Investing

What's your RESP strategy?

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  • Nov 19th, 2022 5:18 pm
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[OP]
Jr. Member
May 10, 2011
112 posts
43 upvotes
GRIMSBY

What's your RESP strategy?

I was thinking 100% VGRO for the first 5 years then go more and more conservative after that to protect the capital but my uncle who is a VP at a public organization pension company said that we should just do 100% Canadian banks/utilities and ride the dividends and not pay the fees.

So now I'm not sure because I trust his opinion but I thought I was smart.
141 replies
Deal Addict
Feb 4, 2003
3285 posts
1598 upvotes
you are not paying too much fees with VGRO.

I was paying more when i was doing the TD e-series and now have switch over to XEQT which I think is better for my risk level when the kids are still young.
Sr. Member
Sep 28, 2011
806 posts
1458 upvotes
Winnipeg
Student88 wrote: I was thinking 100% VGRO for the first 5 years then go more and more conservative after that to protect the capital but my uncle who is a VP at a public organization pension company said that we should just do 100% Canadian banks/utilities and ride the dividends and not pay the fees.

So now I'm not sure because I trust his opinion but I thought I was smart.
This decision is as personal and unique as what should someone hold in their RRSP/TFSA. Some will say VGRO is good, some VEQT, some VUN, others will say a mix of Cdn Banks and Utls is good too, and others will say you can even get more agro than that. Some people would say keep it conservative, although probably not on this forum from what I've read.

Because, the answer to those questions all depend on your life circumstances (job security, family income levels, etc), investment knowledge, risk tolerance, how much time you want to spend on it, and what the backup plan is if your investments don't workout how you planned. For example, I was pretty aggressive with my kids RESP. When I started contributing in the early 00s, I was invested in the TD Science and Tech Mutual Fund, then from 2012-2017, I moved two-thirds of their RESP into HQU [2X Leverage NDX ETF) and the other third into RY. That worked out well thanks to an incredibly strong bull market overall, but especially in tech. But, at the same time I always knew if things didn't workout, my kids would still be able go to uni because I knew we could make it up today if needed.

When it comes RESPs, the most important thing is opening the account and setting up the automatic contribution every cheque to capitalize on that $7200 of free grant money.
Deal Addict
User avatar
Oct 14, 2001
1733 posts
565 upvotes
GMA
From 0-11 : Growth (XGRO)
From 12-16 : Balanced (XBAL)
17+: Conservative (XCNS)

Using similar ETF's from other providers is just as good since long term returns should be very similar. We decided on using Ishares because it allows for Pre-Authorized purchase + I like their reporting better than BMO or Vanguard. This strategy was also built before the all-equities options (VEQT, XEQT) and their ultra conservative counterparts (VCIP, XINC) were made available.

The 0.20% MER is in my opinion a fairly cheap price to pay for ultra-diversified professionally-managed multi-asset classes portfolio. Sure one could shave off a few bps by picking individual ETF's but it comes down to personal preferences.

One last comment/advice, RESP strategy should totally segregated from the rest of your assets because RESP management is about managing someone's else money.
Deal Addict
Dec 8, 2020
1145 posts
1293 upvotes
S.E corner of Toront…
Student88 wrote: I was thinking 100% VGRO for the first 5 years then go more and more conservative after that to protect the capital but my uncle who is a VP at a public organization pension company said that we should just do 100% Canadian banks/utilities and ride the dividends and not pay the fees.

So now I'm not sure because I trust his opinion but I thought I was smart.
including me, some people are not as smart as they think !

its not always about the fees.

since VGRO has only been around since Feb 2019, compare to ZEB the total performance + distributions for the same date range ... 1 Feb 2019 to 11 August 2021

then you decide

using end of day closing price

end of day price start date 1 Feb 2019 - end of day price 11 August 2021, 2.5 years

VGRO $24.40 - $31.94 = 30.90% or average 12.36%/yr

ZEB $27.37 - $37.18 = 35.84% or average 14.33%

total distributions since Feb 2019 to date that could be DRIP.

VGRO $1.794

ZEB $2.685
Deal Fanatic
Aug 4, 2005
8237 posts
899 upvotes
Brampton
I’d probably set up mine like something like in this article:

https://www.tawcan.com/all-in-one-etfs-canada/

But I would change it up slightly and use XEQT + ZAG(Bonds). This way I can control the % of bonds in my portfolio and raise it as the kids get older
Sr. Member
Dec 26, 2019
723 posts
1246 upvotes
- XEQT for now: ages 0-15
- When my kids are 2-3 years out, I'll start moving my funds into a GIC or HISA ETF with no volatility.

As a note, if you go into VBAL, if there's a recession, you'll still have to sell at a loss (albeit a smaller loss). If you completely split your funds into x% Equity and (1-x%) risk-free, you can simply use the risk free money if the market tanks. Then you have a year to wait and hope for the market to recover before you need to withdraw again.
Newbie
Sep 18, 2017
87 posts
92 upvotes
100% VGRO and $153k so far for my two kids ages 13 and 11. Have deposited $2,500 per kid the month they were born and then on January 1st every year since they were born. Total contributions to date are $70,000 and total grants to date are $13,700.

In a couple of years will start to hold some cash for eldest kid's first couple of years at post-secondary.
Member
Feb 11, 2009
384 posts
128 upvotes
if i have ~30k in rrsp right now, should i lump sum all of it in vgro or veqt and forget or DCA? (If DCA, over how long of a period considering i have a 9.99 trading fee per transaction)

thanks
Deal Addict
Nov 9, 2013
4787 posts
5354 upvotes
Edmonton, AB
steph3n wrote: if i have ~30k in rrsp right now, should i lump sum all of it in vgro or veqt and forget or DCA? (If DCA, over how long of a period considering i have a 9.99 trading fee per transaction)

thanks
What's your timeline? Assuming long (like, 10+ years) I'd just lump sum it.
Keep calm and go long
Deal Addict
Sep 2, 2004
2703 posts
1391 upvotes
It's really hard to argue against any of the "GRO" ETFs for a long-term holding. Very low fees, very high diversification, excellent returns in a convenient one-stop shop package. The real downside would be risk tolerance and even more than that, investment timeframe. For example, if your child was going to need the RESP money in a year a GRO fund would not be the right place. But for a 10+ year timeframe they are extremely strong, even against high quality investments like the individual Canadian banks.

Banks and utilities are generally a pretty safe route to go as well. Personally I would not be surprised to see these earn a quality return, but not quite as high as a VGRO, XGRO, etc. over a longer time period. They are also less diversification with this approach.

To your question about moving more conservative after the first 5 years, that seems short to me but again this is an personal decision. It may be something that is situation dependent to a degree as well, for example how well the RESP has done (ie. locking in gains or leaving for more growth), how much income it is generating, etc.
Member
Feb 11, 2009
384 posts
128 upvotes
treva84 wrote: What's your timeline? Assuming long (like, 10+ years) I'd just lump sum it.
timeline is >20 years in my case. thanks for the advice, also read that 2/3 of the time according to vanguard studies that lump sum will be better than DCA
Deal Addict
Nov 9, 2013
4787 posts
5354 upvotes
Edmonton, AB
steph3n wrote: timeline is >20 years in my case. thanks for the advice, also read that 2/3 of the time according to vanguard studies that lump sum will be better than DCA
Yes, and the longer the timeline, the more likely lump sum outperforms DCA (as time in > timing).
Keep calm and go long
Deal Addict
Dec 8, 2020
1145 posts
1293 upvotes
S.E corner of Toront…
treva84 wrote: Yes, and the longer the timeline, the more likely lump sum outperforms DCA (as time in > timing).
DCA can be tricky if one is trying to time the market.

on DCA I have mentioned doing DCA to do it on the same day/date each mth, or on the first trading day each mth at 12 noon or in the last 15 minutes of the first trading day each mth as an example.

I believe doing this over a 10 -20 year time frame will win over the lump sum approach, its a disciplined approach.
Deal Addict
Aug 10, 2006
2488 posts
1219 upvotes
take a look at VGRO's holdings....i wouldnt call this a growth ETF at all.
you may as well by ARKK for 5 years, then slowly convert to more conservative.

ZEB....its equal weight, some people dont like it since there is NO strategies... why are you paying the MER? it is EQUAL weight. they do not rebalance it
Deal Guru
Dec 5, 2006
13028 posts
8268 upvotes
Markham
bestknightmare wrote: take a look at VGRO's holdings....i wouldnt call this a growth ETF at all.
you may as well by ARKK for 5 years, then slowly convert to more conservative.

ZEB....its equal weight, some people dont like it since there is NO strategies... why are you paying the MER? it is EQUAL weight. they do not rebalance it
I thought they do rebalance it. Otherwise how could they equal weight them
Deal Addict
Feb 26, 2017
2562 posts
3641 upvotes
bestknightmare wrote: take a look at VGRO's holdings....i wouldnt call this a growth ETF at all.
you may as well by ARKK for 5 years, then slowly convert to more conservative.

ZEB....its equal weight, some people dont like it since there is NO strategies... why are you paying the MER? it is EQUAL weight. they do not rebalance it
I don't think ARKK is a good idea for an RESP. Its done great in the past but in the future I could see it going either way. I used to own ARKK but sold it at a loss as I felt it didn't really line up with my strategy. There is no way I would buy a lot of the individual companies in it if I wasn't buying ARKK.

I like the idea of etfs more than stocks in a RESP. Something conservative that you can buy every month should work well for an RESP. I'd probably go 50% VFV and 50% VCN with a brokerage where I could auto buy it with no fees if I was starting a new one. I've got two eseries mutual fund accounts myself and have been maxing it out with monthly contributions since my kids were born (They're 11 and 9). I don't do much rebalancing but I have a mix of US, CDN, international and Bond funds. Overall its worked out pretty well.
Deal Guru
Dec 5, 2006
13028 posts
8268 upvotes
Markham
In terms of RESP, we save it for children's education, so most likely one need start to withdraw at a fixed period, so need be careful. Not every crash only take a few months to recover
Deal Addict
Aug 10, 2006
2488 posts
1219 upvotes
smartie wrote:
I thought they do rebalance it. Otherwise how could they equal weight them
They all move together so there is no real rebalancing. See the photo
Screenshot_20210815_124840_com.android.chrome.jpg
Deal Addict
Dec 8, 2020
1145 posts
1293 upvotes
S.E corner of Toront…
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Last edited by Janus2faced on Aug 15th, 2021 5:03 pm, edited 1 time in total.

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