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Email this5:56 pm
August 17, 2019
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Hi guys! I am about to start investing for the first time. This is a long post but basically I am asking you to help me decide what to buy or not.
I opened a TFSA Questrade Account with $5000 CDN. I don't have a RRSP set up yet. But my TFSA contribution room has never been used so it's at the maximum ($70,000). I also have Wealthsimple, but only $100 deposited there (just to try it out). I also have ModernAdvisor (with nothing deposited).
About me: I am 40, in BC, not married, no kids, no income, no job, no debt, no expenses, not disabled, and little net worth. I have lots of free time, in good health, supported by family and hold a good credit rating. I'm willing, interested and able to research various investment options and strategies, especially DIY Low-Cost Investing.
I don't have any short term financial goals or needs, rather looking to enhance my life savings (25K, small portfolio) with a hopeful ROR (5-10%+).
I also have a 3% HISA (5K emergency fund) to keep pace with inflation.
I have a long investment horizon, upper moderate risk tolerance, 60/40 or 70/30. Seeking a globally diversified, passively managed, optimal asset allocation with the lowest possible MER (and other fees). Prefer maximum exposure to the US Stock Market, World Stock Market and Canadian Stock Market, in that order, as well as Emerging Markets, and REIT's. Basically, everything. I really want to focus on diversification, and not get dinged by currency conversion fees, FWT, MER, home bias, etc.. Prefer not to focus on one investment sector for more than 5% of my total portfolio. In case the markets fail, will go against the flow and stick the course, and not sell, rather stay cool or buy more at a bargain.
A single balanced ETF, from Ishares, Vanguard, Blackrock, which requires no rebalancing is an option, but perhaps an S&P index fund is the better way to go? Maybe both? How about $1000 a pop here and there into different index funds/EFT's to start? What do you think?
I can either do lump sum investing or dollar cost averaging. I like the idea of simplicity. The idea of all in one (12,000 items in one fund) appeals to me, but I'd like to keep only part of my portfolio focused on that, and the other parts on completely different investments. Such as dividends.
I don't really need regular income coming in but I like the idea of Canadian dividend payments, from old, large, reputable companies that have a record of growth year after year and have a history of increasing their dividends payouts every year. Large cap, blue chip stocks with oligopoly (companies that people need no matter what). Financials, Energy, etc... Brands you know and see everyday. But I don't want to focus only on dividends, rather a mix with other investments to really become diversified, as much as possible.
In Canada, dividend income from Canadian corporations is taxed at a preferential rate. So preferential, that one could receive up to $50,000 in dividend income and pay very little/no tax on it (provided you have no other sources of income). Since I don't have a job or other income (other than investments), I may be eligible up to 50K in dividend income, tax free. So Basically, for Canadians who have no other income, and own Canadian dividend stocks in a non-registered portfolio, they can make up to $50,000 in dividend income without paying any income tax. Is this true?
I heard a lot about how VGRO is the best. Will probably buy that for sure. I've read it's wise in general to put US/International in the RRSP “box” and bonds and REITS in the TFSA “box” and Canadian dividend paying companies in the non-registered “box”, but can't I just put everything in TFSA?
3 fund portfolios also appeal to me. Prefer to avoid situations where behavioural or emotional issues become commonplace. One approach is to take a balanced approach and keep about 30% in individual dividend paying companies and 70% in index funds/ exchange-traded funds. What do you think?
“The trick is not to pick the right company, the trick is to essentially buy all the big companies through the S&P 500 and to do it consistently.” Decrease foreign withholding tax by keeping international equity listed in the US (rather than overseas), so it only crosses 1 border and buy US equity in a US listed ETF and keep it in RRSP (but I would still have to pay tax when the RRSP is over), so why not just keep everything in the TFSA? Isn't keeping everything in TFSA, the simplest method? Especially since I have 70K of contribution room in my TFSA? Do I even need a RRSP? I can always open a RRSP account with Questrade. Can I recover the withholding tax if I hold the US/International Equity outside an RRSP? A taxable account also allows me to buy and sell ETFs in US dollars and avoid currency exchange fees that way—Questrade allows me to hold US dollars in an RRSP. So maybe I should open a RRSP after all? What do you think?
In conclusion, I'm at the lowest possible tax rate since I have zero employment income. Assuming there is a market downtown coming soon, what would be the best investment strategy (other than HISA/GIC)? I want to invest where I can see a profit. I am interested in low-cost investments. I want to take the frugal approach. I like the idea of really cheap index funds that give broad exposure to everything with low MER, but would like diversified variety with all other investments as well. I want to be well diversified by geography, with no more than 10%-15% of my portfolio in Canada.
One approach is to put 10% of the portfolio in short-term government bonds and 90% in a very low-cost S&P 500 index fund. Good idea to ditch foreign bonds altogether and focus only on Canadian bonds? I would prefer to pay 0% MER in general throughout my entire portfolio and get semi-close tracking of the REIT index by owning the top 5 holdings of the VRE FTSE Canadian Capped REIT Index ETF such as: – REI.UN; HR.UN; CAR.UN; SRU.UN; and, REF.UN. Owning these positions will give me about 55% of the REIT index. The REIT market is fairly small. So each ETF, while charging a fairly hefty MER, will only have a limited number of holdings. Own individual REITs over the ETF. What do you think?
I know some of the following funds are redundant. I'd appreciate your patience in helping me eliminate the bulk of these so I can narrow it down to just 5-10 funds in total. Focusing on the broadest diversification without overlapping, and keeping the MER, FWT, and other costs to a minimum. Some of the individual funds I may be interested in:
VRGO (VUN VAB VCN VIU VBG VBU VEE)
VUN U.S. Total Market Index ETF
VAB Aggregate Bond Index ETF
VCN FTSE Canadian All Cap Index ETF
VRE FTSE Canadian Capped REIT Index ETF
VDY
VGG
VOO S&P 500 ETF
VFV S&P 500 Index ETF
VSP S&P 500 Index ETF (CAD-hedged)
VCE FTSE Canadian Index ETF
VLB Canadian Long-Term Bond Index ETF
VTI U.S. Total Stock Market ETF
VBK Small-Cap Growth ETF
VB Small-Cap ETF
VOE Mid-Cap Value ETF
VOT Mid-Cap Growth ETF
VO Mid-Cap ETF
VV Large-Cap ETF
VTV Value ETF
VUG Growth ETF
VXF Extended Market ETF
VIG US Dividend Appreciation ETF
VYM High Dividend Yield ETF
VGG U.S. Dividend Appreciation Index ETF
VSIAX Small-Cap Value Index Fund Admiral Shares
VSGAX Small-Cap Growth Index Fund Admiral Shares
VSMAX Small-Cap Index Fund Admiral Shares
VMVAX Mid-Cap Value Index Fund Admiral Shares
VMGMX Mid-Cap Growth Index Fund Admiral Shares
VIMAX Mid-Cap Index Fund Admiral Shares
VLCAX Large-Cap Index Fund Admiral Shares
VVIAX Value Index Fund Admiral Shares
VIGAX Growth Index Fund Admiral Shares
VEXAX Extended Market Index Fund Admiral Shares
VTSAX U.S. Total Stock Market Index Fund Admiral Shares
VFIAX 500 Index Fund Admiral Shares
HXQ
XRGO
XUS iShares Core S&P 500 Index ETF
XSP iShares Core S&P 500 Index ETF (CAD- Hedged)
XIC iShares Core S&P/TSX Capped Composite Index ETF
XUU iShares Core S&P U.S. Total Market Index ETF
XUH iShares Core S&P U.S. Total Market Index ETF (CAD-Hedged)
XAW iShares Core MSCI All Country World ex Canada Index ETF
XDIV iShares Core MSCI Canadian Quality Dividend Index ETF
XBB iShares Core Canadian Universe Bond Index ETF
ZGRO
ZAG BMO Aggregate Bond Index ETF
ZSP BMO S&P 500 Index ETF
ZUE BMO S&P 500 Hedged to CAD Index ETF
ZLB BMO Low Volatility Canadian Equity ETF
ZDJ BMO Dow Jones Industrial Average Hedged to CAD Index ETF
ZDY BMO US Dividend ETF
ZLU BMO Low Volatility US Equity ETF
Thank you for helping me!!!
10:36 pm
February 20, 2018
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Always better to buy stocks direct than an index especially this late in the cycle. Build out a diversified stock portfolio one or two blue chips at a time but again its late in the cycle look for value.
11:39 pm
December 12, 2009
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Good questions, @saren. There is substantial academic evidence which supports the theory that markets are efficient (that is, that the market is aware of all available information). Indeed, S&P produces a semi-annual report called the SPIVA report (short of S&P Indices Versus Active), which routinely shows that between 75-85% active fund managers consistently underperform, net of fees, their benchmark indices. Included in that total are so called "closet indexers," which are those managers which merely match the index, at added cost.
Nevertheless, it's important to remember that it is just a theory (albeit one supported by decades of academic evidence), and there are variations in the support for this theory across both geographies and asset classes.
I wouldn't say VGRO is better than XGRO (from BlackRock), ZGRO (from BMO), or even HBAL (from Horizons). They all have minor differences in fees (BMO is the cheapest, followed by BlackRock, Horizons, and then, somewhat ironically considering its historical penchant for being a cost cutter, Vanguard), construction (i.e., real vs. synthetic, the latter of which offers income tax advantages in non-registered accounts; Horizons is the latter and is restructuring their funds as individual classes of an open-ended mutual fund corporation from an open-ended mutual fund trust following changes to around the "redeemers methodology" [Norman can likely go into, if you're so inclined; it may make one's head hurt]), strategy, and asset class. On the latter point, it's best not to mix and match certain ETFs unless you know what the differences are "under the hood" as some indices that they track include South Korea as an emerging market or a developed market. As a result, you may find yourself over-, under-, or non-exposed to a particular geography or asset class.
If you would still like to go with an active fund, which is very affordable, especially in small accounts, and has a long-term track record of outperformance against its benchmark indices, net of fees, I would go with the Mawer Balanced Fund (MAW104), which is not available through TD Direct Investing. Advantages to this strategy is there's no trading commissions.
If you want to go with index funds, which also have no trading commissions, you might try the Series D index funds from Scotia, which average 0.65-0.75% MER and is fully 0.32% lower than Tangerine's index funds.
Hope that helps.
Cheers,
Doug
11:55 pm
October 21, 2013
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Your reach far exceeds your grasp. It's not worthwhile to put 1000 here and 1000 there and so on. In order to make money, you have to have money, and you don't have enough to make much, no matter what you do.
It's laughable to be even thinking in terms of a 200% ROI through eligible Canadian dividends.
I'd say you need to have at least 100K to invest to be bothered with anything more complicated than the Couch Potato formula (see their website) or a good balanced fund. 25K is barely enough to consider something really really simple.
With 25K to start and a reasonable average return of 5%, with no taxes and considering the impact of inflation averaging 2.5%, it will take you until you're close to 70, if you live that long, to even reach 50k in today's dollars. By the time you are about 95, you should have about 100K in today's dollars. Unless you bring in more cash, you will never have enough to make it worth your while to pursue anything but the simplest of investment plans.
So, stop making your life so complicated and asking for free labour and analysis from us. Go to the Couch Potato website and do as they say or just buy a good balanced fund like Mawer etc, and stop thinking about it and don't bother with all the research because you'll never be able to make use of it.
You have two other alternatives:
1. Get a job or start a business; pay your share of taxes for the upkeep of the country, infrastructure and services; save some money, and invest it - like almost everybody else does.
2. Go ask mommy for significantly more play money and invest that.
6:36 am
October 27, 2013
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I agree with Loonie's comment that the best way to get ahead is to get a job and start paying your way and saving for retirement. That is the best investment anyone can make at any age.
That aside, with $25k, an investment in a single Asset Allocation ETF (like VGRO or VBAL) or a low cost balanced fund (like MAW104) is the way to go. It makes no sense to have less than $5-10k in any one holding, even with commission free buys in Questrade, and you can't get enough diversification with less than 5 holdings, even 10 holdings. Stick to passive index investing.
I would do it all in your Questrade TFSA. With no job and no income, you have no taxable income and an RRSP has no current value, nor does any of your other accounts you have set up have any value. It is really that simple.
I have been more fond of the Vanguard series of VGRO, VBAl, etc. than the others for a number of reasons: Vanguard has a history of unitholder friendliness and ownership, Vanguard products are better established (Blackrock's equivalents are a re-formulation of old Claymore products and just got re-constituted this Spring), and the Vanguard products have a slightly different geographical allocation that I like (including hedged global bonds). One might argue it is the most global of the AA ETFs. But all said and done, there is not much difference between the Vanguard, Blackrock and BMO offerings.
Disclosure: My spouse's RRIF is 50% VBAL, my TFSA is entirely MAW104 and my ex-spouse's TFSA is entirely VBAL. We are all seniors so the balanced 60/40 product is better for us than the 80/20 more aggressive offerings.
7:19 am
February 20, 2018
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With cheap commissions these days a lad could invest in a few stocks with as little as 5k and build from there. Keep good records for any tax calculation acb
Include employment income savings in ur overall return i say a job is like a stock it pays "dividends"
11:23 am
October 27, 2013
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Did you not notice the OP has no job and no income? None of this discussion matters. The OP would appear to have much bigger life issues.
2:12 pm
April 21, 2019
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This is going to be a little blunt, but if you don't have a job, your priority should be to find some form of fulfilling employment, not pinching pennies on $25k. You should keep your meager sum in a high-interest savings account in case the charity of your family dries up so that you don't wind up on the street.
2:22 pm
October 21, 2013
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AltaRed said
Did you not notice the OP has no job and no income? None of this discussion matters. The OP would appear to have much bigger life issues.
You or I may think this person has bigger life issues, but in the previous thread that he/she started, she/he claimed to have no interest in any kind of employment, ever. Apparently work disagrees with her/his "values", but benefitting from other people's tax contributions doesn't.
3:23 pm
March 17, 2018
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AltaRed said
Disclosure: My spouse's RRIF is 50% VBAL, my TFSA is entirely MAW104 and my ex-spouse's TFSA is entirely VBAL. We are all seniors so the balanced 60/40 product is better for us than the 80/20 more aggressive offerings.
Funny that your spouse and ex spouse invest alike 🙂
3:33 pm
March 30, 2017
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put it into an index ETF and spend full time looking for a job.
3:55 pm
December 12, 2009
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AltaRed said
I agree with Loonie's comment that the best way to get ahead is to get a job and start paying your way and saving for retirement. That is the best investment anyone can make at any age.That aside, with $25k, an investment in a single Asset Allocation ETF (like VGRO or VBAL) or a low cost balanced fund (like MAW104) is the way to go. It makes no sense to have less than $5-10k in any one holding, even with commission free buys in Questrade, and you can't get enough diversification with less than 5 holdings, even 10 holdings. Stick to passive index investing.
I agree with much of Loonie's general comments with respect to needing money to make money investing in individual stocks. As a general rule. I require to hold at least $5,000 in equity in an individual security and I would never hold more than 20 individual securities as it becomes problematic for managing. Thus, one really would need at least $100,000 to do any sort of individual investing.
Like you, AltaRed, I disagree with Loonie's comments about $25,000 potentially being too low for investing outside of HISAs and GICs. MAW104, VGRO, ZGRO, or XGRO are all good options, though, for clarity, I personally eschew Vanguard Canada's single-ticket asset allocation ETFs on account of (a) their higher MER with no added benefit but, crucially, (b) the snobbery of Vanguard Group that operates under the letter of their incorporating legislation in not disclosing their annual company financial statements. As a company similar, in broad strokes, to a cooperative, credit union, or mutual insurance company, I think, in the spirit of good governance and transparency, they should disclose. For what it's worth, BMO is now Canada's fastest growing ETF company, outpacing BlackRock Canada and Vanguard Canada combined. They're now less than $5 billion CAD in AUM away from #1 ranked BlackRock Canada, and I expect them to overtake BlackRock Canada as the #1 ETF manager in Canada by the end of 2020. 
Cheers,
Doug
3:59 pm
December 12, 2009
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Briguy said
Funny that your spouse and ex spouse invest alike 🙂
@Briguy...that, actually, is not that surprising. Evidentally, they either (a) formerly or (b) currently share the same taste in men. 😉
What's odd is that @AltaRed knows how his ex-spouse invests. Is he able to see that in his CRA online account somehow because it's a Spousal RRSP whereby he was the contributor? Or, maybe all have a super friendly "Kumbaya" relationship (possibly one that is polyamorous) on co-disclosure of their portfolios among all parties? Nevertheless, I, too, smiled when I read that. 🙂
Cheers,
Doug
5:04 pm
October 27, 2013
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Haha! My ex continues to ask for investment advice/opinion/guidance, i.e. we are still on good terms. Just couldn't live together and we split in 2008.
I also wrote her a simple IPS based on what she told me how she wants to invest and direct her retirement plan. There is virtually no difference between the two women in terms of risk, asset allocation (balanced), and investing interest (passive indexing), which is not unusual really. I think most people are their 'type'.
@Doug, I agree BMO has found the right mix for ETFs and I also expect them to overtake Blackrock.
5:26 pm
September 11, 2013
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Maybe OP is from a well-to-do family and has no need for more money, has chosen a low-impact life that works for him/her. Aren't the young people telling us our lives of consumerism are destroying the planet, so I'm not so quick to offer unsolicited advice to saren about the need to get on the treadmill - especially when it seems everybody dreams of winning the lottery and quitting their job. Though I do agree I'm not clear why he'd care about investing advice with his paltry amounts.
6:33 pm
March 17, 2018
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AltaRed said
Haha! My ex continues to ask for investment advice/opinion/guidance, i.e. we are still on good terms. Just couldn't live together and we split in 2008.I also wrote her a simple IPS based on what she told me how she wants to invest and direct her retirement plan. There is virtually no difference between the two women in terms of risk, asset allocation (balanced), and investing interest (passive indexing), which is not unusual really. I think most people are their 'type'.
@Doug, I agree BMO has found the right mix for ETFs and I also expect them to overtake Blackrock.
I like to DIY, I think my ex is more the "financial advisor" type which she can afford to since she has more money than me 🙂
8:18 pm
April 21, 2019
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Bill said
Maybe OP is from a well-to-do family and has no need for more money, has chosen a low-impact life that works for him/her. Aren't the young people telling us our lives of consumerism are destroying the planet, so I'm not so quick to offer unsolicited advice to saren about the need to get on the treadmill - especially when it seems everybody dreams of winning the lottery and quitting their job. Though I do agree I'm not clear why he'd care about investing advice with his paltry amounts.
I’d recommend reading their previous thread. https://www.highinterestsavings.ca/forum/general-comparisons/online-banks-and-the-highest-rates-hisa-tfsa-gic/
9:08 pm
June 3, 2015
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Loonie said
Your reach far exceeds your grasp. It's not worthwhile to put 1000 here and 1000 there and so on. In order to make money, you have to have money, and you don't have enough to make much, no matter what you do.It's laughable to be even thinking in terms of a 200% ROI through eligible Canadian dividends.
I'd say you need to have at least 100K to invest to be bothered with anything more complicated than the Couch Potato formula (see their website) or a good balanced fund. 25K is barely enough to consider something really really simple.
With 25K to start and a reasonable average return of 5%, with no taxes and considering the impact of inflation averaging 2.5%, it will take you until you're close to 70, if you live that long, to even reach 50k in today's dollars. By the time you are about 95, you should have about 100K in today's dollars. Unless you bring in more cash, you will never have enough to make it worth your while to pursue anything but the simplest of investment plans.
So, stop making your life so complicated and asking for free labour and analysis from us. Go to the Couch Potato website and do as they say or just buy a good balanced fund like Mawer etc, and stop thinking about it and don't bother with all the research because you'll never be able to make use of it.
You have two other alternatives:
1. Get a job or start a business; pay your share of taxes for the upkeep of the country, infrastructure and services; save some money, and invest it - like almost everybody else does.
2. Go ask mommy for significantly more play money and invest that.
Loonie...your best post ever.....props dude.
Tangerine....Canada's best bank. LBC.............Canada's 2nd best bank.
Hubert.....worst bank in Canada.
4:49 am
September 11, 2013
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Thanks, chishoik, I hadn't read his previous stuff and now have a better idea. Still seems pretty benign to me, though I don't quite get his time and energy spent on banks, finances, money, given his professed disinterest in the shiny things of our society. And kinda lucky, seems like his mother helps all her offspring financially, so there must be enough (after tax) money in the family for her to do that.
7:16 am
April 6, 2013
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For certain provinces, one can earn about $51,000 of eligible dividends each year with no other income and owe no taxes. But, one doesn't really need to worry about that until one has more income each year than the federal and provincial basic personal amounts.
Last taxation year, the federal basic personal amount (line 300) is $11,809. The current BC personal amount (line 5804) is $10,412. That covers federal income taxes on the first $11,809 of taxable income and BC income taxes on the first $10,412 of taxable income each year.
That means no federal or BC income taxes anyways on
- first $10,412 of interest,
- first $20,824 of capital gains, or
- first $10,412 / 138% = $7,544 of eligible dividends
each year.
One will need substantially more than $25,000 of investments to generate that much interest, capital gains, or dividends each year. For example with interest rates around 3%, one will need over $347,066 to get $10,412 of interest each year.
Please write your comments in the forum.