# Exchange Traded Funds Redundancy?



## dogleg (Feb 5, 2010)

Amongst the following funds which ones would you sell to eliminate redundancy and needless overlap? XTR, XCV, XSB, XBB, CBO, XDV .


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## GoldStone (Mar 6, 2011)

This is what I would do if someone asked me to clean up this portfolio.

1. Sell XTR as fast as I can. I think it's a bad product.

2. XCV and XDV are very similar. Both are quite expensive. I would replace both with a much cheaper XIC. Or XEI, if you want a higher dividend yield.

3. XSB, XBB, CBO: I would replace all three with a 5 year GIC ladder.

Mandatory disclaimer: I am only speaking for myself. This is not an investment advice. Do your own due diligence.


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## gibor365 (Apr 1, 2011)

GoldStone said:


> This is what I would do if someone asked me to clean up this portfolio.
> 
> 1. Sell XTR as fast as I can. I think it's a bad product.
> 
> ...


 XCV and XDV - I would replace with individual dividend stocks.
XSB, XBB, CBO: would leave only CBO or replace with VSC


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## dogleg (Feb 5, 2010)

Thanks to you both for your ideas. Gibor, I am curious as to why you would opt for individual dividend stocks as replacements for XCV and XDV. Wouldn't you be adding a lot of risk with the loss of diversity? Goldstone, Could you expand a bit on XTR please. I know its unit value hasn't risen much in a year but are there other factors you have in mind as well? Thanks to you both.


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## gibor365 (Apr 1, 2011)

dogleg said:


> Thanks to you both for your ideas. Gibor, I am curious as to why you would opt for individual dividend stocks as replacements for XCV and XDV. Wouldn't you be adding a lot of risk with the loss of diversity?


Why would you loose diversity? Sometime ago I did "paper" mini CDZ portfolio (CDZ is similar to XDV), I selected just about 20 stocks within CDZ according to simpliest fundamentals like P/E ratio, payout ratio, yield etc... Was tracking my "mini-CDZ" for some time and it greatly outperform CDZ, had higher yield and mo MER


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## dogleg (Feb 5, 2010)

Gibor: OK I understand you selected about 20 different stocks. Don't you find it a bit time consuming?


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## gibor365 (Apr 1, 2011)

dogleg said:


> Gibor: OK I understand you selected about 20 different stocks. Don't you find it a bit time consuming?


To select 15-20 from 60 or so that CDZ holds, takes about 1 hour.... to buy - you also don't do it in 1 day.... also if I buy , I'm not planning to sell and planning to hold for long time.... I don't care about price fluctuation is stocks like big Can bank, BCE, SU or FTS.... And don't forget that you kinds getting paid for you time  as you pay for XDV 0.55 MER , it's $550 annually for modest 100K portfolio!
I'd agree to hold ETF in some sectors like Europe (VEA), emerging markets (DEM or VWO) , even US (VTI)..
One more thing.... when I retire , I'm planning to stop DRIPs and live mostly on dividend income, it easier with individual stocks, as I know pretty much what will be my dividend and interest income , and in RRIF account my dividend stream, will be almost exactly cover my withdrawal minimum....so I would not need to guess when i have to sell my ETFs


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## dogleg (Feb 5, 2010)

Gibor: Very interesting . Makes good sense to me. I admire your dedication to the process. In my situation I am trying to simplify everything so my wife can take over in the event I can't do it any longer. I have another question for you later about an alternative to two mutual funds. Cheers for now.


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## andrewf (Mar 1, 2010)

XIC on the other hand only costs $50 per $100k invested per year...


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## My Own Advisor (Sep 24, 2012)

Same gibor:

I'm planning to stop the non-reg. and TFSA DRIP taps in another 10-15 years and live off the income.

When I move from RRSP to RRIF, the dividend income stream will cover my RRIF withdrawal minimums so I shouldn't need to sell the assets in any down market or at least I can ride that out until equities come back. For example, RRIF min. at age 55 is 2.86%, so I'll need $3k that year in dividend income to cover the min. withdrawal.

I do invest in index products as well andrewf, as you referenced, so much diversification at a low cost.

To answer the question:

If you want income, I think XDV, XEI or ZDV are good products for CDN dividend income if you don't want to own the stocks they own directly (CDN banks, energy, pipelines, telcos, utilities).

I don't mind XSB or XBB, I think they are good products but likely better off with 5-year GIC ladder.


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## Butters (Apr 20, 2012)

I don't like bonds at all right now

I like what gibor is saying

If You had free ETF purchases you could buy say $300 bucks a month of CDZ and at the end of the year sell it and buy 2 different stock you like from CDZ and keep diversifying and balancing!

Another advantage of owning the individual stocks is FTS offers a 2 or 3% DRIP discount I'm sure there are other stocks too. 

Of course discount brokerages don't give you the synthetic drip discount. So you'd save up AT LEAST $1000 in a HISA before you bought an individual stock or added to a position because of trade fees

Just buy and hold don't look at it. pick one from CDZ list that has a decent yield and that you like/know


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## andrewf (Mar 1, 2010)

Sounds like OP's goal is to minimize the number of securities to manage. Un-bundling an ETF is moving in the opposite direction.


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## gibor365 (Apr 1, 2011)

In this case buy VT abd GIC


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## My Own Advisor (Sep 24, 2012)

andrewf said:


> Sounds like OP's goal is to minimize the number of securities to manage. Un-bundling an ETF is moving in the opposite direction.


Agreed.

The OP can likely have a portfolio of 3-5 ETF, + a GIC ladder, and be done.


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## gibor365 (Apr 1, 2011)

dogleg said:


> In my situation I am trying to simplify everything so my wife can take over in the event I can't do it any longer.


I also was thinking about it.... and I hope that my wife together my son who is 2nd year student in Laurier Business school will figure out what to do....
I just checked my spreadsheet for my wife LIRA account (the easiest calc as obviously you cannot make contribution)... So, dividend income (1st 6 months of the year) grow 32% 2013 vs 2012 and 27% 2014 vs 2011 ...was surprised by myself when I saw those numbers  Account consistes mostly from dividend paying stocks T, MO, JNJ, COP, PSX, BMO, CHE.UN, XLNX, LIQ and some more... Yes, some reason of growth is cheap CAD$, but big chunk of it dividend increased and DRIPs


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## dogleg (Feb 5, 2010)

Thanks to all for the helpful data. In my investment mix I only have two mutual funds CIBC Monthly Income and RBC Can. Dividend Fund. While I'm at it I think I should convert these funds to ETFs . Any suggestions as to suitable replacements?


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## My Own Advisor (Sep 24, 2012)

Dogleg, I wrote about "unbundling" an income fund here, not advice, just a perspective about some options and considerations for you:
http://www.myownadvisor.ca/alternatives-pricy-monthly-income-funds/


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## dogleg (Feb 5, 2010)

MOA: Thanks for your excellent article. Like all investments there are many factors to consider. Bernie's reply to Mark ( May 20/14) at the end of your article I think makes that point very well where he compares the returns for NCE721 and XMD and XCS. In general I turned away from mutual funds a long while ago because of their high fees and feel I have done better with individual stocks and ETFs. I listened to Phil Town's advice mostly and John Reynolds on M. Funds. As always -except for dividend flow- our success depends on when we sell any investment. I wonder if this is a time to be selling. How is your crystal ball?The eternal question.


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## My Own Advisor (Sep 24, 2012)

Welcome.

Well, my crystal ball is always cloudy. 

To your point, I turned away from MFs many years ago and have been much better off because of it.


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