# Beginning investor - vanguard etfs



## futuregrowth (Mar 5, 2012)

I am a beginning investor with a lump sum of cash I have inherited. I am considering investing it split across etfs offered by vanguard. The portfolio breakdown would look like:
(I'm in my 20's and comfortable with the low bond percentage)

Bonds 10% VSB
Emerg. Mkts. 20% VEE
CDN Index 40% VCE
U.S. Index 30% VUS

Thoughts?


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## Soils4Peace (Mar 14, 2010)

Excellent!

I would add that you will need a way to cheaply invest the dividends. If you go to TD Waterhouse, whenever you have >=$100 cash, you will be able to put it to work immediately in an e-series. Also, you can use movement between e-series funds to rebalance so you don't incur trading costs. At some point when you end up with a large block in an e-series fund, you can redeem it and buy the corresponding Vanguard ETF.


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## Spudd (Oct 11, 2011)

I like your allocation, I think it looks good. Further to what Soils4Peace said, you should be able to set up your funds so that they DRIP - meaning that when they pay dividends the broker will reinvest those dividends for you.


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## mrPPincer (Nov 21, 2011)

You could add some unhedged MSCI EAFE exposure using td efunds at a reasonable cost.

re DRIPs, I have recently purchased some VCE, and td waterhouse says DRIP is not available with that fund. 
I'm assuming it's because it's a new fund that had not yet paid a dividend and that they could possibly put it on the list later.
Not a big deal though because vanguard pays dividends once at the end of the year, so I'll add that in when I make my January contribution.


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## CanadianCapitalist (Mar 31, 2009)

Here are my thoughts:

1. The Emerging Markets exposure appears to be very high at 40% of stock market allocation.

2. It is not clear to me why there is no exposure to other developed markets such as Europe and Japan.

3. I would recommend considering an allocation to REITs. REITs have risk/return characteristics sufficiently different from stocks and bonds to merit an allocation to most portfolios.

4. If past results of comparable products (such as XSP) are any indication, VUS will show a significant lag to US stock market returns. I would consider replacing it with VTI (provided, of course, the investor does not have any US Estate Tax issues). The initial currency conversion fees can be reduced with the Norbert Gambit. 

5. I would consider replacing VEE with VWO. It costs half as much for exactly the same fund.


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## futuregrowth (Mar 5, 2012)

Thanks for the responses. Would it be redundant to add a S&P 500 index such as XSP? In terms of REITs what kind of allocation to these would provide balance?

Cheers


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## jgood76 (Apr 3, 2009)

Personally, I have the following allocation:

30% VCE
25% VTI (total US stock market, unhedged)
25% VXUS (total international stock market excluding US, unhedged)
10% XRE (CAD capped REIT index)
10% XCB (CAD corporate bond index)


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## GoldStone (Mar 6, 2011)

I too use VTI for unhedged US exposure and VXUS for unhedged international exposure.

I agree with CC's recommendations:

* avoid currency-hedged ETFs like VUS

* use VWO instead of VEE (but consider VXUS for the total international exposure)

* use Norbert's Gambit to avoid currency conversion fees when buying US traded ETFs like VTI or VXUS


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## Andre112 (Apr 27, 2011)

Quick question regarding USD ETF like VTI
I have 6K of USD in my RBC direct investment account
(about 1/3 of my profolio)
And I'm in the process of moving my money from direct investment into TFSA.
I don't want to exchange for CAD yet so I want to use it to buy VTI since it's in USD.
is it a good idea to hold it in TFSA? 
I read something about US withholding tax still applies in TFSA.


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## futuregrowth (Mar 5, 2012)

Are there any extra implications for trading in u.s. Dollars to avoid hedged etfs (taxes, regulations etc...)?


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## futuregrowth (Mar 5, 2012)

So my new allocation looks like this:

40% VCE 
30% VTI
20% VWO
10% VSB

I don't know enough/feel comfortable enough with Reits to give them a presence yet. 

Also, I have 20k in my tfsa, where would you allocate this?


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## Spidey (May 11, 2009)

futuregrowth said:


> I am a beginning investor with a lump sum of cash I have inherited. I am considering investing it split across etfs offered by vanguard. The portfolio breakdown would look like:
> (I'm in my 20's and comfortable with the low bond percentage)
> 
> Bonds 10% VSB
> ...


I think your allocation is very good for someone your age. I think 20% emerging markets is appropriate for someone your age. 

The only thing I would do differently would be to take 10% from the Canadian equity allocation and put it into REITs. I would likely go with ZRE rather than XRE, but that's your choice.


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## Spidey (May 11, 2009)

I didn't read your last post regarding REITs. Regarding going with the US versions, I would suggest calculating whether the amounts justify the complications of "Norbit's Gambit" to exchange currency. For example the VUS MER is only .08% higher than VTI. It may take a sizable portfolio to make up for the increased transaction fees involved in the Gambit, particularly if you contribute regularly and in relatively small amounts.

Regarding your $20K in the TFSA, while I would suggest you don't rush this, you may want to get your feet wet by buying a few dividend stocks. I would go with relatively solid and secure at this point. TD bank and Interpipeline may be a good place to start.


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## futuregrowth (Mar 5, 2012)

Thanks for the insight. I can actually avoid currency conversion fees as i already have roughly the appropriate amounts of US and CDN $ so that removes my need for the norbit gambit. Unless there's some sort of tax implication for trading in US$ it makes sense just to purchase VTI correct?

I'm considering purchasing ishares dow jones Canada select dividend index fund (XDV) with the tfsa funds.


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## mrPPincer (Nov 21, 2011)

Unless held inside an RRSP or RIF, both VTI and VUS will be subject to the dividend with-holding tax of 15% (not claimable as a write-off if held in TFSA btw).

If held inside your RRSP, VTI will not be subject to the with-holding tax.
But from what I've gathered*, because VUS is basically a canadian fund that holds VTI, it will be taxed even if held inside an RRSP, and the tax will not be claimable as a write-off.

* http://www.morningstar.ca/globalhome/industry/news.asp?articleid=316704


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## stevendlee_101 (Sep 27, 2010)

My portfolio allocation. Feedback or thoughts? 

All of this will be held in a non-reg account, and I will be making multiple purchases over the next year until I am fully invested. 

15%	Vanguard MSCI Canada Index ETF (VCE)	
15%	Canadian Dividend Stocks
10%	S&P/TSX Capped REIT Index Fund (XRE)
30%	Vanguard Total Stock Market ETF (VTI)
30%	Vanguard Total International Stock ETF (VXUS)


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## mrPPincer (Nov 21, 2011)

stevendlee_101 the allocation looks good to me because it's very similar to what I'm moving towards, but I'm prejudiced against bonds right now.
My usual 10% bond allocation is hiding in a HISA right now until interest rates rise a bit
2% interest doesn't even keep up with inflation but I consider the cash an integral part of my allocation with low correlation to the equities.


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