Investing

Starting Non-Reg Portfolio Advice

  • Last Updated:
  • Dec 26th, 2021 6:30 pm
[OP]
Deal Addict
Mar 10, 2010
1497 posts
489 upvotes

Starting Non-Reg Portfolio Advice

Hi all, I'm looking at starting up a non-reg portfolio in the new year and looking for advice/checking my thoughts.

Background: RRSP's/TFSA's for both of us maxed using ETF's following a 70:30/80:20 allocation and broad market coverage.
We'll be mortgage-free in a month so the plan is starting the non-reg account with 100k from the HELOC.
We both have DB pensions. We are both in the same tax bracket so will be splitting it 50:50. Timeline: ~20-30 years.

I don't have a tonne of time to manage things so I'm looking for simple. I'm still debating allocation but am leaning towards 90:10 or 100% equities since our pensions could be considered as a "safe" bond allocation.

I have two current thoughts:

1) XGRO or VGRO MER ~0.20%

2) ZDB/VCN/XAW (10%/25%/65%) MER 0.17%

I am fully aware of how to track ACB, though I haven't had to do it yet.

Am I missing anything obvious here?
Thanks for any advice/feedback.
11 replies
Deal Expert
User avatar
Dec 12, 2009
23593 posts
12776 upvotes
Toronto
Do what has worked in the registered accounts, just buy more of the same/similar ETF products. As for using a HELOC to accelerate the non registered investing, I would suggest not doing so simply because the markets are at much higher than historic earnings multiples. This is not to say that further gains is not possible. Caution would suggest diverting the funds that would go into mortgage payments into non registered investments. This will allow for a higher allocation to equities (100%) given that is no loans involved.
Koodo $40/6GB
Public Mobile 2016 fall promo, $23/1GB, $38/5GB
Fido $0.00/4GB+tablet
Tangerine Bank, EQ Bank, Simplii
Deal Addict
Aug 12, 2010
1200 posts
1161 upvotes
There is no one rule of what works, I have a mortgage and don't pay it off as 1.77% on a mortgage vs. over 30% gains in a non-registered investment account, yeah going to invest.

But then again I am mutual fund rep, former finance instructor and CPA
Zoomer: 1 account for family and planning to leave for good in 2023
Koodo too: for a phone and locked to 24 months but was a good deal.
Deal Fanatic
User avatar
May 11, 2014
5205 posts
6757 upvotes
Rankin Inlet, NU
This might take a bit more time, however Canadian stocks have some tax-preferential treatment due to the Dividend Tax Credit. Also the tax treatment on interest income is worse non-registered. Therefore a recommendation I can make is...

For RRSP and TFSA, make these accounts more foreign stock heavy (eg. use XAW). And also place a higher proportion of your fixed income here.
Balance out the non-registered with higher Canadian content such as VCN. Avoid fixed income for longer term.

If you are consider using a HELOC to invest, one option you can consider is purchasing funds that distribute income monthly. For example, use a dividend fund such as ZDV or CDZ which then allows you to take advantage of the Canadian Dividend Tax Credit. This will pay monthly and allow you to make the monthly payment and some principle payments on the HELOC as you go. By doing so, you guarantee the paydown of the HELOC more or less. When the HELOC is paid, you can contribute again a new sum of money to buy more units, which then accelerates the income produced.

Many different ways you can go about this. Just make sure if using HELOC to use it responsibly and have a payment system in place to get the balance downward.
Support your local Credit Union!

Sask Pension Plan Upto $7000/yr in Credit Card spending on RRSP contributions
http://forums.redflagdeals.com/sask-pen ... ns-2167222
Deal Addict
Jul 23, 2007
4679 posts
3596 upvotes
I only use an ETF for our registered accounts.

I'm on our second non-registered portfolio that got started in 2003, just using individual Canadian dividend equities. I built this portfolio up one stock at a time and we now own shares in thirty companies allocated to seven sectors. Super easy and I don't spend a lot of time at it, but we do like the growing supplemental income it provides each year while in retirement. When we have enough income from combined savings and dividends I either add more shares to whatever we have or occasionally start an investment in a new company.

I've never been interested in using leverage. My wife and I are both debt averse.

So far, I've found our bank brokerage to be accurate when it comes to ACB's.
Sr. Member
Dec 13, 2010
734 posts
1045 upvotes
Vancouver
Clacker wrote: Hi all, I'm looking at starting up a non-reg portfolio in the new year and looking for advice/checking my thoughts.

Background: RRSP's/TFSA's for both of us maxed using ETF's following a 70:30/80:20 allocation and broad market coverage.
We'll be mortgage-free in a month so the plan is starting the non-reg account with 100k from the HELOC.
We both have DB pensions. We are both in the same tax bracket so will be splitting it 50:50. Timeline: ~20-30 years.

I don't have a tonne of time to manage things so I'm looking for simple. I'm still debating allocation but am leaning towards 90:10 or 100% equities since our pensions could be considered as a "safe" bond allocation.

I have two current thoughts:

1) XGRO or VGRO MER ~0.20%

2) ZDB/VCN/XAW (10%/25%/65%) MER 0.17%

I am fully aware of how to track ACB, though I haven't had to do it yet.

Am I missing anything obvious here?
Thanks for any advice/feedback.
You've gotten some good advice already, so I won't rehash. Only thought is, will you be using the HELOC to capitalize the interest (pay its own interest)? Or want the flexibility to pay off the HELOC at any time? Otherwise, you might want to consider taking out a mortgage term on the $100K to get the lower interest rates (as well as putting you on a forced pay back schedule). Cash flow wise, this should be fine given that you will be mortgage free shortly!
[OP]
Deal Addict
Mar 10, 2010
1497 posts
489 upvotes
Hi all, thanks for the feedback, glad to hear I haven't missed anything major.

For those commenting on the use of the HELOC, I am planning on locking in that initial $100k at a lower rate and set up regular payments (basically 3x interest payments per month). I will then make lump sum payments as I go forward and my current plan is that every time my HELOC balance reaches $50k I'll dump another $50k into the non-reg account. I believe that doing it this way will insure a faster build-up than if I just did straight contributions and will mean that my portfolio balance should always remain significantly higher than the outstanding HELOC allowing me to pay it off at any time if I feel the need. I will also only be using ~25% of my HELOC space.
Deal Addict
Oct 4, 2009
3060 posts
2037 upvotes
Montreal
I wouldn’t even consider using leverage until you have cranked the equity dial to 100 and are still wanting more.

Borrowing at HELOC rates or even converted fixed rates while owning a broad bond fund is a great way to nearly guarantee losses. Simply skip the leverage, bonds or both based on risk tolerance but owning both is irrational.
Deal Addict
Jul 8, 2013
2458 posts
3704 upvotes
Red Deer, AB
S5 wrote: I wouldn’t even consider using leverage until you have cranked the equity dial to 100 and are still wanting more.

Borrowing at HELOC rates or even converted fixed rates while owning a broad bond fund is a great way to nearly guarantee losses. Simply skip the leverage, bonds or both based on risk tolerance but owning both is irrational.
Well said.

I wouldn't recommend leverage unless all of the following conditions are met:
1) Maxed out all registered accounts
2) Comfortable with the high volatility of equities
3) Have a high capacity of taking risks
4) Have a very stable job

OP seems to have 1 and 4 points covered. Not sure about points # 2 and # 3. Only he (she) can answer this.
Be Balanced. Be Diversified. Stay Invested.
[OP]
Deal Addict
Mar 10, 2010
1497 posts
489 upvotes
TuxedoBlack wrote: Well said.

I wouldn't recommend leverage unless all of the following conditions are met:
1) Maxed out all registered accounts
2) Comfortable with the high volatility of equities
3) Have a high capacity of taking risks
4) Have a very stable job

OP seems to have 1 and 4 points covered. Not sure about points # 2 and # 3. Only he (she) can answer this.
You're correct on #1 & 4 and we are indeed comfortable with #2.
I'd argue that with a 20-30 year investment horizon this wouldn't count as a very risky play though. The plan would be to taper it more to bonds after ~20-25 years and by then if I even had a HELOC balance it should be <25% of the portfolio worth.
Deal Addict
Jul 8, 2013
2458 posts
3704 upvotes
Red Deer, AB
Clacker wrote: You're correct on #1 & 4 and we are indeed comfortable with #2.
I'd argue that with a 20-30 year investment horizon this wouldn't count as a very risky play though. The plan would be to taper it more to bonds after ~20-25 years and by then if I even had a HELOC balance it should be <25% of the portfolio worth.
Then you're the perfect candidate (if there is such a thing!) to use your HELOC and accelerate your FIRE. Check out @Blubbs incredible thread on his own HELOC journey. There is some great nuggets of information there for those wanting to start their leveraged investing journey.
Be Balanced. Be Diversified. Stay Invested.
Deal Addict
Oct 4, 2009
3060 posts
2037 upvotes
Montreal
This may help better understand mortgage debt in the context of asset allocation.

Top