# Advice for a newbie ( to investing and this forum)



## younginvestor1988 (Oct 4, 2016)

Hi All
Have been a lurker on this board for a while...was hoping to get some advice from all you good folks

I am 28 and a relatively new physician in Calgary. I am frugal and good with keeping my expenses relatively low. I am married and have a several month old baby at home. We have purchased our first home, and luckily we have no debt. My wife is also a professional but after mat leave she will return to work on very part time basis. 

Current state of affairs
~200K of equity in house 
No RRSPs or TFSAs for either of us
~350K in cash in my professional corporation

I did do quite a bit of trading some years back in my TFSA and didn't do terribly- but had to sell off everything and use the money personally as downpayment for the house

Going forward I hope to be able to have 150-200K per year in my prof corp for investment

Now my question is what should I do to invest? 
-invest in index fund on a regular basis
-wait until a major correction and buy big blue chips/ index?
-buy rental real estate ( i live in Calgary and am somewhat afraid of what happens to it after oil goes the way of the coal etc)

I did see a financial advisor, but he just kept pushing mutual funds...

sorry for the long post...any advice for someone just starting out!!

Thanks in advance


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## AltaRed (Jun 8, 2009)

With a young family and establishing yourself in a career, you have your hands full with daily life. I would really suggest a Couch Potato portfolio of 3-4 ETFs (or index mutual funds) for the foreseeable future (next 5-10 years at least). It is passive, you are in the market and it doesn't take much time to manage via a discount brokerage. Look at the Couch Potato site and/or www.finiki.org for Couch Potato type profiles. You can always decide to start stock picking at a later point in life.

Personally, I would never be a landlord. It takes time, angst and money to be a landlord and again, you have a busy life with family and career. You really don't need the hassle of tenants. You already will have exposure to RE in Calgary with your family home. You don't need 'double jeopardy' having more of your net worth in yet more RE.


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## mordko (Jan 23, 2016)

^ +1


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## Oldroe (Sep 18, 2009)

Like anybody else you should know why you are investing. Retirement income, thrills, vacation. 

Set up a rocks solid base Div Aristocrats. Then move into other areas of interest.


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## My Own Advisor (Sep 24, 2012)

Congrats on a great career. Congrats with the family. Well done with the home.

Advice?

Don't rush into anything.

Here are some saving and investing resources for newbies.
http://www.myownadvisor.ca/saving-investing-resources-newbies/

Some of them are free 

What you'll find out from your reading, a Couch Potato portfolio is a long-term path to financial success for a busy career. Invest like AR mentioned above, in 3-4 low-cost ETFs, pay yourself first for the next few decades, wake up at 60, celebrate your kids wedding, home purchase, etc, and be near retirement if you wish. 

I would also avoid landlord-ship. Establish your career, do some DIY low-cost investing, and you'll have tons of wealth for your family to enjoy without the headaches. If you want to dabble in dividend paying stocks later, well, you certainly can.

Enjoy. 

Good luck!


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## Pluto (Sep 12, 2013)

Take your time and don't forget to think about investing in what you know best - IE the medical field. Its my understanding that clinics where the clinic owner rents space to other physicians can be quite profitable, so you might developed an eye for starting one, or buying into an existing one as a partner. Managing that, like real estate, could be headache at times, however.

Too, in the realm of bio-tech stocks you might be able to separate the wheat from the chaff better than the average investor. 

Then again, if you buy blue chip stocks in 20 years you will have so much money and dividend income you won't know what to do with it. If you stick to tried and true companies with tons of assets, managing it shouldn't be a problem.


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## younginvestor1988 (Oct 4, 2016)

Thanks guys for all the helpful suggestions

I'm definitely going to be doing the ETF route with good diversification within Canada, US, and some emerging markets as well.

Should the general strategy then be ignore the market, basically hold forever (with rebalancing regularly), and just buy more shares on a regular monthly basis? Or should there be some component of timing, buying during the market corrections and selling a good chunk when the general consensus is that the market is overheated? I understand that with the second option, I might end up sitting on the sidelines for years missing a bull market or selling too soon...


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## OurBigFatWallet (Jan 20, 2014)

I'm also in Calgary and in your case I wouldnt recommend buying real estate. No one knows where the market is headed but I do know that being a landlord can be a second job for some, and a nightmare for others. And being a physician you probably dont have the time needed to dedicate to a property. I agree with the above couch potato recommendation. With such a long timeline I wouldnt worry about trying to time the market, I'd go with slow and steady. Best of luck with your investing journey


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## Oldroe (Sep 18, 2009)

Most people miss the bull market because there weren't prepared for the bear market. Cash on hand.

That core base holding is buy on the corrections. And you can just stay at this level or you can jump in and out of things for profit. Maybe 10 % of your holdings.

You already sound like someone that will have trouble selling and that's a problem.


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## Spudd (Oct 11, 2011)

Buy and hold with rebalancing is the best bet. Jumping in and out takes a lot of attention and even the experts have trouble with it.


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## Pluto (Sep 12, 2013)

younginvestor1988 said:


> Thanks guys for all the helpful suggestions
> 
> I'm definitely going to be doing the ETF route with good diversification within Canada, US, and some emerging markets as well.
> 
> Should the general strategy then be ignore the market, basically hold forever (with rebalancing regularly), and just buy more shares on a regular monthly basis? Or should there be some component of timing, buying during the market corrections and selling a good chunk when the general consensus is that the market is overheated? I understand that with the second option, I might end up sitting on the sidelines for years missing a bull market or selling too soon...


Every bull market is punctuated by corrections so it is not possible to miss an entire bull market by buying during a correction. But I suppose I should ask you how do you define "correction"? Usually a correction is defined as a 10 - 20% decline from the high. (A pullback is a 5 - 10% pullback from the high. A bear market is a decline > 20%). There are usually plenty of pullbacks and corrections in bull markets. However that may conflict with a dollar cost averaging strategy. 

And speaking of strategies, their are many. the Globe and Mail does a good job of explaining the many strategies and the performance you might expect. 
http://canadianmoneyforum.com/showthread.php/98754-Strategy-Lab 

Too, Rob Carrick wrote an article some time ago about a doctor who, apparently all on his own decided to buy stocks in essential businesses, so he bought banks, pipelines and telecoms and outperformed the market and just about everyone else. 

by the way, how did you get through medical school by your young age and have no student debt?


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## younginvestor1988 (Oct 4, 2016)

I was able to graduate with no debt very luckily because I lived with my parents the entire time and they also paid off my student loans (only child)

I've done some reading/thinking on the ETF's and have come up with the following allocation
90% equity
10% gold
no bonds

40% XIU: S and P/TSX 60 Index 
30% XSP: S and P Index CAD hedged
10% XIN: MSCI EAFE Index hedged
10% XRE: Canadian REIT
10% gold bullion ETF

Thoughts? Thanks for the replies!


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## My Own Advisor (Sep 24, 2012)

If going the ETF route, I would simplify a bit but almost splitting hairs. Your path is overall very solid.


Inside TFSA and/or RRSP - XIU or XIC or VCN - up to 40% Canadian exposure.

Inside TFSA and/or RRSP - VTI and VXUS - up to 25% each if you want to own US-dollar accounts. Otherwise, consider VXC for an "all-in-one" fund outside of Canada = 50%

10% XRE or VRE for Canadian REIT. Own inside TFSA and/or RRSP.

I wouldn't bother with bonds or gold myself.

Max 4 ETFs this way. 

Again, overall, great stuff.


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## younginvestor1988 (Oct 4, 2016)

I've been thinking and reading more about ETF's and got to thinking about swap based ETF like the Horizon HXT and HXS.....since I am only investing with a corporate trading account....the dividend tax I would save over decades should be very significant. In essence if I buy and hold, I don't have to pay any taxes on my investments. Any thoughts on these ETFs for essentially a non registered account?


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## mordko (Jan 23, 2016)

younginvestor1988 said:


> I've been thinking and reading more about ETF's and got to thinking about swap based ETF like the Horizon HXT and HXS.....since I am only investing with a corporate trading account....the dividend tax I would save over decades should be very significant. In essence if I buy and hold, I don't have to pay any taxes on my investments. Any thoughts on these ETFs for essentially a non registered account?


This is OK if you appreciate the additional risks with a swap ETF. Also, keep in mind that you will have to pay your tax on the dividends eventually, only it will be capital gains. And with a corporate account it will be taxed at the highest rate even if your income goes down in the future. You also pay a bit more in MER. HXS costs 17 basis points vs 3 basis points for a USD non-swap ETF representing S&P 500.


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## mgarf (Oct 14, 2016)

younginvestor1988 said:


> I was able to graduate with no debt very luckily because I lived with my parents the entire time and they also paid off my student loans (only child)
> 
> I've done some reading/thinking on the ETF's and have come up with the following allocation
> 90% equity
> ...


A few comments:

1) Your Canadian allocation. XIU has a annual fee of 0.18% AND only holds 62 stocks. You can get better fee and more diversification with VCN (~500 stocks, 0.06% fee)

2) Your American allocation. 

a) Point on hedging. CAD Hedging of US stocks can actually be counter-productive in a canadian portfolio with CA stocks (although doesn't make much of a difference in the long-run). If you think the Canadian dollar rise though, I'd hedge, if not, I wouldn't. If your not sure, get 50% hedged, 50% not hedged (that's what I do).

b) Your pick of XIU. Again... not as well diversified as other options out there. XUU has ~3000 stocks and is even a bit cheaper on the annual fee! I'd choose XUU (not hedged) or XUH (hedged).

3) International allocation. XIN has high annual fee of 0.5% and only ~1000 stocks. VXC has ~8000 stocks and only costs you 0.27% per year. NOTE: VXC is 50% US, so take this into account.

4) Having REITS and gold. I personally don't think these add either added return or diversification. But it's up to you. If you do want them... shop around and find the lowest fees!

If you'd like a full comparison of US, international and canadian stock ETFs and mutual funds available for Canadians I've made a comparison table on my blog. You can access it here: lrdatabase.com/investlogic/guide.html (click on the "What to Buy" section)

Happy savings!


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## mordko (Jan 23, 2016)

@mgarg - wow, that's impressive 

Just one comment - you have to take taxation into account. It impacts your selection of funds. For example, for someone with enough $s it would make more sense to buy a US-traded ETF for the American market (e.g. VTI) rather than XUU. Not only is it cheaper, but you also save the withholding tax.


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## mgarf (Oct 14, 2016)

mordko said:


> @mgarg - wow, that's impressive
> 
> Just one comment - you have to take taxation into account. It impacts your selection of funds. For example, for someone with enough $s it would make more sense to buy a US-traded ETF for the American market (e.g. VTI) rather than XUU. Not only is it cheaper, but you also save the withholding tax.


If you're just in an RRSP... there's no benefit. But let's say you've maxed out your RRSP. You're right, there is a tax advantage... but the conversion costs to US currency would counter-act this effect and then some. The counter to this is Norbit's gambit if you have the energy to do it!


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## mordko (Jan 23, 2016)

mgarf said:


> If you're just in an RRSP... there's no benefit. But let's say you've maxed out your RRSP. You're right, there is a tax advantage... but the conversion costs to US currency would counter-act this effect and then some. The counter to this is Norbit's gambit if you have the energy to do it!


There absolutely is benefit within an RRSP. You will not be subjected to any US withholding taxes as long as you hold a US-traded product. If you hold XUU within your RRSP then you are losing the withholding tax of 15% on dividends. 

And yes, Norbert's gambit should be used for conversion. No, it does not take much energy.


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## mordko (Jan 23, 2016)

Furthermore, XUU has a fairly high bid-ask spread vs something like VUN. 

And if we are talking abut a non-registered account then you can claim withholding taxes back afterwards, so the advantage is actually less than within an RRSP.


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## mgarf (Oct 14, 2016)

Thanks for correcting me, I remembered the facts wrong. I agree: holding a US listed US-stock ETF trumps CA listed US-stock ETF in RRSP accounts if you do away with currency conversion mark-up with Norbit's gambit. 

If we're gonna choose CA-listed stocks though... XUU vs. VUN. Do you think the bid-ask spread trumps the 0.07% difference in MERs?


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## mordko (Jan 23, 2016)

@mgarf:

VUN has 0.16% MER and 0.13% spread.
XUU has 0.10 MER and 0.69% spread. 

So, it may take a while to recover what you would lose on the spread with XUU and by then VUN may drop its MER but I am splitting hair. These two seem very close.


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## james4beach (Nov 15, 2012)

One general comment, avoid the currency-hedged ETFs. This currency hedging has shown to introduce a significant drag on returns, plus it's desirable to have the foreign currency exposure.



mgarf said:


> I agree: holding a US listed US-stock ETF trumps CA listed US-stock ETF in RRSP accounts if you do away with currency conversion mark-up with Norbit's gambit.


Something you should know about: there is one downside to holding US listed ETFs (or any US stocks). Your estate will likely have to file paperwork with the US govt upon death. And you may be liable for US estate taxes. If you're a high income earner this is more likely to affect you, as your net worth may actually get into the millions:
http://canadianmoneyforum.com/showt...file-US-tax-return-if-deceased-owns-US-stocks

To clarify: you may end up having to pay US estate taxes even if you have nothing to do with US.


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## lonewolf :) (Sep 13, 2016)

younginvestor1988 said:


> I was able to graduate with no debt very luckily because I lived with my parents the entire time and they also paid off my student loans (only child)
> 
> I've done some reading/thinking on the ETF's and have come up with the following allocation
> 90% equity
> ...


 I think your setting your self up for failure 90% stocks WOW. Your making good money so don't have to be a good speculator just a good banker. Why risk it (debt has gone parabolic so setting up for deflationary crash)

90% that's high without much experience to know if your personality is suited to that high of a percentage  I would go with Goldmoney instead of gold ETF maybe latter when holding enough gold switch to a gold Swiss Annuity,

Would not hedge currency go with SPY for S&P

REIT would consider private REIT that does not act like a stock

Cash need some cash in there perhaps working up to holding every major currency of each of the 7 Continents of world as well as small percent digital currency. 


Good luck, old school talk playing stock market is not investing it is speculation. New school talk playing stock market is investing


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## mordko (Jan 23, 2016)

james4beach said:


> To clarify: you may end up having to pay US estate taxes even if you have nothing to do with US.


Ok, but:

1. You must have more than 5.45 million USD for this to be a risk. This figure keeps increasing with inflation, but obviously no way to predict the future.

2. You won't pay anything, its your estate that that would be taxed.

3. If your assets are reaching the threashold then you can engage in estate planning at the age when a death is more likely.

4. If you have, say, a million dollars in US stock, then you would be saving around $4000 every year by having your money in a US based ETF rather than a TSX version.


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## humble_pie (Jun 7, 2009)

mgarf said:


> A few comments ...
> 
> If you'd like a full comparison of US, international and canadian stock ETFs and mutual funds available for Canadians I've made a comparison table on my blog. You can access it here: lrdatabase.com/investlogic/guide.html (click on the "What to Buy" section)




well, well, well. A whole lot of money went into the creation of that lil ole blogspot. The editing alone - it's excellent btw - would have cost a fortune.

wondering who you are, mgarf? who's paying for investlogic? that's "you" in the plural, since there's obviously an entire team or organism behind lil ole blogspot.

whoever you or they are, investlogic is couch potato propaganda .each:

.


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## mordko (Jan 23, 2016)

^ do you think it could be Mossad?


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## humble_pie (Jun 7, 2009)

of late cmf has attracted some heavy hitters. Bass player for example. What seems to have put the bass knackers in a knit is the US nuclear entente with iran. He's one of those who will hate clinton/obama for it, all the remaining days of their lives.

turning now to the couch potato professionals who dot financial social media, one fund family more than any other seems to be driving the propaganda ...


.


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## younginvestor1988 (Oct 4, 2016)

Thanks for all the knowledge guys!
Any other thoughts on HXS and HXT for my corporate trading account? I am ok with swap structure and counterparty risk but am somewhat nervous about trudeau government suddenly changing the rules and making me have to sell off my shares in a premature way....


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## mgarf (Oct 14, 2016)

humble_pie said:


> well, well, well. A whole lot of money went into the creation of that lil ole blogspot. The editing alone - it's excellent btw - would have cost a fortune.
> 
> wondering who you are, mgarf? who's paying for investlogic? that's "you" in the plural, since there's obviously an entire team or organism behind lil ole blogspot.
> 
> ...


I'm flattered! But no.... I am a physician-in-training (with no history of or current affiliation to Mossad) with a hobby as a website developer / programmer. The blog was entirely of my creation, with input from my retired investor cousin. Likewise, the investlogic iOS app was completely created by me. It's been a long-time in the making. I don't think I have any non-altruistic motives (other than maybe making a small profit on app sales).... I was just doing a lot of reading and found that there lacked a lot of legible evidence-based guides for the average investor.


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## mordko (Jan 23, 2016)

@mgarf, relax, HP thinks that pretty much everyone on this board is part of a sinister plot to do some thing or other. Your denial will only firm HP in her convictions but nobody brighter than an average shovel ever doubted what you said in the first place.

Your site is really slick though. Assume you have read this: http://canadiancouchpotato.com/


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## humble_pie (Jun 7, 2009)

mgarf said:


> I'm flattered! But no.... I am a physician-in-training (with no history of or current affiliation to Mossad) with a hobby as a website developer / programmer. The blog was entirely of my creation, with input from my retired investor cousin. Likewise, the investlogic iOS app was completely created by me. It's been a long-time in the making. I don't think I have any non-altruistic motives (other than maybe making a small profit on app sales).... I was just doing a lot of reading and found that there lacked a lot of legible evidence-based guides for the average investor.



really? you're an amateur?

it's an extraordinarily polished presentation. Although there is a slight bias towards the US, wondering how you would account for that. On 2nd thought, such a bias could help sales, if your wish is to sell your app stateside.

one of you - yourself or the cuz - is a flawless editor. I couldn't see any mistakes - unlike a few on here whose names i shall not mention ...

it's a pity you want to be just another couch potato disciple though. There are so many creative opportunities for a web designer who is not married to ETF proselytizing .each:

.


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## james4beach (Nov 15, 2012)

mgarf said:


> If you'd like a full comparison of US, international and canadian stock ETFs and mutual funds available for Canadians I've made a comparison table on my blog. You can access it here: lrdatabase.com/investlogic/guide.html (click on the "What to Buy" section)


mgarf - that's an amazing looking web site. I'll also admit to looking up some information on you (this is purely from your own web site) and you also seem like an amazing person all around. How do you find time for all of this?

humble_pie, I can confirm: he's a medical doctor who also has advanced computing skills. He runs a medical resource web site, and also creates software both for medical purposes and investing. I don't see any affiliation with any ETF provider or fund company.


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