# RRSP/TFSA/SAVINGS, which ETF to buy for couch potato portfolio?



## LeeAnne (Apr 27, 2017)

Hi, I would like to put all my RRSP, TFSA & other investments together in Questrade ETF (since I already have an account here). 

1) I need advice on which ETF to buy for RRSP (RBC mutual fund $200,000 + $70,000), TFSA ($30,000) & margin ($100,000) for couch potato portfolio. 
2) I also need advice for the allocation of each please.
3) Do I transfer all my RBC mutual funds at once or should I stagger? All are front end load mutual funds. 
4) I have lots of oil & gas stocks, should I wait for them to go back up or take the loss & sell?

I am 56 years old. Plan to retire @ 65. Has indexed pension. Marginal tax 36%. Plan to invest $3,500/month until retirement.
Paid principal residence & have a small paid rental property.

Thank you so much for your input.


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## EngPhysGuy (Jul 9, 2015)

I'd pick one of the Canadian Couch Potato model portfolios and go with that for the asset allocation for each. 
http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-ETFs-2016.pdf
The one you choose will depend on our risk adversity and time until retirement (~9 years). There's plenty of articles / threads on the equity / fixed income split you can refer to.

You'll definitely want to hold the fixed income (ZAG) in a tax sheltered account and then next the international portion (XAW). Put the Canadian (VCN) in the non-registered as you'll get favourable tax treament on the dividend income. 

Personally I'd just transfer everything and change it over. If it makes you feel better and helps you sleep at night then you could transfer in say 3 lump sums on a specified date. Do not slip this date and try to time the market! If there are additional transaction costs from doing this then you'd need to consider that as well.

As for the stocks - that one is on you. I don't feel that I can time the market do you? What makes you think that they are going to go back up any time soon? The reason to index ETF is to not try and beat the market by timing it or thinking you know better.

Best of luck to you!


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## Jimmy (May 19, 2017)

My .02. 

1 & 2) 

Here is a good article on what investments go best where. 
http://www.taxtips.ca/personaltax/investing/taxtreatment/investmentaccounts.htm

A rule of thumb is your age = % in fixed income ETFs but you can probably weigh it down another 10% ie go 40% FI. maybe look at some good quality corporate bond ETFs like HAB, XHB which have a little better yield 2.5-3% For equities, the low volatility index funds are good ( they take teh least variable stocks in teh TSX, , S&P etc so they don't fluctuate as much) BMO has a series of them ZLB, ZLH,ZLD. The non CDN are currency hedged too. You don't want to have to worry about forex risks. 20% in each. Or stay w the indexes. Here are some links on ETF resources. Rob Carrick has a series on ETFs too if you subscribe to the G&M

https://www.theglobeandmail.com/glo...er-wanted-to-know-about-etfs/article13468367/
https://www.theglobeandmail.com/fea...uce-risk-in-volatile-markets/article29546295/

3) I would stagger over a period maybe 1-2 yrs?. Try moving from the same asset class to ie cdn equity to cdn equity so you aren't losing switching asset classes


4) If these are in your non registered account that is an option, if not just leave them as you won't be able to use the losses in registered accounts


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## LeeAnne (Apr 27, 2017)

Thank you for your replies.

Should I use the same ETF for all my RRSP, TFSA & non registered account? 
Or should I buy different ETF for each portfolio? Which ones? Sorry but I don't know which ones to buy from the ones that had been mentioned above. 

Thanks again.


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## Jimmy (May 19, 2017)

LeeAnne said:


> Thank you for your replies.
> 
> Should I use the same ETF for all my RRSP, TFSA & non registered account?
> Or should I buy different ETF for each portfolio? Which ones? Sorry but I don't know which ones to buy from the ones that had been mentioned above.
> ...


It looks like you have $400,000 in total. I would split that into 40% Fixed Income (Bond) ETFs - 60% Equity ETFs. So $160K into FI and $240K into equity ETFs. For the RRSP account, you don't want to be moving $ out from your RRSPs (ie selling them). You want to just switch over old holdings to the new etfs inside them.

*Fixed Income ETFs - $160,000*

1) Inside RRSP $160,000

Interest is best held in here so maybe switch part of your mutual funds to buy all of the $160K in FI ETFs. Look at yield to maturity as the key measure as this is what your return will be over the long term.
Here are some good choices w yield to maturity % return after fees. I would put 80 K in one of the aggregate bond etfs and 80 k in one of the corp bond etfs for a good mix

XBB Ishares aggregate Bond ETF - 1.8%
XHB Ishares Corp bond Hybrid - 3%
HAB Horizons Corp Bond - 2.3% 
ZAG BMO aggregate bond - 1.9%

Here is a good review if you read the G& M

https://www.theglobeandmail.com/glo...buyers-guide-best-bond-funds/article34416202/

*Equity ETFs $240,000*

There is some debate here. For simplicity of bookkeeping I feel it is best to put these in your RRSP and TFSA first so you don't have to keep track of cost bases and file taxes on their dividend returns each year. So you will be switching your holdings from the remainder of your RRSP , TFSA and margin account in that order to these ETFs below.

You want to diversify and you want to have the non cdn etfs currency hedged. A simple and good way is put ~ 1/3 into Canadian, 1/3 into US and 1/3 into EAFE( Europe and Far east)

_Option 1_

You could follow the couch potato portfolio from above

VUC- Vanguard Canadian Equity ETF - $120,000
XAW - Ishares MSCI all world ETF $120,000 ( this is everything except Canada) - $120,000

_Option 2_

One of ZLB BMO Canadian low volatility Index ETF, XIU (Ishares) or ZCN(BMO) S&PTSX 60, VEC vanguard Canadian equity - $80,000
One of ZUE (BMO) or XSP Ishares S&P 500 or ZLH US low volatility index or VUN Vanguard us equity (not hedged though - $80,000
One of VI Vanguard world ex N America hedged, ZLD BMO low volatility International index hedged or XFH Ishares MSCI EAFE index hedged - $80,000

I would go ZLB, ZLH and ZLD as they are a smaller 'lower volatility' subset of the larger indexes and tend to not move up and down as largely as the general market

If you subscribe to the Globe read Rob Carrick who reviews 7 of the etf classes.
This should get you started on ~ what to put where. Indexes and use currency hedging and you really can't go to wrong w any of the etfs here. They are all relatively low fee too.


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## LeeAnne (Apr 27, 2017)

Thank you Jimmy. That is exactly what I was looking for. The exact ETF & allocation/amount I should be buying. 

The ETFs you mentioned will be for RRSP & TFSA. 
How about the non registered account. Which ETF should the approx $3,000/monthly go?


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## Jimmy (May 19, 2017)

LeeAnne said:


> Thank you Jimmy. That is exactly what I was looking for. The exact ETF & allocation/amount I should be buying.
> 
> The ETFs you mentioned will be for RRSP & TFSA.
> How about the non registered account. Which ETF should the approx $3,000/monthly go?


Ok. To clarify first for your existing holdings, $100,000 of the $260,000 in Equity ETFS will be in the investment account. Here is a possible split too.

*Existing*

*RRSPs - $ 270,000* 
_Bond ETFs_ - $160,000
_Equity ETFs _ 
Cdn ETF - $80,000, 
US ETF - $30,000

*TFSA*
$30,000 (US ETF)

*Investment*
US ETF - $20,000 
Intl ETF - $80,000 

----------------------------------------------

Now for the $3,000/month going forward, $36,000/yr: Same 60/40 split. So for simplicity $21,000 in Equity ETFs. $15,000 Bond ETFs. I would put all the bonds in the RRSP. Equity ETFs are better in the TFSA vs the RRSP as they are not taxed. When you withdraw equity ETFs from the RRSP, the income gets added as general income and is at a higher rate ( ie 15-31% depending on your bracket) So better in the TFSA w no tax.

Not sure what your RRSP limit is but will assume the max of $26,000 for an even #. For simplicity we will keep the equity ETFS classes in just account ie all US in your RRSP only. This will save on transaction costs. Pick the ETFs from the list above for each class here as well

*
RRSP *

_Bond ETFS - $15,000_
same picks as above or just go with one of the aggregate bond funds ie ZAG to save on transaction costs of $10/trade

_Equity ETFs - 11,000 _
A Canadian ETF from above - ZLB,VEC etc - $8,000
A US ETF - from above - $3,000

*TFSA*

An International equity ETF - $5,500 ( TFSA limit)

*
Investment account - $4,500*

US equity ETF - $4,500


This is a general guideline as I don't know your exact RRSP limit but should help. You may not want to use all your RRSP limit either, ie just use some to get you out of the higher tax brackets and save some of your room for the same strategy in future years .


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