Advice for investing a Small Portfolio (25K) | Page 2 | General financial discussion | Discussion forum

One thing we "know" is OP was 30s back in Aug 17,19 when posted other thread.
First forward to Sep 15,19 and now 40. So just had birthday in the past month or so ! Belated happy birthday !

Back to the question, at age 40 and an investible asset of $25k, the OP started really late in life. If it was me, I would just put it all into CAD bank stocks and earn the 4-5% div (assume tax circumstances not an issue for the OP). Or ETFs and leave it there until the 60s

Norman1, right, bottom line is many Canadians can make over $50K of eligible dividend income and not pay taxes, assuming no other income.

While the number is similar in Ontario, for some provinces the numbers vary greatly. For example in Quebec and Manitoba eligible dividend income is taxed more heavily (socialists!), I believe in Quebec you can only make about $35K before you start paying tax.

And, re non-eligible dividend income, in BC, for example, you can earn about Cdn $22.2K of USA or other foreign based non-eligible dividend income, assuming no other income, and not pay taxes, i.e. no gross-up, no dividend tax credit.

The amounts are somewhere in between for domestic non-eligible dividend income, e.g. corporations subject to the small business deduction (SBD), but that's probably enough detail for now on this topic here.

Norman1, you are correct, it's not tax free, I forgot about the foreign withholding amount.

saren said
[snip]
HI DOUG:

Thank you for your diplomatic approach.

I also noticed ZGRO is cheaper, so why isn't it recommended over VGRO? Especially since VGRO is more Canadian-focused, and how is that a good thing considering Canada is only 3% of the world stock market?

To your first question, I suspect there's two reasons for this. For one thing, Vanguard Canada was the first to market with single-ticket, broadly globally diversified and purely passive-tracking asset allocation ETFs. For another, it's got a lot of Vanguard fanboys and Bogleheads (a reference to one of the founding team members of Vanguard Group, the late Jack Bogle).

To your second question, I haven't looked into the differences between ZGRO and VGRO's underlying ETFs, but suspect it's the weight they allocate to different geographies. Canada will typically be over-weight and arguably should be 15-20% of a portfolio despite only making up 2-3% of global markets because, simply put, we live in Canada, desire to use and spend Canadian dollars, and there's the dividend tax credit.

I'm interested in a link that has organized and categorized the list of funds I mentioned so I don't overlap when purchasing more than 1 ETF or index fund. My goal is to capture as much of the world stock market as possible (as well as US/Canada, etc.) without overlapping or complicating matters.

Best bet is not to mix-and-match ETFs from different providers then. Or, if you do, make sure you're sticking with all MSCI indices, all FTSE indices, or all CRSP indices. There's differences in terms of how MSCI and FTSE Russell categorize countries like South Korea, for example. 😉

Having said that, which funds can I eliminate?

I know I have too many listed there.

Yes, too many. Basically, advantages of CAD-listed fund wrappers of US-listed ETFs is: (1) over $100,000, you don't have to report "yes" to foreign assets and (2) simplicity. Downsides is some tax drag in certain registered accounts (i.e., RRSPs and TFSAs, notably). Justin Bender goes into this on his site. I tend to prefer him to his PWL colleague Dan Bortolotti as he tends to be more Vanguard agnostic (that is to say, he's more prone to recommend the best ETFs regardless of fund provider).

Thanks for the MAW104, what is the MER on that? 0.91%, isn't that a bit high? Or is the rationale because I am investing so little into the fund (5K) it doesn't matter what the MER is?

Remember, fund returns from the Fund Facts and prospectuses are net of fees. Over the really long term, it's reported a compound annual growth rate of 8.6-9.5% since 1986 or something like that, which is pretty good considering it's gone threw at least three major stock market corrections (1987, early- to mid-1990s, and 2008).

As for expensive, though, it's cheaper than the Saskatchewan Pension Plan (by a few bps, not much), which is another solid option that uses a mix of Leith Wheeler (competitor of Mawer) and TD Greystone institutional class mutual funds, and fully 17-20 bps cheaper than the much lauded Tangerine and Simplii Simplii Financial/CIBC index funds.

Based on the following link, it looks like a solid fund:
https://www.morningstar.ca/ca/report/fund/performance.aspx?t=0P0000714D

Thanks for the tip!

Can I purchase this fund with my Questrade account?

Remember, it is actively managed, but that said, it does tend to have a value tilt, which has outperformed the benchmarks until recently (although it's starting to have favour in the past few weeks).

Yes, MAW104 is available on Questrade, but I think Questrade charges a fee to purchase mutual funds, but supposedly rebate part of the MERs. You'd have to look into how their mutual fund Maximizer program works.

How about 5K in MAW104 and 5K in VGRO or ZGRO?

That's a good strategy. I'd probably do something similar, might go 40-60% passive (probably ZGRO or XGRO) and then remainder in MAW104.

For small accounts, MAW104 is ideal because, unless it's Questrade, most DBs don't charge fees to purchase mutual funds. You can also contribute on a pre-authorized purchase plan.

And then maybe another 5K in a few blue chip stocks (as suggested by BUD).

Your portfolio is small, I wouldn't invest less than $5,000 in any one security. Your costs will start to be cost prohibitive and you can't DRIP or DPP (reinvest) the dividends since there's no fractional share purchases in issuer-sponsored brokerage DRIP programs and broker-sponsored brokerage DPP programs.

That adds up to 15K, then maybe keep the other 10K in my HISA.

Definitely keep at least $10-15,000 in a HISA.

And then when my inheritance kicks (1 million), I can enhance my investment portfolio.

Okay. That's when you could invest in individual stocks.

Cheers,
Doug

Dean said

saren said
. . .

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 . . .

. . .  

.

WOW !!!   

It's not that uncommon. We have quite a few of those on this board. (Full disclosure: I do live at home, but am not supported monetarily by family.). I'm thinking of "Roz" and "Max", possibly "SD2013".

Cheers,
Doug

Plus he probably likes Mass Effect video game, since Saren is a character in that game.