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May 11, 2014
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Iqaluit, NU
Any ETF can be great, and you have listed ones that are great, however the biggest problem you seem to have is there is little to no strategy. You can buy all of these funds, but why? What exactly are you trying to do and achieve?

For example, a dividend or REIT fund produces income, but if your objective is long term growth, these funds might not necessarily be appropriate. You don't need regular distributions and they limit your exposure.
But if you were trying to build a portfolio so you may or eventually may use the distribution income, then it might be appropriate.

Ask yourself first, what is your objectives, then we can suggest a proper portfolio from there.
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Sep 1, 2013
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Quentin5 wrote: A while back i had asked for investing advice, but i never got around to choosing investments. The market went down since then, inadvertent market timing
I wish you well in your efforts to achieve your investment goals in the years to come, but if I may make an observation?

I think there are a lot of people out there who have an idea in their head that someday, they need to "get around" to learning how to invest, and to actually pull the trigger and buy the securities. But for some reason or other, this is put on the back burner because there are always things that come up in life that seem to be higher priority at the time.

I won't give you any advise on what securities you need to buy, but will advise you not to be one of these people described above.
[OP]
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Feb 8, 2014
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badmus wrote: There is a couch potato thread on page 2 with a lot of information on ETF’s.
If your referring to the one with 3,539 posts perhaps something more distilled would be helpful.
xgbsSS wrote: Any ETF can be great, and you have listed ones that are great, however the biggest problem you seem to have is there is little to no strategy. You can buy all of these funds, but why? What exactly are you trying to do and achieve?
This is a great question.
The goal is to invest and grow my money for retirement, with an ability to get some cash if i needed it in a crunch, which i hope never happens but being prepared.
Plus diversification, having all my money in a couple index funds is great if they do well but i would prefer to also have money in assets that are also producing more direct returns. Also if the market goes down an index fund would recover once the market does but the dividend should still be paying, even if its paying less, though the reason i am looking at REITs is that people still need a place to live and even in these times the CERB helps people pay their rent.

Though one question would be assuming equivalent returns is there any advantage in say 50% dividend paying (reinvested) plus 50 % index vs 100% index, if both being worth the same amount at retirement but the 100% index then reallocated towards dividend paying or allocated in some other way that provides equivalent stable continuing income?

Another advantage of dividend paying is that during downturns i would have some extra money to invest when the market is down.
For example, a dividend or REIT fund produces income, but if your objective is long term growth, these funds might not necessarily be appropriate. You don't need regular distributions and they limit your exposure.
But if you were trying to build a portfolio so you may or eventually may use the distribution income, then it might be appropriate.
My thoughts are to not have to touch the money till retirement, but if i did then there would be some funds without having to cash anything in, especially in case of job loss beyond my emergency fund which is robust already. The income from the REIT/dividend funds would be reinvested right away into index funds or more dividend investments. When i had looked at VRE back in January its dividend was about 3.5%, now its over 7%. If an index fund delivers say 10% averaged over time then i am almost there just in dividends without any stock appreciation, and i hope the dividend will increase with inflation as well. Plus the stock will presumably appreciate as well, even if it goes back to where it was after a recovery that would also cause index fund recovery it would in fact pay more then 10% in stock price appreciation plus dividend though 10%/yr averaged is my informal goal for both index and dividend/reinvestment/appreciation of the dividend fund price.
And long term i am hoping that dividends would fund my retirement without having to cash in investments, as i am buying all of this in TFSA so not subject to annual RIF withdrawal requirements.
Ask yourself first, what is your objectives, then we can suggest a proper portfolio from there.
My objective is to build the largest nest egg possible and live off it in retirement without running out of money.

If i can match an index fund while having free cash flow in case of necessity that would be great, while preserving capital.
CheapScotch wrote: I think there are a lot of people out there who have an idea in their head that someday, they need to "get around" to learning how to invest, and to actually pull the trigger and buy the securities. But for some reason or other, this is put on the back burner because there are always things that come up in life that seem to be higher priority at the time.
Hence this thread :)
I obviously did not foresee covid but i have the money and it didn't drop in the downturn so i might as well invest now and if it goes down further thats the risk i am taking but waiting for an upturn is silly because then i would be paying more then i am now.
Ironically i had already started investing but the advisor at TD screwed up the paperwork and it stayed in the cash account so in essence i got a 25% return!
I have a TDDI account now so i'm looking at doing my own investing and that was just to get their $100 incentive
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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Sep 8, 2013
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Windsor
It sounds like you're trying to use a few strategies but leaning more towards passive income. FOMO?
VFV for growth, VGRO as a conservative play, single companies/ETFS for dividends. Personally don't love all the holdings in the ETFS.

https://www.tawcan.com/top-canadian-dividend-etfs-dont/ <- Gives a great breakdown to the Canadian Dividend ETF's, holdings, exposure, costs.
With the ETFs listed, the dividend p/o will be lower as companies have started cutting dividends.
Look at energy companies, they are beginning to cut dividends (IPL and Suncor thus far) - this sector typically pays higher dividends and now they are making changes to survive.

Look into NOBL / DGRO to add into your RRSP for help with tax drag.

Also what ETF pays a stable 10% yearly in distributions?
[OP]
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nathand wrote: It sounds like you're trying to use a few strategies but leaning more towards passive income.
Passive income in the future.
FOMO?
Not FOMO, flexibility.
VFV for growth,
Why VFV instead of VSP?
And why S&P 500 vs VUS?
VGRO as a conservative play,
I was thinking VEQT as an alternative, i'm not interested in conservative at this point, an investing horizon of 25-30 years, i want returns.
single companies/ETFS for dividends. Personally don't love all the holdings in the ETFS.
I like diversification, hence VRE, it has 16 REITs with a 25% cap, but i do understand that over diversification my lead to dilution.
But its not the only high dividend game in town so i am open to better alternatives.
That said i am not averse to owning individual stocks, just that i would diversify that as well, owning many dividend producing stocks, though at this point this point i might start with a fund like CDY and branch out over time.
https://www.tawcan.com/top-canadian-dividend-etfs-dont/ <- Gives a great breakdown to the Canadian Dividend ETF's, holdings, exposure, costs.
With the ETFs listed, the dividend p/o will be lower as companies have started cutting dividends.
Thanks for this link. I notice it has VDY that i linked above.
Look at energy companies, they are beginning to cut dividends (IPL and Suncor thus far) - this sector typically pays higher dividends and now they are making changes to survive.
I am not interested in fossil fuels though i know index funds will have them for now. They are dead men walking (an opinion but being in the energy business my detailed opinion on that could write a novel).
Look into NOBL / DGRO to add into your RRSP for help with tax drag.
Thanks, i have been meaning to look at how this works, though i am investing in the TFSA for now so its not an issue but that will change.
Also what ETF pays a stable 10% yearly in distributions?
None that i know of, but VRE is paying 7%+
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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Sep 8, 2013
64 posts
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Windsor
https://www.portfoliovisualizer.com/backtest-portfolio

Run a back test for each.

Portfolio performance statistics
Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio US Mkt Correlation
VSP $10,000 $22,076 11.40% 13.38% 33.17% -10.75% -20.25% 0.82 1.21 0.99
VFV $10,000 $32,149 17.26% 12.08% 40.91% -2.97% -14.78% 1.32 2.31 0.78
VUS $10,000 $21,248 10.82% 13.95% 33.89% -11.90% -21.79% 0.75 1.10 1.00

Past does not predict the future, honestly any of those 3 will be fine.

More info for REIT ETFS: https://dividendearner.com/canadian-reit-etfs/
REITs in general: https://dividendearner.com/best-canadian-reits/

Personally I think REITS as a long term hold will be fine. In the upcoming months, dividends will prob get cut - hope they dont, loving the yield.
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May 11, 2014
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OK, I get where you are coming from, however if you already have a robust savings account, I am not sure whether having a dual index-dividend ETF strategy would be wise.

Dividend ETFs are not made the same and you do need to keep in mind the type of exposure you are getting when investing in these. I find the coverage to be completely different. See the following page and look at the sector distribution:
https://dividendearner.com/canadian-dividend-etfs/

While you didn't mention your risk tolerance, all of your investments are equity so first things first, are you planning a full equity portfolio with ETFs and considering your cash savings as part of your fixed income? Or do you want to consider them as separate entities?

There is no huge difference between going index vs dividend ETF strategy. The exception is dividend ETFs tend to target some companies while index will include all. Dividend ETFs also tend to be a little more expensive. They generally have monthly distributions as well.
If I were to go with a strategy I would either go one or the other, but not both and not combined in one account. There is no right way to go about this, but you could try my friend's strategy...

My friend uses the TFSA account as the dividend ETF account, 100% equity. This was originally 33% ZDV, 33%ZDY, and 33%ZDI. Now this has gone to 15% CDZ, 5%ZPR, 40%ZDY and 40%ZDI. The reason they went this way is because they started accumulating non-registered assets and to keep somewhat tax efficient, they focused their non-registered assets to contain Canadian assets so as to capture the qualified dividend and capital gains tax advantages. Setting your TFSA in this manner allows you to create a tax free cash distribution vehicle for emergencies while growing the assets tax free. For RRSP, they have set it as full index funds. Again 100% equity. They are planning to tone down the risk overtime, but for now they are full equity. Perhaps splitting the account like this could be a way to utilize both types of ETFs?

Now as for REITs, whether you think that exposure is something you want to have is up to you. Remember, there is some REIT exposure in some of these dividend ETFs, so you should consider that before adding it to your portfolio.

If of course you are a long term investor though, you don't necessarily need those distributions. There is nothing wrong with getting them of course. The difference in the end won't be large. Personally I prefer owning the equity outright if going with a dividend strategy, but that is just me.

If you like REITs, you may also want to consider using Utility ETFs as well. Just remember, these are equity ETFs so make sure to adjust your portfolio to your risk tolerance.
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