# Newbie investor with very basic questions



## sunshine88 (May 10, 2017)

Hi I'm a newbie investor interesting in purchasing mutual funds for growth towards retirement in 20 odd years. 
I'm looking to have as hands off approach as much as possible, hence mutual funds.

1. For say 100K, how many different mutual fund companies should be invested in for basic/minimum diversification? 
2. Does the answer change if it's 200K?
3. Any opinions on MAW104 Mawer Balanced Fund and its MER .94? 
4. Any suggestion on other mutual funds?

Thank you kindly for any advice, it is much appreciated.


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## Just a Guy (Mar 27, 2012)

Try looking at etfs instead of mutual funds...same idea, less mer, so you make more money.


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## AltaRed (Jun 8, 2009)

Simple answer. MAW104 for everything. It is a 'all in one' answer. Seriously.... Answer really does not need to change for $100k or $1000k.

If you are thinking mutual funds, Mawer is one of the best for actively managed mutual funds. Steadyhand and/or Tangeine are a few other options.

But you should consider TD e-series index mutual funds with their low MERs. They can be bought with an online account.... or a TDDI brokerage account. You only need 4 funds. Cdn equity, US equity, Int'l equity and Cdn bond. That said, if you are into having a discount brokerage account, e.g. with TDDI, with $100k, you can do the same thing with even lower cost ETFs (purchased on the stock market). You can do it with 3 funds.... VCN (Cdn equity), VXC (or XAW) for US and Int'l, and VAB (Cdn bond). Using low cost ETFs is even more effective the more money you have....whether $100k, $1000k, or $5000k.


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## sunshine88 (May 10, 2017)

Thank you so much for the input and recommended ETFs! This was much appreciated and highly informative.

I have done a bit of research on Index ETFs and am trying to understanding how to evaluate *MAW104 Balanced Mutual Fund* versus a portfolio of (VCN Cdn Equity, VXC US/Intl Equity and VAC Cdn Bond). Maybe I'll buy all 4 anyways but:

1. If I was to buy MAW104, should I be super concerned with timing my *purchase* in terms of the purchase price? It's at its highest price in one year it seems. 

2. Same question from #1 for Index ETFs

3. Am I supposed to watch the market and time my *sale *of my above portfolio of Index ETFs or is it long term like a mutual fund, like don't touch it for 5 yrs type thing? 

Basically I want to not sell or time anything as much as possible until retirement (in terms of type of investor I am).

3. Would something like a MAW104 Balanced Mutual Fund generally have a higher return than the above portfolio of Index Cdn, US/Intl, Bond ETF bc mutual funds have an active manager who is actively trading/looking for good stocks with high return potential?

4. How can I find out the return since inception of an Index Fund like VCN on morningstar? 

quote.morningstar.ca/quicktakes/ETF/etf_ca.aspx?t=VCN&culture=en-CA&region=CAN

I dont know where to look....

For MAW104 for example, I can see the 'Since Inception Return' has been 8.6% but I don't see this field on the Index ETF VCN to compare

quote.morningstar.ca/quicktakes/Fund/f_ca.aspx?t=0P0000714D&region=CAN&culture=en-CA

5. What is a realistic return to aim for an investor who doesn't want to actively trade but just wants to buy a handful max of mutual funds/ETFs? Is 10% too high an expectation? Within a 5 yr or so long term range, what is the minimum return threshold that should cause me to consider ditching my mutual fund and buying another?


Thank you kindly again for any input on my newbie, minimal research/hands-off/investor type questions.


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## Jerm (Jun 2, 2016)

You may want to consider checking out canadiancouchpotato.com and working your way from left to right across the top bar of links (at least the first 4 anyway). That should give you an idea of what index investing for retirement entails, as well as some model portfolios and historic returns.

IMO avoid the articles unless you're looking for specific info on something.

You'll notice in the FAQ they recommend mutual funds if you have less than 50k to invest and ETFs if you have more than 50k. This is their (arbitrary) breaking point where the cost of owning a mutual fund (higher MER - no cost to purchase) outweighs the cost of ETFs (lower MER - typically $10 per transaction at a discount brokerage) so the amount you have to invest *can* affect what you invest in if you really want to min/max your portfolio.

Regarding Vanguard ETF performance - https://www.vanguardcanada.ca/individual/etfs.htm


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## sunshine88 (May 10, 2017)

Thanks Jerm! I will go directly to the fund site for returns going forward. I see now from the returns (and low costs as everyone's been saying) why ETF Indexes are highly recommended  

Thx for the recommended couch potato site also, I am gaining a better understanding of mutual funds cons.


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## AltaRed (Jun 8, 2009)

Returns of any entity, mutual fund, or ETF, from inception is a bad indicator simply because they all have different start dates!!! I would look at 5 and 10 year returns, and if you are lucky 20 year returns to compare products, but you won't find 10 year returns for VCN for example....simply because it hasn't been around that long... BUT because it is based on an 'all cap' index, e.g. like the TSX300 Composite, a proxy for VCN would be XIC from Blackrock. Essentially the same thing.

Generally speaking, broad market index ETFs will be your best choices mostly because of lower MERs and less turnover. You can do all the research you like, but the TSX300 Composite pretty much behaves the same as the TSX60 (60 large caps) and in the USA, the Total Market index pretty much tracks the S&P500. There is just not enough difference in the decimal points on performance returns to make a lot of difference.

If you are buying for the long haul, e.g. 10-20-30 years, to retirement, it does not make much sense to try and time the market. Five years from now, you won't even remember if you bought high, or in the middle, or in a market pullback. Some people (and I can subscribe to it) will suggest that you invest 50% now and 50% in 3-6 months just in case there is a big market dip within the next 6 months. This helps alleviate buyer's regret of having bought 'high' now, and buyer's regret can sometimes cause heartburn, despondency, sleepless nights and unnatural behaviour. The odds are perhaps 50/50 that the market will be higher 6 months from now, rather than lower...but it seems people have more angst over buying high than missing an opportunity to have bought earlier, i.e. now. You have to decide what your own temperment is.


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## sunshine88 (May 10, 2017)

Thank you AltaRed for your insights and esp for the 3rd paragraph, that's super helpful!!


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## Oldroe (Sep 18, 2009)

If you buy at the top of the market and a crash happens it's gut wrenching.

On the other hand if you can buy on a dip or correction and it recovers the next dip or correction will not likely put you in a loss situation. This makes staying in the market easy.

If you can discipline your self to buy on corrections.

I would spread your money over a year and buy steady every month and if you get lucky and hit a correction buy hard.


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## CalgaryPotato (Mar 7, 2015)

10% is way too high of an expectation for a return on a balanced portfolio. And like you said, things are near a high, whether you expect a crash or not, expecting 10% over the next few years just is not likely.

Anyway your question about 5 year range and return threshold to consider ditching your mutual fund... uggh. That is pure returns chasing and very deadly to your growth. If you purchase a mutual fund, and it's underperforming the market after 5 years (regardless of what the returns are) then you should try to look at it, and understand why it's underperforming? Is it bad stock picking? Or are you comparing against the wrong index? Or is it overweight in a sector that is at a low.

You don't want to hold on to a "bad fund", but the biggest mistake people make in investing is jumping from one fund that is at a low to another one that is at a high, and implicitly using a buy high, sell low strategy.


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## AltaRed (Jun 8, 2009)

Oldroe said:


> If you buy at the top of the market and a crash happens it's gut wrenching.
> 
> On the other hand if you can buy on a dip or correction and it recovers the next dip or correction will not likely put you in a loss situation. This makes staying in the market easy.
> 
> ...


Buying monthly works with mutual funds with zero commissions, but this is not practical with $10 commissions buying ETFs. The OP has sufficient funds to be in 2-3 ETFs for a couch potato portfolio and if the OP goes the ETF route, the OP is probably can probably only divide the $100k into 2 separate purchases... one now (or soon if waiting for a dip) and one later (potentially at another market dip). The issue is whether that dip happens soon... or in 2018 and in the meantime the market goes up. It's a 50/50 gamble.

I also agree with CalgaryPotato that sustained 10% returns is over-optimistic on a 5 or 10 year rolling average basis. A balanced 60/40 portfolio might be in the 4-5% return range with a 75/25 perhaps 1 percentage point more. The outsized returns since the depth of the 2008/2009 financial crisis are unsustainable. Global GDP growth just isn't high enough to keep aggregate corporate earning increasing at double digit numbers.


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## Beaver101 (Nov 14, 2011)

AltaRed said:


> ...
> 
> *If you are buying for the long haul, e.g. 10-20-30 years, to retirement, it does not make much sense to try and time the market*. Five years from now, you won't even remember if you bought high, or in the middle, or in a market pullback. Some people (and I can subscribe to it) will suggest that you invest 50% now and 50% in 3-6 months just in case there is a big market dip within the next 6 months. This helps alleviate buyer's regret of having bought 'high' now, and buyer's regret can sometimes cause heartburn, despondency, sleepless nights and *unnatural behaviour. * The odds are perhaps 50/50 that the market will be higher 6 months from now, rather than lower...but it seems people have more angst over buying high than missing an opportunity to have bought earlier, i.e. now. You have to decide what your own temperment is.


 ... +1 ... LOL on "unnatural behaviour" ... such as?


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## AltaRed (Jun 8, 2009)

Beaver101 said:


> ... +1 ... LOL on "unnatural behaviour" ... such as?


Purposely meant to stimulate your imagination......


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## DPB (May 17, 2017)

*newbie help*

As another very newbie(VERY) I have another question that I'll piggyback on this thread.

I was looking at a statement of mine(TFSAs) and my returns are listed cumulatively. Why are they added up instead of averaged out?

ex.
Jan | Feb | Mar | Apr | May | June | July | Aug | Sept | Oct | Nov | Dec
-1.46 | -2.39 | +2.76 | -1.69 | +3.66 | +0.78 | +2.96 | -0.22 | +0.14 | +0.28 | +0.86 | +1.82
1st quarter |2nd quarter |3rd quarter |4th quarter
-1.13 |+2.73 |+2.85 |+2.99
Year
+7.74

A cumulative return is 7.74 but an averaged is 0.645. Would really appreciate an explanation or link to one.


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## Just a Guy (Mar 27, 2012)

There are 12 months in a year, you averaged .645% per month, multiply by 12 months and you get 7.74% over the year.


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## Oldroe (Sep 18, 2009)

The OP could buy thru Share Owner all positions for cheap. And drip to 4 digits.


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## My Own Advisor (Sep 24, 2012)

I agree with many comments....

Another thing to keep in mind...further to AR's point, you're not just investing to retirement, you're investing beyond retirement...in retirement. So, if your time horizon is 20-odd years then likely today's price, certainly if you're an indexer, is the best price available.

That said, nothing wrong with limping-in now...50% now; 50% in 3-6 months; 25% over a year, etc. Really the choice is yours. 

Honestly, if we could predict the future, we'd all be super wealthy.


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## DPB (May 17, 2017)

Just a Guy said:


> There are 12 months in a year, you averaged .645% per month, multiply by 12 months and you get 7.74% over the year.


Sorry, was late and I don't think I made my confusion evident. There's a discrepancy between what I'm shown as a yearly return versus if I actually applied each % to the month. For example, if I started with 1000 and then applied each month as it came to that amount it'd end up at 1086.39. If I used the reported percent which just appears to be a sum of the year's returns the same 1000 would be 1077.40. Extrapolated to larger sums and this is quite a difference.


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## sunshine88 (May 10, 2017)

AltaRed, MyOwnAdvisor, OldRoe, Potatoe, thank you, learned alot from your replies and makes sense. I will aim for a short term correction and limping in type strategy, even if since it's retirement/long term growth goal, it should grow with ETFs, I'll feel better as per the temperament comment 

So today (I dont normally follow financial news and frankly I won't really end up in future after I watch for my purchases, that's the type of investor I truly am), they are saying

"Dow plummets more than 370 points, TSX tumbles"
"North American stock indexes fall into the red after strong start"

1. Is this considered a dip? Guessing not, I'd be too lucky timing-wise lol.
2. What type of news headline or keywords should I look out for to know if we're in a Dip? 
3. When was the last dip please? I will look for articles from that time and get a feel for how dips are reported, to be able to understand when there's a dip in future.

Thank you!!


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## AltaRed (Jun 8, 2009)

Today was a dip, albeit only about 1-1.5% or so. You have to define what kind of dip you are looking for. A soup ladle? A tablespoon? Or a pitcher sized dip? That is the challenge of the market. Will the market go down some more tomorrow? Friday? Next week? Will May end another 2-3% lower? No one knows. Maybe today was it and it is all upslope from here. 

News headlines, talking heads and all that stuff is simply financial pornography. None of them know any better cause they'd not be flogging themselves in the media trying to get attention for themselves. None of it means much.

As for defining a dip, take a look at the TSX Composite and the S&P500 indices over the last 1-5 years. 

Let's try the TSX Composite as an example https://web.tmxmoney.com/charting.php?qm_symbol=^TSX and click on the 1 year chart. I can see 2-3 dips per month....or I can see one in June 2016, one in Sept 2016, one in Nov 2016, a not so bad one in March of 2017 and maybe one now, but we won't know that until its gone. 

Now re-set that to a 5 year chart.... And wow... we had a darn nice one circa Feb 2016. That would be a real nice dip in which a lot of CMF folk probably were doing some buying at that time. Are you prepared to wait perhaps a year or two pr three for another one of those to happen? What if it takes 5 years to happen? How will you know if it is a 'big' one or a small one? How would you know when to buy? July 2015? Aug 2015? Sept 2015? How do you know when it has 'bottomed'? The point is that you don't, so you pick your spot, roll the dice and buy. You cannot beat yourself up if you try to time it and call it wrong.


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## sunshine88 (May 10, 2017)

Excellent exercise for me to follow/check and I see your logic in terms of no one being able to predict and knowing what bottom is...thanks AltaRed!!


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## Just a Guy (Mar 27, 2012)

DPB said:


> Sorry, was late and I don't think I made my confusion evident. There's a discrepancy between what I'm shown as a yearly return versus if I actually applied each % to the month. For example, if I started with 1000 and then applied each month as it came to that amount it'd end up at 1086.39. If I used the reported percent which just appears to be a sum of the year's returns the same 1000 would be 1077.40. Extrapolated to larger sums and this is quite a difference.


Have you accounted for compound interest? I haven't done the math, but that probably accounts for the discrepancy. 77.40 would be simple interest paid yearly. Compound interest should yield more.


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## indexxx (Oct 31, 2011)

I highly recommend that you read The Wealthy Barber Returns; it's aimed exactly at your questions and is a fun read as well. Make sure it's that (updated a few years ago) version and not his first Wealthy Barber. Any bookstore will have it, or the library if you can find it there. The extremely short gist of the book is go with low ME index funds or ETFs, start now, and keep piling into them until you retire. you'll drive yourself crazy waiting for a correction 'bottom'. What if everything swings up for another year and you haven't pulled the trigger- you'll have lost that entire year of growth. What about a monthly allocation strategy until your original principle is filly invested- 10% a month?


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## Spudd (Oct 11, 2011)

DPB said:


> Sorry, was late and I don't think I made my confusion evident. There's a discrepancy between what I'm shown as a yearly return versus if I actually applied each % to the month. For example, if I started with 1000 and then applied each month as it came to that amount it'd end up at 1086.39. If I used the reported percent which just appears to be a sum of the year's returns the same 1000 would be 1077.40. Extrapolated to larger sums and this is quite a difference.


I did the math, and when I did exactly that, started with 1000 and applied each month's return to it in a row, I ended up with 1075.47, not 1086. Maybe re-do the math?


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## Oldroe (Sep 18, 2009)

Just buy at slow pace until the 6 o'clock news opening storrie is 1000 , 2000 pt drop and every expert alive said they predicted. Buy Buy Buy. Which is a pt. if you 10k in you need to put 30k to avg down to that days drop.


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## DPB (May 17, 2017)

Spudd said:


> I did the math, and when I did exactly that, started with 1000 and applied each month's return to it in a row, I ended up with 1075.47, not 1086. Maybe re-do the math?


My goodness, I feel like an idiot. I went by 0.9861 instead of 0.9761 on Feb. So yes in this case it would've ended up comparable. Although say a theoretical steady +5% growth each month. An addition answer, as it seems to use, would then yield 60% yearly compared to a compounding at 79.6%. I tried asking my financial adviser and he said it used the DVM monthly linking and IRR, without any explanation on the actual workings.

I really appreciate the patience with me on this. I'm a total layman on this and I found myself with some extra free time this summer and so I want take the time to learn something new and important. Any beginner's reading you could suggest would be great as well.


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## sunshine88 (May 10, 2017)

indexxx said:


> I highly recommend that you read The Wealthy Barber Returns; it's aimed exactly at your questions and is a fun read as well. Make sure it's that (updated a few years ago) version and not his first Wealthy Barber. Any bookstore will have it, or the library if you can find it there. The extremely short gist of the book is go with low ME index funds or ETFs, start now, and keep piling into them until you retire. you'll drive yourself crazy waiting for a correction 'bottom'. What if everything swings up for another year and you haven't pulled the trigger- you'll have lost that entire year of growth. What about a monthly allocation strategy until your original principle is filly invested- 10% a month?


Thanks indexx for the recommended read! I see what you're saying and it's basically diversifying my buy price and spreading my risk of buying too high. Thanks oldroe also.

I've really appreciated everyone's help on my thread and your understanding that there's so much info out there that it's overwhelming and one doesn't know what orgs/sites/advisors etc to trust so all of your impartial insights and recommends have been sincerely appreciated.


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## james4beach (Nov 15, 2012)

> 5. What is a realistic return to aim for an investor who doesn't want to actively trade but just wants to buy a handful max of mutual funds/ETFs? Is 10% too high an expectation?


5 years is not an appropriate time frame for these kinds of investments. 10 years is probably the bare minimum time horizon, and more realistically should be 15 to 20 years minimum.

Over a 15+ year time frame, for a balanced fund or portfolio of mixed stocks & bonds, I think you can probably see between 4% to 6% annual returns (my opinion).


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## sunshine88 (May 10, 2017)

james4beach said:


> 5 years is not an appropriate time frame for these kinds of investments. 10 years is probably the bare minimum time horizon, and more realistically should be 15 to 20 years minimum.
> 
> Over a 15+ year time frame, for a balanced fund or portfolio of mixed stocks & bonds, I think you can probably see between 4% to 6% annual returns (my opinion).


Awesome, thanks james4beach, that's perfect bc i'm the type of investor who wants to dump in their money and forget about it until retirement and have it grow to beat inflation and grow at least some so as not to kick oneself in terms of basic opportunity loss, so your input more aligns with my couchpotatoness lol.


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## Just a Guy (Mar 27, 2012)

Dump and pray is a very common investment strategy...explains why common returns are so poor. Never understood why people will spend hours following their favourite sports teams, tv shows, movies, etc. To the point where they can quote things line per line, pull out obscure facts, etc. Yet, when it comes to their financial stability, they don't want to spend any effort and just want to collect millions in the end.


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## My Own Advisor (Sep 24, 2012)

+1 ^

I find some people agonize much more over their cell phone contract than their investment accounts.


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## agent99 (Sep 11, 2013)

Just a Guy said:


> Dump and pray is a very common investment strategy...explains why common returns are so poor. Never understood why people will spend hours following their favourite sports teams, tv shows, movies, etc. To the point where they can quote things line per line, pull out obscure facts, etc. Yet, when it comes to their financial stability, they don't want to spend any effort and just want to collect millions in the end.


You have a point, but in practice that is the way things are. I know that when I was working, I paid very little attention to our investments. I was just too busy working, at times 7am-11pm except for a couple of afternoons when I spent a couple of hours participating in a sport. When RRSP time came, I bought something and so did my wife- usually on advice of bank or full service brokerage we had back then. But in the end, our retirement nest egg was sufficient. I am sure it could have been better if I had paid more attention, but then maybe my business or other activities may have suffered. Since retirement, I have a paid a lot more attention. I made it my new "job" and we have done quite well!

For someone with little time to learn about investing, putting money into a couple of balanced funds plus some GICS may not be a bad thing to do. Best to buy through an on-line brokerage. Something like 25% GIC ladder, 35% MAW104 (has some US exposure) and 40% TDB622 (TD Monthly income fund) would provide some fixed income for safety plus two balanced funds (that also include some fixed income). I wouldn't count on much more than 2% REAL growth (4% at present inflation rates), but you should at least beat inflation. Taxes make a difference, so put the GICs in registered accounts. 

Another option would be to consider a couch potato portfolio that suits you: http://canadiancouchpotato.com/model-portfolios-2/

In the meantime, read about investing when you can so you will be in a position to manage your investments down the road.


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## Jimmy (May 19, 2017)

james4beach said:


> 5 years is not an appropriate time frame for these kinds of investments. 10 years is probably the bare minimum time horizon, and more realistically should be 15 to 20 years minimum.
> 
> Over a 15+ year time frame, for a balanced fund or portfolio of mixed stocks & bonds, I think you can probably see between 4% to 6% annual returns (my opinion).





sunshine88 said:


> Awesome, thanks james4beach, that's perfect bc i'm the type of investor who wants to dump in their money and forget about it until retirement and have it grow to beat inflation and grow at least some so as not to kick oneself in terms of basic opportunity loss, so your input more aligns with my couchpotatoness lol.


Have done a lot of reading on investments,savings, good investment sites, books etc recently as a hobby and interest as am retired too now. FYI Here is a great site where you can plug in your asset mixes, time period and it will calculate the return % and SD%. ie a 25% = wt of TSX, S&P, CDN bonds and EAFE is ~ 5%, SD 10% from 2000-2016. The periodic table of investments tool is pretty neat too ( yearly returns of each category)

I can't post links yet apparently but the site is Stingy Investor . com and under Tools select Asset mixer.


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## Eclectic12 (Oct 20, 2010)

agent99 said:


> Just a Guy said:
> 
> 
> > ... Never understood why people will spend hours following their favourite sports teams, tv shows, movies, etc. To the point where they can quote things line per line, pull out obscure facts, etc. Yet, when it comes to their financial stability, they don't want to spend any effort and just want to collect millions in the end.
> ...


It does not sound like you fit the "spend hours following their sports teams, tv shows, movies etc. To the point where they can quote thing line for line ...". JAG knows for sure but what I read as part of his point is that people *have* the time yet chose to spend it differently.

Many people who tell me they are "too busy" have plenty of time to learn/participate in equally challenging hobbies but for whatever reason are not willing to admit that their priorities/willingness is the barrier.


Cheers


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## james4beach (Nov 15, 2012)

I've noticed the same, people just choose to not make time for their finances and investments.

I have many friends who love puzzles and play complex board games and card games. Investment is a puzzle too... to be honest it's a hobby for me and I find it full of challenges, puzzles, and a healthy dose of random luck.


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## Beaver101 (Nov 14, 2011)

^^ + ^ ... you see having time for sports, tv shows, movies, etc. provides entertainment... and spending enormous amount of time shopping new car, gadget, toy, whatever will kill boredom, provide enjoyment, etc. as for other hobbies like puzzles, and games, etc. All of these are sure things. OTOH, spending time to learn how to invest, only to see your money deplete on your investment (never a sure thing) is never pleasurable. I can see why people avoid taking the time to learn how to invest - aside from the usual fodder excuses of not having time, too complicated, etc.


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## DPB (May 17, 2017)

Beaver101 said:


> ^^ + ^ ... you see having time for sports, tv shows, movies, etc. provides entertainment... and spending enormous amount of time shopping new car, gadget, toy, whatever will kill boredom, provide enjoyment, etc. as for other hobbies like puzzles, and games, etc. All of these are sure things. OTOH, spending time to learn how to invest, only to see your money deplete on your investment (never a sure thing) is never pleasurable. I can see why people avoid taking the time to learn how to invest - aside from the usual fodder excuses of not having time, too complicated, etc.


As someone who has absolutely zero knowledge on investing and is currently just trying to learn the most basic stuff like specific jargon and has avoided being more informed and involved with investing previously, it is a struggle. You're absolutely right, a lot of the learning process does feel complicated and dry/boring and can be frustrating when a lot is self teaching/from books as opposed to something interactive like a classroom. It's definitely not made easier to get into when the end result and your 'satisfaction' can be years away. I do construction, because I love building something and then being able to stand back, look at my finished product, and enjoy the result. You can do that on a daily basis most of the time. With this, it's delayed gratification in the extreme in a world that promotes the opposite. Try not to be too hard on people who don't get involved. It really may just seem to daunting for them. And I realize places like these aren't meant to be a teaching forum so much as a place for more learnt people to exchange ideas, but it's appreciated when all of you do take the time to help. Seeing people work together to help others shed their ignorance really makes you want to learn more.

I'm looking at starting my way through the list of 8 books to read stickied on the front page. Should make for some interesting reading at my cabin this summer.


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## Beaver101 (Nov 14, 2011)

DPB said:


> As someone who has absolutely zero knowledge on investing and is currently just trying to learn the most basic stuff like specific jargon and has avoided being more informed and involved with investing previously, it is a struggle. You're absolutely right, a lot of the learning process does feel complicated and dry/boring and can be frustrating when a lot is self teaching/from books as opposed to something interactive like a classroom. It's definitely not made easier to get into when the end result and your 'satisfaction' can be years away. I do construction, because I love building something and then being able to stand back, look at my finished product, and enjoy the result. You can do that on a daily basis most of the time. With this, it's delayed gratification in the extreme in a world that promotes the opposite. *Try not to be too hard on people who don't get involved. * It really may just seem to daunting for them. And I realize places like these aren't meant to be a teaching forum so much as a place for more learnt people to exchange ideas, but it's appreciated when all of you do take the time to help. Seeing people work together to help others shed their ignorance really makes you want to learn more.
> 
> I'm looking at starting my way through the list of 8 books to read stickied on the front page. Should make for some interesting reading at my cabin this summer.


 ... my post was meant quite the opposite or contrary to posts #31, 34 and 35 and agreeing with what you have posted (particularly the bolded part). Nevertheless, congrats on starting the investment learning process! Gotta start somewhere. :applouse:


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## JackJac (Mar 13, 2017)

james4beach said:


> I've noticed the same, people just choose to not make time for their finances and investments.
> 
> I have many friends who love puzzles and play complex board games and card games. Investment is a puzzle too... to be honest it's a hobby for me and I find it full of challenges, puzzles, and a* healthy dose of random luck*.


I think the bold portion of your comment explains why many people choose to avoid the stock market. The volatility and unpredictability of the market can turn a healthy hobby into a stressful, obsessive addiction. I think it's fair to say that for most people, investing in themselves and their work will make them rich, and when they accumulated enough savings and near retirement they can turn to fixed-income vehicles such as annuities. 

If the bottom line is that, despite how much you know and how much you learn, dumb luck plays a major role in the stock market, then all the detailed rhetoric eventually boils down to gobbledygook. Throwing some money into a "diversified portfolio" and hoping and praying for a positive return starts to feel more and more like gambling -- and perhaps playing board games instead just might ultimately be better investment for most.


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## Eclectic12 (Oct 20, 2010)

DPB said:


> As someone who has absolutely zero knowledge on investing and is currently just trying to learn the most basic stuff like specific jargon and has avoided being more informed and involved with investing previously, it is a struggle ...


I guess that's part of the personality piece ... I like learning stuff, whether it works for investments, deciding whether to hire a mechanic versus DIY, to make sure I won't be bamboozled by someone who sounds like they know what they are talking about or just to have trivia for a conversation starter.

Another difference is that I try to learn what I can, when I can - even if it's a simple conversation between relatives. Others of a different bent seem to look at what they know versus the larger part they don't know then decide it is too complicated/not going to pay off anytime soon then give up.




DPB said:


> ... You're absolutely right, a lot of the learning process does feel complicated and dry/boring and can be frustrating when a lot is self teaching/from books as opposed to something interactive like a classroom. It's definitely not made easier to get into when the end result and your 'satisfaction' can be years away ...


While I understand your point - there's a lot more resources as well as choice available now (ex. CMF, YouTube videos, investment discussion clubs, paper trading accounts, more intro books) to try to line up one's learning style as best as one can versus in the '80's. I could ask my uncle questions ... assuming he wasn't at his broker's office, watching the ticker versus today where one can have updates on one's computer/phone.

Don't get me wrong - I am not downplaying your point so much as pointing out there are a lot more choices out there now.

As for the "satisfaction can be years away" - for me, it's in the here and now. Reading about split shares in the late '90's meant another tool in the toolbox ... which to me, is satisfaction enough. I've used it several times since then with each use bringing more satisfaction. 

Or investing half an hour researching alternatives to GICs with similar guarantees meant the questions asked confirmed the specific product had minimal limitations. My tenant asked the question "what's available with a similar guarantee", took what was offered then was wondering why his payout for essentially the same thing was 1/3 less than I was paid. I didn't brag or beat him over the head about it ... but it was certainly satisfying to know I had avoided a limitation by asking the right question.




DPB said:


> ... Try not to be too hard on people who don't get involved. It really may just seem to daunting for them ...


If they don't want to and say so - no problem. The typical scenario is "I don't like paying so much for mediocre/bad returns - can you help me learn?" Then with some basic intro stuff is covered, all the rationales that don't apply are brought out (ex. I have no time to learn as I'm going out five times this week to watch playoff games at bars this week).

I've learned to skip everything, give a few pointers to web article or books to start with then they can ask questions. Of the few that come back - only two have wanted to discuss how their learning is going or the material - the rest just want tips. 




DPB said:


> ... And I realize places like these aren't meant to be a teaching forum so much as a place for more learnt people to exchange ideas, but it's appreciated when all of you do take the time to help.


While there is a lot of detailed stuff where people can dive too deep too quickly into the nuances - there is lots of teaching going on here.
http://canadianmoneyforum.com/showthread.php/115234-What-s-a-quot-Bypass-Trade-quot-on-the-TSX
http://canadianmoneyforum.com/showthread.php/115010-Moving-portfolio-to-retirement-mode
http://canadianmoneyforum.com/showthread.php/112297-Minimizing-Fees
http://canadianmoneyforum.com/showthread.php/115106-Question-about-fees
http://canadianmoneyforum.com/showthread.php/114482-Interac-e-Transfer
http://canadianmoneyforum.com/showthread.php/113953-Taxes-after-Death-(RRSP-amp-RRP)


Just make sure to indicate what is new and what the question is .... also don't be surprised if questions come as a twenty year old with no ongoing expenses versus a married person with mortgage/bills/car payments versus a widowed retiree will have different priorites/things to watch out for.




DPB said:


> ... I'm looking at starting my way through the list of 8 books to read stickied on the front page. Should make for some interesting reading at my cabin this summer.


I hope you enjoy one or more of them. Don't forget that despite some of the nuances etc., there like will be good discussion if you were to post a thread about "read this bit about XYZ, I'm learning so while I get X, what's this YZ?"


Cheers


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## Eclectic12 (Oct 20, 2010)

JackJac said:


> I think the bold portion of your comment explains why many people choose to avoid the stock market. The volatility and unpredictability of the market can turn a healthy hobby into a stressful, obsessive addiction. I think it's fair to say that for most people, investing in themselves and their work will make them rich, and when they accumulated enough savings and near retirement they can turn to fixed-income vehicles such as annuities ...


True ... the problem is that no one cares for your money like you do. 

Some went this dependable route just to lose millions having a "expert" take care of it for them in retirement. Others are in better shape in that the manager made good $$, the return isn't that great but the $$$ didn't disappear.


Cheers


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## JackJac (Mar 13, 2017)

Eclectic12 said:


> True ... the problem is that no one cares for your money like you do.
> 
> Some went this dependable route just to lose millions having a "expert" take care of it for them in retirement. Others are in better shape in that the manager made good $$, the return isn't that great but the $$$ didn't disappear.
> 
> ...


Yep. I definitely think everyone should know about investments and how they work, etc. However, perhaps the stock market shouldn't be a focal point, what with it's unpredictability and healthy dose of luck and all.


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## Eclectic12 (Oct 20, 2010)

^^^

Isn't "knowing about investments" supposed to include GICs, bonds, precious metals etc.?

Or are you saying that part of the problem is that the few who want to learn are limiting themselves to the stock market?


Cheers


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## JackJac (Mar 13, 2017)

Eclectic12 said:


> ^^^
> 
> Isn't "knowing about investments" supposed to include GICs, bonds, precious metals etc.?
> 
> ...


Yes, I think there are other "investment" vehicles out there such as annuities, and the average joe would better off learning about those sorts of vehicles as opposed to getting lost in the unpredictable and stressful world of stock market investing. If one has a career that they enjoy and they are reasonably frugal, then turning to annuities as they approach retirement seems like wise move as opposed to spending your free time obsessing over market fluctuations and guessing the future.


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## Just a Guy (Mar 27, 2012)

I found the comment about investing being complicated shows another issue. Investing is only as complicated as you make it. For example, I give money to the bank and earn interest...not complicated. I buy a gic, again not complicated.

Now, let's take it up a notch...

I buy and use a product that I love, all my friends use the product as well, I find out the company is publically traded, I go to their website and read up on their financials, it looks like they are doing well, I buy some stock...not complicated. 

Of course you could also go to a broker and buy some convertible debentures in a company that bundles derivative mortgage backed securities with a moody AAA rating. Now, most people I know would have to look up about every second word of that investment strategy...meaning it's probably not a good investment for the average joe.

My point is, there are simple ways to invest, that probably work quite well that anyone could do...if they wanted to. A good rule of thumb when it comes to investing is, if you don't understand what you are buying, don't buy it. Another is, where does the money come from and where does it go. If you don't know, then you don't know enough (and that included the money the broker makes not just the investments). 

If you take long enough to know those two things, you can probably be an investor who does quite well. It doesn't have to be complicated.


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## JackJac (Mar 13, 2017)

Just a Guy said:


> I found the comment about investing being complicated shows another issue. Investing is only as complicated as you make it. For example, I give money to the bank and earn interest...not complicated. I buy a gic, again not complicated.
> 
> Now, let's take it up a notch...
> 
> ...


That seems like solid advice. I just have beef with the stock market and the diversified approach that seems to yield little more than HISAs in the long run. I'd rather have cash on hand than throw my money into the matrix, I mean market. Even blue chip stocks are a gamble. Who's to say these companies will be half as strong in the near future as they are now? There's a lot of competition out there and various trends on a mirco and macro level can really be game-changers. When it comes to the stock market -- truly, don't invest more than you can afford to lose. To me, that says it all right there. 

Just my 2 cents.


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## Just a Guy (Mar 27, 2012)

I should have also said keep an eye on what's happening in the world. If the company changes its product and you and your friends are unhappy, it's a good sign to get out of the stock. Again, not complicated.

If rule 2 changes, re-evaluate the stock. Not complicated. 

Everyone always talks about blue chip companies, but how much do you know about them? IBM was everywhere in the 80's and 90's, what do they do today? What blue chip companies do you use? Bank stocks? Okay, which banks do people like, and which do they not like? Some have better reputations than others, but those reputations also change. So should your investments. If a company has a monopoly (utilities for example) then they are probably safe no matter what they do. If government opens up competition, then get out.


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## sunshine88 (May 10, 2017)

Jimmy said:


> Have done a lot of reading on investments,savings, good investment sites, books etc recently as a hobby and interest as am retired too now. FYI Here is a great site where you can plug in your asset mixes, time period and it will calculate the return % and SD%. ie a 25% = wt of TSX, S&P, CDN bonds and EAFE is ~ 5%, SD 10% from 2000-2016. The periodic table of investments tool is pretty neat too ( yearly returns of each category)
> 
> I can't post links yet apparently but the site is Stingy Investor . com and under Tools select Asset mixer.



Thanks agent99 for your input and Jimmy for the tool.

I will likely go with couchpotato Portfolio Model 3 ETFs -> 40% BMO ETF Bonds, 60% (ETFs VCN and iShares Intl) limping in/investing the lumpsum over 1 yr.

Does anyone have any input on what should be put in RRSP vs TFSA vs Regular Account? 

I will likely keep adding to the RRSP from my company that has a fairly low rate for Fidelity Balanced Mutual Fund, so it's the *TFSA* that's far from maxed out right now. I'm open to changing up the RRSP/Fidelity but feel more comfortable just leaving it.

So I'm wondering of the 3 ETFs (BMO bond, VCN and iShares Intl), if there's a particular allocation of those 3 I should consider for my TSFA and Regular Investment account.

Thank you for any advice!


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## AltaRed (Jun 8, 2009)

sunshine88 said:


> I will likely keep adding to the RRSP from my company that has a fairly low rate for Fidelity Balanced Mutual Fund, so it's the *TFSA* that's far from maxed out right now. I'm open to changing up the RRSP/Fidelity but feel more comfortable just leaving it.
> 
> So I'm wondering of the 3 ETFs (BMO bond, VCN and iShares Intl), if there's a particular allocation of those 3 I should consider for my TSFA and Regular Investment account.


If the Group RRSP through your company has low MER, I'd agree with just leaving it as is.

There is no perfect answer for what goes in the TFSA vs non-reg account. 
1) The default would be to put the Bonds in the TFSA because the vast majority of the income generated by the bond ETF wll be interest/Other Income taxed at the full taxation rate.
2) The default would be to put your VCN into your non-reg account so that you can take advantage of the eligigle dividend tax credit from dividends issued by Canadian corporations. The effective tax rate for eligigle dividends is considerably lower than your fully marginal tax rate.
3) The Int'l (I assume XAW?) could be best to consider in your TFSA because most of its income would be taxed as Other Income (like Bond interest), but that ETF will also have foreign withholding taxes of circa 15% which are NOT recoverable as a Foreign Tax Credit on your income tax.
4) There is a school of thought that suggests you put your highest performing asset into the TFSA because it will grow tax free.


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## Jimmy (May 19, 2017)

sunshine88 said:


> Thanks agent99 for your input and Jimmy for the tool.
> 
> I will likely go with couchpotato Portfolio Model 3 ETFs -> 40% BMO ETF Bonds, 60% (ETFs VCN and iShares Intl) limping in/investing the lumpsum over 1 yr.
> 
> ...


That looks good. I'm not sure what the MERs are for the RRSP . ETF MERs can be as low .10%. There are also no transaction fees for RRSPs though they are minor for ETFs at $10/trade. 

Here are some great articles that lists what investments should go where in what priority. If the ETF MERs are less than the RRSP's, generally, keep it simple w Canadian ETF companies like you mentioned (ZAG, VCN, XAW etc) and generally go TFSA to the limit first. 

As from ^,
Bond ETFs in the TFSA,then RRSP
Stock ETFs (from BMO and Canadian companies) that pay dividends in the TFSA (no tax) then regular acct ( little tax) 

Briefly, returns in the RRSP get dinged as regular income on withdrawal, so at 22% or 25% etc or whatever your marginal tax rate is. Hence the taxes are better in the TFSA (none) and regular acct (returns are dividends and capital gains and taxed at a lower rate).


http://www.taxtips.ca/personaltax/investing/taxtreatment/investmentaccounts.htm
https://www.theglobeandmail.com/glo...egies-remember-the-tax-angle/article22842779/

Briefly, try and have your Intl ETF hold the stocks directly vs other ETFs of Intls stocks as it lowers withholding taxes See 'Worlds apart' in the article below. Ishares XAW is good from the couch potato articles

http://canadiancouchpotato.com/2017/01/13/model-portfolio-update-for-2017/

Here are the couch potato portfolios Option 3 is for ETFs

http://canadiancouchpotato.com/model-portfolios-2/

That is a lot for now. You may want to look at a currency hedged version of XAW too or similar to eliminate $ fluctuations entirely. To replace XAW, I use BMO's low volatility currency hedged funds for this ie add ZLH for US S&P 500 low volatility and ZLD for Intl ( rest of the world) . They have the least variable stocks in the larger indexes and are lower risk. Here are a few articles about them. They are likely similar in the long run, just less variable.

http://www.moneysense.ca/columns/inside-the-bmo-and-powershares-low-vol-etfs/
http://canadiancouchpotato.com/2016/09/20/understanding-the-low-volatility-factor/


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## sunshine88 (May 10, 2017)

Thanks AltaRed, your above input is invaluable and much appreciated! Yes, XAW. 4. Makes sense! 

I will go research ETFs further to understand...bc I didn't realize I would get income from ETFs as per your input #3.


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## sunshine88 (May 10, 2017)

Thank you Jimmy for all your input, and I have surmised from your input that ETF Stocks will have income from dividends.


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## Jimmy (May 19, 2017)

sunshine88 said:


> Thank you Jimmy for all your input, and I have surmised from your input that ETF Stocks will have income from dividends.


You are on the right track. I had to do a lot of reviewing/planning recently too. Lots to learn but investment shopping and education is fun. Let me know if you need any links for good articles. If you subscribe to the Globe, check out Rob Carrick on the Globe & mail who did a 6 pt series on ETF recommendations. https://www.theglobeandmail.com/glo...guide-foreign-dividend-funds/article35061633/

A good show to watch just on ETFs is on BNN on Monday at 8:00pm is Berman's Call. They have other ETF specialists too on Market Call


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## Eclectic12 (Oct 20, 2010)

JackJac said:


> Yes, I think there are other "investment" vehicles out there such as annuities, and the average joe would better off learning about those sorts of vehicles as opposed to getting lost in the unpredictable and stressful world of stock market investing ...


So you'd prefer people use only screwdrivers/hammers and ignore the nail gun/back hoe?

I'd rather learn about them all then match them up to the job that is being done.




JackJac said:


> ... If one has a career that they enjoy and they are reasonably frugal, then turning to annuities as they approach retirement seems like wise move as opposed to spending your free time obsessing over market fluctuations and guessing the future.


Where one is obsessing/guess - it sounds more to me that there's a gap in range of knowledge, strategy or experience. Either way - while annuities may fit near retirement, there's accumulation where one is not retired. 




JackJac said:


> That seems like solid advice. I just have beef with the stock market and the diversified approach that seems to yield little more than HISAs in the long run.


Then may I humbly suggest there's something wrong with the methods being used? Or perhaps too much in one particular thing?




JackJac said:


> .. I'd rather have cash on hand than throw my money into the matrix, I mean market. Even blue chip stocks are a gamble.


Then go with cash on hand ... being able to sleep at night plus not obsess is worth more than any profits.


Cheers


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> ... 4) There is a school of thought that suggests you put your highest performing asset into the TFSA because it will grow tax free.


There's another school of thought as well - anything with tedious bookkeeping like a REIT or ETF goes into the TFSA to avoid the updates. :wink:


Cheers


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## My Own Advisor (Sep 24, 2012)

Just a Guy said:


> I found the comment about investing being complicated shows another issue. Investing is only as complicated as you make it. For example, I give money to the bank and earn interest...not complicated. I buy a gic, again not complicated.


Agreed. 

Honestly, even if people invested their money in mutual funds (not super costly ones mind you), it is their savings rate, general tax management (i.e., max out TFSAs and/or RRSPs or both first before non-registered investing); and keeping a long-term plan intact that will allow them to succeed. Heck, you could invest in one of Tangerine's all-in-one solutions and become a millionaire after 30 years of saving and investing, if you were disciplined enough.

The reality is you can sum up 80,000 personal finance and investing books into a few bullet points. Again, for the most part, people know far more about how their cell phone works than their investment accounts and products in them. 

It makes no sense to me but I'm a money nerd and I think about this stuff often.

Back to the cell phone analogy, if people spent _one tenth of the time_ understanding their savings and investing accounts, and put some thought into the investments products for them; as they did playing with their cell phones they would be tens of thousands of dollars better off 

Updated: Kudos to sunshine for reaching out and wanting to learn more. We all started this way and we all continue to learn.


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## Eclectic12 (Oct 20, 2010)

sunshine88 said:


> ... I will go research ETFs further to understand...bc I didn't realize I would get income from ETFs as per your input #3.


http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm




sunshine88 said:


> Thank you Jimmy for all your input, and I have surmised from your input that ETF Stocks will have income from dividends.


YMMV ... even from year to year.

For example, XIU 
2015 paid $0.85573 per unit with $0.53122 eligible dividends with $0.32451 as capital gains. 
2014 has $0.56857 with $0.54033 eligible dividends and $0.02824 return of capital (RoC).

One of the more complicated years was 2008 with eligible dividends, other income, capital gains, RoC and foreign income paid (as well as Foreign Tax deducted).


Two areas that investors seem to miss for ETFs are:

a) RoC - which is subtracted from the cost base (i.e. deferred until the sale as a CG).
http://howtoinvestonline.blogspot.ca/2010/07/return-of-capital-separating-good-from.html

b) for a Canadian domiciled ETF - phantom distributions (CG is paid that year, no new units are received, cost base is *increased* by the amount of the distribution).
https://www.theglobeandmail.com/glo...by-phantom-etf-distributions/article18225076/
https://www.theglobeandmail.com/glo...ve-a-reinvested-distribution/article29574794/
https://www.adjustedcostbase.ca/blog/phantom-distributions-and-their-effect-on-adjusted-cost-base/


Cheers


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