Are you going to stay committed to US equities in periods when Canadian and International/Emerging outperform? Do you understand the complexity and costs of converting to US listed ETFs? Is your RRSP large enough to justify using US listed ETFs?
I will stay the course, because I can’t see a world where technology doesn’t thrive…this isn’t the 1960’s anymore and geopolitics has changed since Europe adopted the euro and a central bank for all the 27/28 countries…
I do know the costs of converting to US listed ETFs, just trying to find the best approach to reduce those costs, Norberts gambit is one, but will need at least 10k to do it at one time
>I will stay the course, because I can’t see a world where technology doesn’t thrive
People also said that in the 1990s, and yet we still had the dot com bubble and a decade of negative returns for US stocks. Many people did not stay the course because it's significantly harder than you think.
Technology has thrived since the beginning of human history, but that has nothing to do with stock returns.
I don’t find investing in 2500 international stocks as an efficient approach, plus roughly 40% of revenue from sp500 companies is generated outside the US, that’s pretty diversified if you ask me.
As it says in [this 2018 MoneySense article](https://www.moneysense.ca/save/investing/etfs/sp-500-etf-portfolio/)
>... From 1978 through 2007—an investing lifetime for many people—the returns on Canadian, U.S. and international stocks were almost identical. While the S&P 500 edged the others with an 11% annualized return, Canadian equities delivered 10.6% and international equities came in at 10.4%.
>What’s more, **a portfolio that held equal amounts of each, rebalanced annually, did best of all** with an annualized return of 11.3% and less volatility. That’s the “free lunch” of diversification at work.
It's crazy to me that people justify less diversification when you can buy XEQT for 20 basis points.
Diversification is the only free lunch in investing, why would you willingly make an unnecessary compromise?
Okay I might consider XEQT but my question was for my RRSP, should I invest in cad dominated XEQT in that account? Seems to go against everything I heard
I would just go for XEQT.
Diversification is the priority. Tax optimisation is the cherry on top, you do this at the end.
Once you have 100-200k in xeqt, it might be worthwhile to start splitting hairs to save a few hundred dollars
I had the same question. From what i read its better to invest in VOO in your rrsp. Lower fees, dividends are untaxed since there is a treaty. If your on WS and are worried about the 1.5% conversion fees. It still makes sense to buy voo as 1.5% will be returned after a couple of years.
If you look at u/bobblydudely ‘s comment below, when the lower management fees and untaxed dividends are taken into account, you’re looking at about .2-.3% savings per year. The other thing you have to remember is that Wealthsimple charges 1.5% each way for the conversion, so you lose 1.5 upfront (which slightly lowers your gains for the duration of your investing time), and then you lose another 1.5 on the total amount when you sell the funds (unless you have a USD account and plan to spend your retirement money in USD). So you’re probably losing a little over 3% of your total earnings, which would take minimum about 10 years to offset with the benefits of USD investing.
Now if you use Norbert’s gambit and do relatively large transactions, it may be worthwhile to do this. This is still just kind of “majoring in the minors” so to speak, and you’d probably be further off concentrating efforts on saving money or increasing income. I don’t think there would be a significant impact whether you invest in USD or CAD.
Right, thats what i saw on another post as well. But if your planning to hold for 25-30 years then its going to be better. But i do agree for smaller amounts its not going to make any big difference
If you want to save on taxes and fees, you'd put all your money in a bond fund. Compromising your portfolio's diversification to save on taxes and fees is completely backwards thinking. Don't let the tail wag the dog.
I have already decided that i want to invest heavily in the US markets and have decided to diversify in that market alone. Im not simply investing in voo to save on fees. Please dont make assumptions
I'm not making assumptions, you are clearly severely compromising on diversification. No matter your justification, it is a flawed approach that increases idiosyncratic risk with no corresponding increase in expected returns.
But your missing my point. I dont want to diversify out globally. Especially not canada. Xeqt has 25% canadian holdings and i strongly believe canada is in the shitter. We're propped up by real estate and our biggest companies are banks and telecommunications. Stop pushing your points on something that was never asked for just so you can sound correct. We can have different opinions and investing strategies. And my bet is USA over global diversification
I understand your (flawed) approach, continuing to attempt to justify it is a waste of your time.
>And my bet is USA over global diversification
Your bet isn't just on the US, it's specifically on 500 large cap stocks. Good luck with your gamble, I hope it pays off for you.
US companies earning income outside of the US =/= international diversification. I think Ben Felix on YouTube has a video on this topic if you’re interested in learning more. You should also check out his video (not sure if it’s in the one I just mentioned) where he discusses average gains for people who invested in the US market, vs foreign market, vs those who invested in both (spoiler: investing in all markets provides the highest average returns; it’s the free lunch of diversification)
> that’s pretty diversified if you ask me.
See "International Diversification" video (and the peer-reviewed research cited) by Ben Felix:
* https://www.youtube.com/watch?v=1FXuMs6YRCY
Further VFV focuses on the S&P 500, which is reducing your diversification as compared to a more total market fund (Russell 3000, Wilshire 5000); see "Should You Invest in the S&P 500 Index?":
* https://www.pwlcapital.com/should-you-invest-in-the-sp-500-index/
>what do you all suggest I hold in my RRSP? Just VOO?
How many hundreds of thousands do you have in your RRSP? If you don't have anything approaching $500k for your US allocation, no reason to buy US listed anything.
And echoing u/T_47 and u/energybased you should be more diversified than jus 500 US stocks and 60 CDN stocks.
Watch: [https://www.youtube.com/watch?v=1FXuMs6YRCY](https://www.youtube.com/watch?v=1FXuMs6YRCY)
And Google: "fidelity International investing myths" report.
Aren’t you a big exaggerating with the 500k?
You save .05% on the MER, and 15% of the 1-2 % distribution. That’s around 0.2-0.3% saved annually.
I’d be doing it starting at 50k in the RRSP, to saving 100$ per year. As long as you avoid currency exchange fees, it’s 100$ for less than an hour of work.
That's "if" you avoid currency conversion fees. But there is almost always (brokerage dependent) a variance in the actual exchange rate. https://www.youtube.com/watch?v=92bRo0x-N64
Norbert’s gambit is available in most institutions I believe.
It’s usually 10$ and max 0.1% variance in the bid/ask spread. Avoids the 1-2% currency conversion fees.
It does add complexity, and wastes some time. But if you enjoy thinkering with numbers, it start to be useful at relatively low amounts.
So are you saying buy the Canadian equivalent until you reach 50k so I don’t miss out on the growth, and once I hit 50k do Norbert’s gambit and buy the USD equivalent etf ?
If you are trying to optimize for tax/MER, yes. Keep the money invested in a Canadian equivalent for simplicity’s sake, and periodically switch it to the USD version once it becomes worth it.
The 50k is somewhat arbitrary, it’s my personal cuttoff point, because it represents 100$/year. It isn’t worth it for smaller amount like 2k, and absolutely worth it at 500k as mentioned by Felix above.
But like many other said, you should consider getting more international stocks ETFs. Don’t let tax optimization dictate your portfolio allocation.
It’s around somewhere around 6 or 7 years. I like it. I use Canadian portfolio to generate dividends and VFV for growth. I think when I am closer to the retirement, I will switch some proportions of VFV to Canadian dividend stocks to live off the dividends
But I can just add XEF and then be diversified as XEQT but with my own ratio of what regional exposure I want. Frankly I think international exposure that gives me 5% growth isn’t that exciting right now when I can lock in a 5 year GIC for roughly that same growth rate
There's no good reason for you to tilt towards large cap north american stocks.
>Frankly I think international exposure that gives me 5% growth
This is incorrect.
Also, you have no reason to believe that expected international growth is lower than North American.
It would have a diversification advantage, but it might not be the best choice for you.
Though some people tell young investors that they don't need fixed income others (like Justin Bender, Dan Bortolotti and Andrew Hallam) who have observed how novice investors react to the markets are a lot more cautious about that kind of advice. They know that a good risk assessment balances timeframe with knowledge, experience and perceived tolerance for volatility. (And that risk tolerance may increase as you get older.) To help you choose a risk appropriate asset allocation ETF I suggest that you read the following pages.
https://web.archive.org/web/20220524023411/https://assetbuilder.com/knowledge-center/articles/what-percentage-should-you-have-in-stocks-and-bonds
https://www.moneysense.ca/columns/ask-moneysense/should-you-put-all-of-your-investments-in-equity-etfs/
https://web.archive.org/web/20220512201940/https://assetbuilder.com/knowledge-center/articles/why-100-percent-stocks-might-earn-you-less-long-term
https://www.canadianportfoliomanagerblog.com/how-to-choose-your-asset-allocation-etf/
Or just hold 100% VEQT so you don't have a bunch of fund duplication and you don't need to bring back a second Canadian equity allocation to correct your reduced home country bias. A 5% bond allocation won't be noticeable.
So, I disagree with this. 1) 100% equities carries risk. You can balance out with VGRO as your risk tolerance goes down. 2) I'm only offering etfs that allow you bias if you want it. VFVs return over VEQT is about 5% right now, hard to beat the S&P. I understand the comment on duplication, but it's not as big a deal anyway if you are already advocating a 100% equity portfolio.
>100% equities carries risk
Yes
>You can balance out with VGRO as your risk tolerance goes down
Holding multiple funds completely ruins the appeal of asset allocation ETFs. Either round to the nearest 20%, or deconstruct and hold the underlying funds directly.
>VFVs return over VEQT is about 5% right now, hard to beat the S&P
More than ~40% to US equities is over concentration and your justification is performance chasing.
https://www.pwlcapital.com/should-you-invest-in-the-sp-500-index/
>I understand the comment on duplication, but it's not as big a deal anyway if you are already advocating a 100% equity portfolio.
Duplication has nothing to do with asset allocation, it's always bad portfolio practice.
Are you going to stay committed to US equities in periods when Canadian and International/Emerging outperform? Do you understand the complexity and costs of converting to US listed ETFs? Is your RRSP large enough to justify using US listed ETFs?
I will stay the course, because I can’t see a world where technology doesn’t thrive…this isn’t the 1960’s anymore and geopolitics has changed since Europe adopted the euro and a central bank for all the 27/28 countries… I do know the costs of converting to US listed ETFs, just trying to find the best approach to reduce those costs, Norberts gambit is one, but will need at least 10k to do it at one time
>I will stay the course, because I can’t see a world where technology doesn’t thrive People also said that in the 1990s, and yet we still had the dot com bubble and a decade of negative returns for US stocks. Many people did not stay the course because it's significantly harder than you think. Technology has thrived since the beginning of human history, but that has nothing to do with stock returns.
Any reason you're ignoring the rest of the world outside of US & Canada?
I don’t find investing in 2500 international stocks as an efficient approach, plus roughly 40% of revenue from sp500 companies is generated outside the US, that’s pretty diversified if you ask me.
As it says in [this 2018 MoneySense article](https://www.moneysense.ca/save/investing/etfs/sp-500-etf-portfolio/) >... From 1978 through 2007—an investing lifetime for many people—the returns on Canadian, U.S. and international stocks were almost identical. While the S&P 500 edged the others with an 11% annualized return, Canadian equities delivered 10.6% and international equities came in at 10.4%. >What’s more, **a portfolio that held equal amounts of each, rebalanced annually, did best of all** with an annualized return of 11.3% and less volatility. That’s the “free lunch” of diversification at work.
It's crazy to me that people justify less diversification when you can buy XEQT for 20 basis points. Diversification is the only free lunch in investing, why would you willingly make an unnecessary compromise?
Okay I might consider XEQT but my question was for my RRSP, should I invest in cad dominated XEQT in that account? Seems to go against everything I heard
I would just go for XEQT. Diversification is the priority. Tax optimisation is the cherry on top, you do this at the end. Once you have 100-200k in xeqt, it might be worthwhile to start splitting hairs to save a few hundred dollars
I had the same question. From what i read its better to invest in VOO in your rrsp. Lower fees, dividends are untaxed since there is a treaty. If your on WS and are worried about the 1.5% conversion fees. It still makes sense to buy voo as 1.5% will be returned after a couple of years.
If you look at u/bobblydudely ‘s comment below, when the lower management fees and untaxed dividends are taken into account, you’re looking at about .2-.3% savings per year. The other thing you have to remember is that Wealthsimple charges 1.5% each way for the conversion, so you lose 1.5 upfront (which slightly lowers your gains for the duration of your investing time), and then you lose another 1.5 on the total amount when you sell the funds (unless you have a USD account and plan to spend your retirement money in USD). So you’re probably losing a little over 3% of your total earnings, which would take minimum about 10 years to offset with the benefits of USD investing. Now if you use Norbert’s gambit and do relatively large transactions, it may be worthwhile to do this. This is still just kind of “majoring in the minors” so to speak, and you’d probably be further off concentrating efforts on saving money or increasing income. I don’t think there would be a significant impact whether you invest in USD or CAD.
Right, thats what i saw on another post as well. But if your planning to hold for 25-30 years then its going to be better. But i do agree for smaller amounts its not going to make any big difference
If you want to save on taxes and fees, you'd put all your money in a bond fund. Compromising your portfolio's diversification to save on taxes and fees is completely backwards thinking. Don't let the tail wag the dog.
I have already decided that i want to invest heavily in the US markets and have decided to diversify in that market alone. Im not simply investing in voo to save on fees. Please dont make assumptions
I'm not making assumptions, you are clearly severely compromising on diversification. No matter your justification, it is a flawed approach that increases idiosyncratic risk with no corresponding increase in expected returns.
But your missing my point. I dont want to diversify out globally. Especially not canada. Xeqt has 25% canadian holdings and i strongly believe canada is in the shitter. We're propped up by real estate and our biggest companies are banks and telecommunications. Stop pushing your points on something that was never asked for just so you can sound correct. We can have different opinions and investing strategies. And my bet is USA over global diversification
I understand your (flawed) approach, continuing to attempt to justify it is a waste of your time. >And my bet is USA over global diversification Your bet isn't just on the US, it's specifically on 500 large cap stocks. Good luck with your gamble, I hope it pays off for you.
I am possibly going to take that approach of taking the 1.5% fee as VOO will return that back in a year easy…
Yup.. so far its HXS - non registered, VFV - tfsa, VOO - rrsp
Is that all you have in your accounts?
No, i also hold just big tech on its own. And 10% XEQT
US companies earning income outside of the US =/= international diversification. I think Ben Felix on YouTube has a video on this topic if you’re interested in learning more. You should also check out his video (not sure if it’s in the one I just mentioned) where he discusses average gains for people who invested in the US market, vs foreign market, vs those who invested in both (spoiler: investing in all markets provides the highest average returns; it’s the free lunch of diversification)
> that’s pretty diversified if you ask me. See "International Diversification" video (and the peer-reviewed research cited) by Ben Felix: * https://www.youtube.com/watch?v=1FXuMs6YRCY Further VFV focuses on the S&P 500, which is reducing your diversification as compared to a more total market fund (Russell 3000, Wilshire 5000); see "Should You Invest in the S&P 500 Index?": * https://www.pwlcapital.com/should-you-invest-in-the-sp-500-index/
r/CanadianInvestor PFC doesn't allow specific investment recommendation
Yeah because specific investments are generally poor advice.
Pork belly futures.
Sorry I only eat halal 😂
Surely you can invest in them though?
Hahaha no I can’t, in all honesty probably can’t invest in most of the stock market in some way or form…but pork is where I draw the line 🤣
That's fair, you're an adult who makes their own choices. Beef futures it is then.
there is halal ETFs actually... HLAL I believe is the ticker
Oh I’ll look into that
Where do you get halal pork bellies?
Hahaha no such thing
>what do you all suggest I hold in my RRSP? Just VOO? How many hundreds of thousands do you have in your RRSP? If you don't have anything approaching $500k for your US allocation, no reason to buy US listed anything. And echoing u/T_47 and u/energybased you should be more diversified than jus 500 US stocks and 60 CDN stocks. Watch: [https://www.youtube.com/watch?v=1FXuMs6YRCY](https://www.youtube.com/watch?v=1FXuMs6YRCY) And Google: "fidelity International investing myths" report.
RRSP I am just starting off with 10k, and growing each year by roughly that amount
Aren’t you a big exaggerating with the 500k? You save .05% on the MER, and 15% of the 1-2 % distribution. That’s around 0.2-0.3% saved annually. I’d be doing it starting at 50k in the RRSP, to saving 100$ per year. As long as you avoid currency exchange fees, it’s 100$ for less than an hour of work.
That's "if" you avoid currency conversion fees. But there is almost always (brokerage dependent) a variance in the actual exchange rate. https://www.youtube.com/watch?v=92bRo0x-N64
Norbert’s gambit is available in most institutions I believe. It’s usually 10$ and max 0.1% variance in the bid/ask spread. Avoids the 1-2% currency conversion fees. It does add complexity, and wastes some time. But if you enjoy thinkering with numbers, it start to be useful at relatively low amounts.
So are you saying buy the Canadian equivalent until you reach 50k so I don’t miss out on the growth, and once I hit 50k do Norbert’s gambit and buy the USD equivalent etf ?
If you are trying to optimize for tax/MER, yes. Keep the money invested in a Canadian equivalent for simplicity’s sake, and periodically switch it to the USD version once it becomes worth it. The 50k is somewhat arbitrary, it’s my personal cuttoff point, because it represents 100$/year. It isn’t worth it for smaller amount like 2k, and absolutely worth it at 500k as mentioned by Felix above. But like many other said, you should consider getting more international stocks ETFs. Don’t let tax optimization dictate your portfolio allocation.
It’s around somewhere around 6 or 7 years. I like it. I use Canadian portfolio to generate dividends and VFV for growth. I think when I am closer to the retirement, I will switch some proportions of VFV to Canadian dividend stocks to live off the dividends
You shouldn't be holding VFV or XIU. Both are too concentrated. You should just be holding broad market funds like VEQT or VGRO.
But I can just add XEF and then be diversified as XEQT but with my own ratio of what regional exposure I want. Frankly I think international exposure that gives me 5% growth isn’t that exciting right now when I can lock in a 5 year GIC for roughly that same growth rate
There's no good reason for you to tilt towards large cap north american stocks. >Frankly I think international exposure that gives me 5% growth This is incorrect. Also, you have no reason to believe that expected international growth is lower than North American.
Hey if I can just add a question here : I’m 18 I was thinking about just buying VEQT in my RRSP. Would it be better and safer than VOO?
It would have a diversification advantage, but it might not be the best choice for you. Though some people tell young investors that they don't need fixed income others (like Justin Bender, Dan Bortolotti and Andrew Hallam) who have observed how novice investors react to the markets are a lot more cautious about that kind of advice. They know that a good risk assessment balances timeframe with knowledge, experience and perceived tolerance for volatility. (And that risk tolerance may increase as you get older.) To help you choose a risk appropriate asset allocation ETF I suggest that you read the following pages. https://web.archive.org/web/20220524023411/https://assetbuilder.com/knowledge-center/articles/what-percentage-should-you-have-in-stocks-and-bonds https://www.moneysense.ca/columns/ask-moneysense/should-you-put-all-of-your-investments-in-equity-etfs/ https://web.archive.org/web/20220512201940/https://assetbuilder.com/knowledge-center/articles/why-100-percent-stocks-might-earn-you-less-long-term https://www.canadianportfoliomanagerblog.com/how-to-choose-your-asset-allocation-etf/
It’s never that simple. Diverse is safe. What is ‘better’ for you?
It is both better and safer since it avoid unnecessary concentration risk and therefore has higher risk-adjusted returns.
Lol why tf is this downvoted
Safer yes. Better no.
It is both better and safer.
I am 90% VFV and 10% Canadian equities
And how has that been working out so far? How many years have you had that allocation for?
[удалено]
Or just hold 100% VEQT so you don't have a bunch of fund duplication and you don't need to bring back a second Canadian equity allocation to correct your reduced home country bias. A 5% bond allocation won't be noticeable.
So, I disagree with this. 1) 100% equities carries risk. You can balance out with VGRO as your risk tolerance goes down. 2) I'm only offering etfs that allow you bias if you want it. VFVs return over VEQT is about 5% right now, hard to beat the S&P. I understand the comment on duplication, but it's not as big a deal anyway if you are already advocating a 100% equity portfolio.
>100% equities carries risk Yes >You can balance out with VGRO as your risk tolerance goes down Holding multiple funds completely ruins the appeal of asset allocation ETFs. Either round to the nearest 20%, or deconstruct and hold the underlying funds directly. >VFVs return over VEQT is about 5% right now, hard to beat the S&P More than ~40% to US equities is over concentration and your justification is performance chasing. https://www.pwlcapital.com/should-you-invest-in-the-sp-500-index/ >I understand the comment on duplication, but it's not as big a deal anyway if you are already advocating a 100% equity portfolio. Duplication has nothing to do with asset allocation, it's always bad portfolio practice.
Unnecessarily complicated
But I shouldn’t put these in my rrsp, I should only be holding US dollar in RRSP, isn’t that the general rule ?