# XIC vs VCE, XWD vs VUS+VEF.



## somecanuck (Dec 23, 2011)

http://ca.ishares.com/product_info/fund/overview/XWD.htm
http://ca.ishares.com/product_info/fund/overview/XIC.htm
https://www.vanguardcanada.ca/portal/ca/en/etfs/etfs.jsp#characteristics

Vanguard's MSCI Canada Index ETF has 102 holdings versus 254 for iShare's equivalent. They track different indices, but still, that's a substantial difference.

On the other side of things, iShare's MSCI World Index Fund has 1,538 holdings versus 4,218 for Vanguard's combination of MSCI US Broad Market Index and MSCI EAFE Index. Vanguard's two are CAD-hedged however.

I'm jumping between these on a basis of MER and holdings. Vanguard offers the better MER by far, but the small holdings and hedging have me concerned.


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## larry81 (Nov 22, 2010)

What about...

XIC for canadian equities
VXUS for international equities

?


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## somecanuck (Dec 23, 2011)

Interesting idea, but I'd have to add something else to cover US equities. Another option would be to go solid Vanguard with VCE for Canada, VTI for US, and VEA for international. I don't know enough about the consequences of purchasing on a US exchange though. I do know that there's tax consequences on the dividend returns if it isn't in an RRSP, that's about it.


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## larry81 (Nov 22, 2010)

XIC+VXUS+VTI

Thats what i use


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## somecanuck (Dec 23, 2011)

I'm looking more at the forex option with the Vanguard ETFs. Using Virtual Broker's 0.75% forex fee for ETFs representing 50% of my portfolio, that's an initial drag of 37.5 bps on the entire portfolio. 

I'm not entirely sure how to model the overall difference after 5-10 years with that drag versus picking ETFs without the forex and slightly higher MER. 

Would anyone happen to know of a tool on how to do it, or can explain it in a few steps to do in Excel/Google Docs?

EDIT: Nevermind that, I forgot about one Google Docs spreadsheet I'd made before. I modified it to include a forex charge for each year. My forex portfolio (4 ETFs, 0.22% weighted MER, 0.75% forex on 50% of it, $0.99 per trade, 4 trades per month) still beats out my non-forex portfolio (3 ETFs, 0.39% weighted MER, $0.995 per trade, 3 trades per month).


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## larry81 (Nov 22, 2010)

somecanuck said:


> I'm looking more at the forex option with the Vanguard ETFs. Using Virtual Broker's 0.75% forex fee for ETFs representing 50% of my portfolio, that's an initial drag of 37.5 bps on the entire portfolio.
> 
> I'm not entirely sure how to model the overall difference after 5-10 years with that drag versus picking ETFs without the forex and slightly higher MER.
> 
> ...


what about this:

http://www.canadiancapitalist.com/a-foolproof-method-to-convert-canadian-dollars-into-us-dollars/


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## somecanuck (Dec 23, 2011)

Yeah I've read about the Norbert Gambit before, from that same site actually, but I'm looking at monthly purchases. I'd hate to have to do the whole 3-4 day process each month. And I think my discount broker might come to hate me for it.


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## larry81 (Nov 22, 2010)

somecanuck said:


> Yeah I've read about the Norbert Gambit before, from that same site actually, but I'm looking at monthly purchases. I'd hate to have to do the whole 3-4 day process each month. And I think my discount broker might come to hate me for it.


Depending of the amount invested, it might be better to consider mutual funds for monthly contribution. A 10$ buy commission on a 1000$ monthly purchase is 1% !


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## somecanuck (Dec 23, 2011)

larry81 said:


> Depending of the amount invested, it might be better to consider mutual funds for monthly contribution. A 10$ buy commission on a 1000$ monthly purchase is 1% !


Yeah, I've compared a portfolio of TD e-Series against my ETF portfolios. Virtual Broker's $0.99 minimum commission works in favor against the MER differences to come ahead, assuming I don't blow it all on a poor spread. It's still up in the air though, I'm researching at this point.


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## larry81 (Nov 22, 2010)

somecanuck said:


> Yeah, I've compared a portfolio of TD e-Series against my ETF portfolios. Virtual Broker's $0.99 minimum commission works in favor against the MER differences to come ahead, assuming I don't blow it all on a poor spread. It's still up in the air though, I'm researching at this point.


Dont sweet it too much, a good alternative might be

If this is in a registered account you could put your monthly contributions in TD e-series and then at year end (or two time a year), sell your e-series position to purchase ETF.

But dont focus too much on the details, sure cost are important but difference of 0.10% is a detail, having a proper assets allocation is much more important


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## larry81 (Nov 22, 2010)

relevant to this topic:


*The case for indexing Canada*


> The main event: XIU versus VCE
> 
> I said above the real battle will be about becoming the “core” position of indexed portfolios. This being Canada and investors here as elsewhere inclined to considerable home-country bias, it follows that the biggest single skirmish will be in Canadian equity ETFs.
> 
> ...


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## humble_pie (Jun 7, 2009)

i don't think it matters whether vce has a significantly lower mer than xiu or not.

xiu is where the institutions do play & where they will continue to play. This is where they can set up elaborate options structures & where they can, when it's profitable, sell & deliver baskets of shares to the fund. There are only 60 securities in XIU & they are the biggest canadian companies by capitalization. They are the perfect foil for an institution that is ready to trade off continuously between the real & the derivative canadian market.

however, both xic & vce contain too many small illiquid canadian companies for the above 2 activities to be carried out. The institutions do not play in xic & my money says they are not going to play in vce either.

this leaves only the small retail investor. He can worry about the difference between a .09% mer & a .17% mer & change his etfs accordingly. But none of his reasons will ever be valid for institutional investors.


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## somecanuck (Dec 23, 2011)

Thanks! Good article. I'll save it in my "Read It Later" queue for another review (great service by the way).

I'm mostly down to three choices for representing US and international equity in my (thus far) fictitious portfolio.


iShares MSCI World Index Fund (XWD), with an MER of 0.46%.
Vanguard MSCI US Broad Mkt ETF (VUS) & Vanguard MSCI EAFE ETF (VEF), with MERs of 0.15% and 0.37%. These two are CAD-hedged.
Vanguard Total Stock Market ETF (VTI) (NYSE) & Vanguard Total International Stock ETF (VXUS) (NYSE), with MERs of 0.07% and 0.20%. These two would incur forex charges.

I know the Total International Stock covers more than the MSCI EAFE index, but that's not a concern just now. I need to find a way to quantify the advantages and disadvantages a bit more precisely to myself so I can make a decision. I'm leaning towards the 3rd option right now. 

I suppose I should compare Virtual Brokers ($0.99 min trade, 0.75% forex) versus Questrade ($4.95 min trade, 0.50% forex) while I'm at it.

EDIT: Whoa, hold up. Questrade doesn't charge a forex commission, they only do the bps spread? http://www.questrade.com/pricing/commissions_forex.aspx


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## CanadianCapitalist (Mar 31, 2009)

humble_pie said:


> this leaves only the small retail investor. He can worry about the difference between a .09% mer & a .17% mer & change his etfs accordingly. But none of his reasons will ever be valid for institutional investors.


To add to the above point: I haven't looked at VCE lately but when it was launched, VCE spreads were much wider than XIU. XIU's huge volume means the spread is almost always 1 penny.


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## humble_pie (Jun 7, 2009)

very tight spreads in all markets would accompany hi volume in xiu, would they not.

& the reverse - wide spreads in illiquid markets - would accompany lo volume etfs, no.


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## Donny (Dec 14, 2011)

somecanuck said:


> EDIT: Whoa, hold up. Questrade doesn't charge a forex commission, they only do the bps spread? http://www.questrade.com/pricing/commissions_forex.aspx


That's for trading forex, not for converting money from CAD to USD. They don't post their fees anywhere, but I did a live chat with their support a month or two ago asking what they were and saved the chat on my computer. Here it is:



questrade live chat said:


> Richard: Thank you for contacting Questrade, how can I help you today?
> 
> Donny: I've got a question about exchanging funds from CAD to USD. When I go to the "exchange funds" page, is there any way to see what exchange rate I'm going to get quoted *before* I accept it?
> 
> ...


Right now I'm looking at converting money from CAD to USD using Norbert's Gambit, except using DLR/DLR.U because that way you don't have any issues with short selling or price movements - right when you buy DLR you've locked in your exchange rate. Plus using scotia itrade the DLR ETF is commission free (at least when buying it - I'm in the middle of my first gambit right now so I'll be able to confirm in a day if the DLR.U sell is commission free as well). So right now it looks like I can convert CAD to USD for a little under 20 basis points, the only cost is a week or so (a few days to put money in to itrade, 3 day settlement for the gambit, a few days to get it out, then a few days to get it in to my actual broker), but from my calculations the delay is worth it to save 0.5% off of each conversion.


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## somecanuck (Dec 23, 2011)

Thanks for the information, you've saved me more time spent in a spreadsheet.  It's odd that they don't list it though.


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