# Time to get serious about money stuffs.



## forrory1 (Mar 1, 2015)

Hello all,

It's finally time I jump on the money diary bandwagon. I am a 28 year old male renting in Toronto. The bulk of these funds stems from the sale of my investment property in Nov of 2014. I have been working in engineering for the last four year. My plan is to finish the current project I’m working on and then hopefully take up a contract positions abroad. I hope to jump between contract positions for the next few years as I like to travel.

Curent Assets:
Rent Deposit:	1.4K
BMW: 12K
Ducati: 12K
RRSP: 20K cash
TFSA: 10K cash 
TFSA: 8K stock
Margin Acct: 10K cash
Cheq Acct: 6K
Savings Acct: 5K
Bitcoin: .6K

Total Assets: 85K

Liabilities:
Credit Cards:	$200

I should also be receiving a healthy tax return (5K-8K) based on the amount I contributed to my RRSP this year. Also the pension plan is DB and this year I should be between 110k - 150k for income. 

Right now I am leaning towards a couch potato portfolio comprised of 30% CND TSX (ETF VCN), 30% US (S&P ETF VSP), 30% INTERNATIONAL MRKTS (ETF VEF), 5% stock gambling and 5% Cash/Physical Gold. My plan is to contribute monthly and rebalance once a year.
Questions:
Should I add some dividend income?
Should I hold any cash at all?
In which accounts should I hold the ETFs mentioned above?
How do my percentages look?
Should I buy in one shot or spread it out over the next few months?

Regards,
RL


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## nobleea (Oct 11, 2013)

Several comments:
A DB pension that is worth 110-150K after only 4 years of work is hard to believe. That seems a very high number. I think you'll find the termination benefit (the amount you get when you quit) is a fair amount lower than that. I guess the 100K+ DB number could be right if you had a really high income, but if that's the case, you would have much more to show for it in terms of assets. You have a networth of 60-85K depending on whether you include the car values or not. Perhaps you've just finished paying off large amounts of student loans? I guess if the termination benefit is really 100K+ on your DB plan, then maybe you're not sitting bad.

The rule of thumb I've used occasionally is that your networth should be your age times your income divided by 10. You might be below that target at the start of your career due to student loans, etc, and would normally be above the target as you approach retirement. So if you make 85K a year as an engineer, you should have a networth around $240K.

Be aware that an engineer with 4-5 yrs experience is pretty junior and might not get juicy contract positions abroad. Depends how specialized you are.


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## forrory1 (Mar 1, 2015)

Sorry, I'll should clarify. I don't know what the value of the DB pension is at this point (I've never bothered to find out as I've read on here it is best left to an actuary). What I was trying to convey with "110K-150K" is my current yearly income. The project I am working on is very specialized. As long as the contract is decent I will take it as my main driver for leaving is the travel.

RL


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## My Own Advisor (Sep 24, 2012)

Good on you to focus on your finances!

Should you add divi income?
A personal choice I think. I'm a hybrid investor myself, using dividend stocks and ETFs.

Should I hold any cash at all?
I would, at least an emergency fund.

What accounts for what investing products?
Here's what I do FWIW:
http://www.myownadvisor.ca/indexing/

How do my percentages look?
Overall, good when >90% of portfolio is indexed.

Should I buy in one shot or spread it out over the next few months?
Nobody can time the market and if you're an indexer, you don't care when you invest nor what the market does


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## gibor365 (Apr 1, 2011)

> hopefully take up a contract positions abroad.


 just curious how you find contracts abroad? Any specific website?


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## forrory1 (Mar 1, 2015)

Thanks for the responses.

@My Own Investor: Maybe I should reduce the percentages down to 25% CND/25% USD/25% INT/15% Div/5% Cash/5% Gold. This would leave me more to invest in dividends.

After reading your article let me see if I got this right. I should buy the TSE EFT in my TFSA, the S&P and Ex N/A EFT in my RRSP. Cnd Div in TFSA and US Div in RRSP? 

@gibor: Mostly via Linkedin. I've been approached three times now with contract offers on Linkedin. Also other contractors currently working for us have lots of opportunities. Usually you just want to sign up with one of their headhunters and they will do the leg work for you.


If I decide to start working abroad I would be denouncing my Canadian residency. My understanding is that everything in my TFSA and RRSP would remain as is for tax purposes. But would I not loner be generating addition contribution room in my TFSA and RRSP for every years I'm a non-resident?


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## daledegagne (Apr 6, 2015)

*I made Tea*

Hi Forroy1, 

I wasn't going to get into this one but your case just got more complicated with your decision to become a non-resident of Canada for tax purposes. I have lived overseas for nearly 4 years and this was a consideration for us at one point.

*Canada Non Resident for Tax Purposes.*

1. The best piece of advice I have for you is to pay a lot of money to sit down with an accountant who specializes in international situations like these. Their advice and guidance will be invaluable in making this a clean break.

They will also be authoritative on how maintaining things like family ties, bank accounts, investment accounts etc will affect your ability to do make this transition.

2. There are other things to consider about living abroad that may be hard to grasp if you haven't before. I see many people move here (Thailand) and believe that it's all sunshine and roses. They build homes, buy cars, and then 2 years later they've had it with how "backwards" and "stupid" people are here. They have a fire sale, and move home. 

My point is that international living is exciting and awesome however the long term validity of it may or may not work for you. Of course it might, but until you've experienced it for a couple years, you may want to be more cautious on it. 

3. Having the ability to invest with tax benefits now, assuming you're going to work for many years, should not be under-rated.

The value of being able to contribute to your TFSA and your RRSP and grow that money tax free is amazing when given time to germinate. That alone should be worth the extra taxes you may or may not pay from working abroad. Of course, if you plan on stopping working in the next 10 years, it's less so, but still valuable.

*
That said - you can always return.*

I'm not saying you should not file for non-residency, however I'm saying you should consider delaying. Personally, we did not become non-residents because we were about to start a family, and maintaining that health care (which you can maintain if you are leaving Canada for work) and international security in the form of embassies was worth the slight bit extra that we pay in taxes every year. We are also able to claim many benefits which helps offset things for us. 

It was also more difficult for us to make a clean break because we had been rental real estate that we were leaving behind and had been traveling for 2 years off of that income by the time we considered working overseas.



*Asset Allocation*

You're sort of in a similar situation to what I was a few months ago. Sitting with a lot of cash, having to allocate. Looking at what you have, and your background, I'm going to assume that you're a really smart guy who does a lot of research into things that are important to him. If you don't mind putting in a few hours of reading then I would suggest a book called The four pillars of investing. 

In essence, it shows you why (even smart people) can't beat the market consistently, how to find the best ETF's to match the market as close as possible (and minimize fees), what psychological experiences you can and should be aware of that you may experience. Most importantly it shows you how asset allocation is the most important feature of an investment portfolio and how to choose your asset type and class allocations.

*What that means for you (and my concerns with your portfolio choices)* 

1. There's nothing wrong with 95% stocks, 5% other (ie gold) if you've made the conscious decision that you can stomach losing up to 40% of your money in 1 year. Personally, I can't, and so I put a hefty amount in bonds and income generating Real Estate. Has your decision to ignore the bond market been a conscious one?

2. Asset Class (Large Cap Value, Small Cap Value, Large Cap Growth, Small Cap Growth) - each class does better at different times in the business cycle. Buying only say, an SP500 etf and calling it a day more heavily weights yourself to Large Growth. Again, if that's your conscious choice then fine, but be aware that is what you're doing. My recommendation though is to consider branching out a bit.

3. Buying the United States of Canada - (No, that's not a typo) you originally mentioned buying a TSX fund. I would dig a little to whatever ETF you purchase to see your exposure to the united states. For example, buying the TSX/SP composite gives you a blend of US exposure already. Are you sure you want another 25-30% on top of that? That could put your exposure to International stocks at 65% (approx 50% for US, 15% elsewhere). Also, when investing int'l the exchange rate will be a considering factor. 

*In the End it's not that hard to figure out* 

My hope is that I've challenged you to dig a little deeper. Looking into my suggestions isn't that hard. The book will cover a lot of it. In the end, you're not going to over complicated things. 

Diversification across asset type (bonds, stocks, Real Estate) and Asset classes (value vs. growth, large vs. small) can be done with an extra 3-4 ETFs. 

And it's STILL a couch potato method. It's still a take a look every month or 2, and rebalance every year or more. 

Of course, I don't know everything, especially about you so take this all with a grain of salt. And if you do move overseas, be sure to contact me when you go to sell your BMW and Ducati - We may be moving back in a year or so ;-)


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## StockTrader (Apr 21, 2015)

forrory1 said:


> Should I buy in one shot or spread it out over the next few months?


Spread it out over the next months. You don't want to be buying at a top :stupid:. Consider a dollar cost averaging or a value averaging approach.


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## daledegagne (Apr 6, 2015)

StockTrader said:


> Spread it out over the next months. You don't want to be buying at a top :stupid:. Consider a dollar cost averaging or a value averaging approach.


To add to this - IF the market has reached its top (bears think it's a new top every day that's bound to crash), then buying in segments makes you feel better because you don't lose as much. It's like buying comfort food. If the market doesn't have a correction (not right away that is), then you feel better because you were cautious and protected yourself from the downside.

If you go this route I would recommend 2 methods -

1. Time Based purchases - Purchase 1 time per quarter. Monthly is too much. Fees will kill you. - Bi Quarterly/yearly too little. 

2. % based - This is my method. After making my investment choice, I set alerts for 5% and purchase at that point (up or down). Down averages me in. Up means I'm buying strength. Both ways I'm happy. That makes for 3 transactions for each purchase (2 buys and 1 sell...eventually) which caps me out around $30/investment.


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## My Own Advisor (Sep 24, 2012)

forrory1 said:


> Thanks for the responses.
> 
> @My Own Investor: Maybe I should reduce the percentages down to 25% CND/25% USD/25% INT/15% Div/5% Cash/5% Gold. This would leave me more to invest in dividends.
> 
> ...


Personally:

1. I prefer CDN stocks and ETFs in my TFSA.
2. I prefer US stocks and US ETFs in my RRSP, so the S&P 500 ETF would go there.

Happy investing!


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## gt_23 (Jan 18, 2014)

I'm the same age as you and living in the same city. Hope this helps:

Questions:
Should I add some dividend income? _No, not unless you need it for something. Firms that reinvest their cash do better vs. those that payout dividends. This doesn't mean excluding certain stocks because they pay dividends though..._
Should I hold any cash at all? _No, best to always be fully invested in the market, particularly when you have good cash FLOW and access to credit. You're also buying index ETFs, which hold cash, so any cash in your accounts will ensure you never match the market return._
In which accounts should I hold the ETFs mentioned above? _No question 100% TFSA until it's fully maxed, then RRSP, then margin. Once registered accounts are maxed, rebalance for tax efficiency._
How do my percentages look? _Excellent, although I would be a bit lighter on TSX and no cash/gold, but it's a personal choice._
Should I buy in one shot or spread it out over the next few months? _Buy in one shot with cash on hand, use future savings to buy more units at the market._


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## forrory1 (Mar 1, 2015)

Hello everyone,

I have been busy making money and reading/researching as much as possible in-between regarding ETFs. Here is an update.

@daledegagne
I appreciate the response. I went ahead and ordered the book and have started reading it. My interest in index investing comes from reading The Intelligent Investor and Four Pillars has been on my list.

My decision to avoid bonds is a conscious one I have made for now. Later I do plan to add these into the mix once I understand more about them. REIT is something I overlooked and I have now added, thanks for the feedback.
The BMW I’d sell but the Ducati won’t be left behind sorry! 

@StockTrader
Yes DCA was what I was thinking. I will be buying $500.00 of each ETF monthly till I’m fully invested.

@daledegagne 
I’m doing all my trading on Questrade so buying ETF is free.

@gt_23
With regards to investing all my available cash I’ve taken your advice. After analyzing min Cheq acct balance, savings, credit and money in transit I should be fine in case of any unforeseen expenses. At the end of each month I’ll transfer the funds in savings and use them to buy more ETFs.
I will also hold out on buying gold. (Although the thought of buying gold and selling during a correction to buy more ETFs does still interest me)

So far this is where I stand:
US EFT I bought XSP in RRSP over VSP due to slightly lower MER of .10 vs .13 but mostly because it has better liquidity.

Ex North America I chose VEF in RRSP over XIN due to MER .27 vs .50. I am considering CGR for the REIT portion of this category and would hold it in my RRSP.

Canadian side I bought XIC in my TFSA over XRE again due to lower MER of .05 vs .11 and better liquidity. I am considering VRE as the REIT portion and it would be in my TFSA.

The goal is to have each of these categories (US,CND and EX NA) at 30% each and use the rest for individual stocks. 

How do these two REITs look CGR, VRE?

Would a non-North America REIT ETF at value?

Finally of the 30% in each category what % should I contribute towards REITs?

I really appreciate all the feedback and consideration. It’s really helped me stay focused on the type of strategy I’ve chosen.
Regards,
R


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## daledegagne (Apr 6, 2015)

forrory1 said:


> Would a non-North America REIT ETF at value?
> 
> Finally of the 30% in each category what % should I contribute towards REITs?
> R


I think you'd be hard pressed to find a non NA REIT at a reasonable MER. But even if you did....I'm not sure I would put in the energy/effort. REIT's are mainly meant to spread yourself out a bit and pick up some security, but also some upside in the years that they do very well.

If you are allocating your assets like that (30/30/30 + 10% random) then I would recommend REIT's making up 10-15% of each of those (so 3-4.5% total assets into CDN REIT's). This is avg to 1.5 higher than you'd have recommended in 4 pillars, however, I think your 30/30/30 split will give you much more volatility due to your heavy Ex NA. So stabilizing your US/CDN may be a wise move. 

If you want to set out a really decent, non-cookie cutter plan and you're not afraid of a little brain power usage, then I can recommend speaking with Erik Conley (www.zeninvestor.org) - He's who I used when I wanted to set up my strategy - and it sounds like you're pretty serious about getting this right so some truly expert help may be good. You have to pay him out of your pocket...but that's always the best way when it comes to financial advice.


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## forrory1 (Mar 1, 2015)

Ok so it has been a while.

In the meantime I think this site got hack and I lost my password and I also has a motorcycle accident. :beaten:

Here's an update,

Currently renting/living in Toronto with my girlfriend who I happen to meet just before my accident. Still working at the same aerospace firm on the same project (6 years now). Girlfriend works as environmental site assessor/technical writer. Driving the same old car, insurance wrote off the motorcycle and paid me in full for it. I've missed about 6 months of work over the last 2 years while recovering, had 3 surgeries.

Ok onto the financials, I did follow through with my plan as I had posted on here. Took all that great advice into account:

Curent Assets:
Rent Deposit: 1K
BMW: 4K
Ducati: --K
Computershare: 4.2K (BBD)
RRSP: 29.5k (XSP, ZDM)
TFSA: 56.2K (BBD, XIC, XSP) 
Margin Acct: 52K cash
Cheq Acct: 11K
Savings Acct: --K
Bitcoin: 3.5K
DB Pension: 62K

Liabilities:
Credit Cards: -$~100

Total Assets: 223K


Couch potato portfolio on Questrade comprised of 32% XIC, 32% US XSP, 32% ZDM, 4% stock gambling BBD, BTC. My plan was to contribute monthly and re-balance once a year. Which is what I have been doing, I started with $500 into each ETF a month for a total of $1500a month buy but saw that my cash pile was still growing so I bumped it up twice now. Currently at $4500 a month total buy and considering another bump.

Questions:

What fund should I put all my cash in while I wait to make my monthly buys? (cash drag)
Now that my TFSA is maxed and my RRSP (25K home buyer limit) should I sell and re-buy/balance my ETFs into different accounts? Add more into my RRSP? I think holding XIC in the margin makes the most sense. Where should I put ZDM and XSP?

Would like to keep assets liquid as I am waiting on an opportunity to get back into real estate.
Happy at my job since they switched management. Have been traveling every chance I get so the desire to change jobs isn't so great anymore. Visited ~15 countries in the last two years (major spending category).

Regards,
RL


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## forrory1 (Mar 1, 2015)

An update,

Most significant would be the girlfriend landing a job at my company and her base salary doubling. She has also started investing and is now in the habit of monthly ETF buys. 

With all of our income from one source now I really need to de-risk and drop all my corporate shares along with maybe having a larger cash position.

I have started real estate shopping. If some sort of real estate dip materializes I would like to be in a position to buy something in the city.


Curent Assets:
Rent Deposit:	1K
CAR:	4K
Computershare: 3.9K (BBD)
RRSP: 30.6k (XSP, ZDM)
TFSA: 57.3K (BBD, XIC, XSP) 
Margin Acct: 25K (XIC, XSP, ZDM)
Cheq Acct: 9K
Savings Acct: 35K
Bitcoin: 12K
DB Pension: 68K

Liabilities:
Credit Cards: -$~100

Total Assets: 245.8K


I'm not overwhelmed with my savings rate over the last year. I think I've spent too much on traveling and I really need to go back to less trips per year but longer trips as most of my travel costs were flights.

Also not sure if I'm holding the right ETFs in the right accounts for tax efficiency. RRSP and TFSA are maxed to date.

R


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## james4beach (Nov 15, 2012)

forrory1 said:


> Most significant would be the girlfriend landing a job at my company and her base salary doubling. She has also started investing and is now in the habit of monthly ETF buys.
> 
> With all of our income from one source now I really need to de-risk and drop all my corporate shares along with maybe having a larger cash position.


I agree. If you're holding shares of your employer it's a good idea to sell. You mentioned your pension is DB so that's also exposure to the company, because it's their liability to you -- and they may or may not pay it in the future (pensions are not rock solid things, but more like promises).

So I think your overall exposure to your employer is both household incomes + company stock + DB pension

That's a lot of exposure. I agree strongly with increasing your cash position, an emergency fund.


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## Eclectic12 (Oct 20, 2010)

forrory1 said:


> nobleea said:
> 
> 
> > forrory1 said:
> ...


Sorry to be late to the party ... but there is a recent post. :biggrin:

On one hand, credits built up in the DB pension will change what future pension is available and will be a factor in the formula to figure out what the lump sum payment will be, should one choose to leave the DB pension. Salary doesn't help much as the rate of credit build up as well as the number of years of service play bigger factors in the usual DB pension formula.

For example, once could have a credit build up of 1.75% of annual salary per year. The person making $115K that has twenty years in the DB pension has a lot more built up than the person working for five years. The first would have credits worth 35% of the annual income built up while the second would have 8.75% built up. There are a lot more factors but hopefully the idea that annual salary is not enough info is clear.


Secondly, the bit about needing an actuary to figure out the value may or may not apply. 

Where one wants to know how much is built up so that one knows what would be paid if one stayed in the DB pension plan to have it pay out income, that should be available. Using a simplified example to help illustrate, the formula may say one earns 1.7% of annual salary credit per year where thirty five years of service are required for the max pension to be paid. The payout formula usually uses something like "best five years annual salary over the last seven years employed" or similar. There is typically an age when one is allowed to start the pension, say sixty two for this example and a schedule of reductions to the earned amount, should one start the pension earlier. 

This applies to someone who stays in the DB pension to eventually start pension income, whether they leave the company years before the pension is started or are working for that company when they retire.


Where the actuary is needed is when someone quits the company then decides to leave the DB pension. There is a complicated formula that takes into account stuff like the number of years to retirement left (lots of time? less paid, little time? more paid) and interest rates. I suspect this may be the "termination benefit (the amount you get when you quit)" that is referred to but so far, of the three DB pensions I have been in - quitting the job means being presented with the choice of staying in the DB pension with no further credits being earned or leaving the DB pension which results in a lump sum payment of the actuary calculated value.

https://www.thebalance.com/what-happens-to-my-pension-when-i-leave-a-job-2063411


There are times when one can be forced out of DB pension to take the proceeds but AFAICT, it is usually at the decision of the departing employee.



Cheers


*PS*

I notice that in the two recent updates, the DB pension is listed as a growing sum. What is that number? Have you found out the formula for the DB pension credits and pension payout?


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## james4beach (Nov 15, 2012)

Eclectic12, you really know this stuff! Could you help explain the risk involved with a corporate DB plan -- let's assume it's not government. Is it just a liability of the company, or is it more solid? Is it at risk in case of company insolvency? I'm thinking here of friends of our family who were ruined by the Nortel collapse (initially lost 90% of their pension value, somewhat recovered I think).

Is there a way to estimate that risk, for example, could one say that the risk of the DB pension is about the same as the risk of holding bonds in the company? As a first order approximation, anyway.


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## boingboing (Jul 5, 2017)

My Own Advisor said:


> Personally:
> 
> 1. I prefer CDN stocks and ETFs in my TFSA.
> 2. I prefer US stocks and US ETFs in my RRSP, so the S&P 500 ETF would go there.
> ...


When i was going about correcting what stocks i held in what account I moved all my US stocks away from my TFSA to my RRSP, but i also moved some stock from my unregistered account to my RRSP resulting in it a "deemed disposition". Ouch! Learned the hard way about that new phrase


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## forrory1 (Mar 1, 2015)

Eclectic12 Thanks for your clarification. I wanted to leave a quick response for now.

The first BD pension value matches that of an employee who shared the same position and start date as myself and recently quit taking the cash value of his pension. I used his value. 

The second value was a guess based on the first value having a service period was ~5 years. I added another .5 years to the first value.

Also I know conditions around pension are 30 years of service + 55 years of age and $68 x years of service. Something about covering for old age security too. Sorry I'm not well versed in pension details since it's still 25 years away and to date required no decisions on my part. Anything else I could look up I'm sure.

R


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## forrory1 (Mar 1, 2015)

boingboing said:


> When i was going about correcting what stocks i held in what account I moved all my US stocks away from my TFSA to my RRSP, but i also moved some stock from my unregistered account to my RRSP resulting in it a "deemed disposition". Ouch! Learned the hard way about that new phrase



Did you move the funds "in kind" from your non-reg acct to the RRSP? Or did you sell funds in both accts and rebuy accordingly?

R


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## humble_pie (Jun 7, 2009)

forrory1 said:


> Did you move the funds "in kind" from your non-reg acct to the RRSP? Or did you sell funds in both accts and rebuy accordingly?



makes no difference, always a "deemed disposition"


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