# Suggestions for an all-ETF "set it & forget it" portfilio?



## jargey3000 (Jan 25, 2011)

As the title says ... looking for models for a simple, inexpensive tax-efficient, portfolio that will effectively cover all the basic investment sectors for me (no more than 6 ETFs in total). Let's assume it's for my maxed-out TFSA.


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## richard (Jun 20, 2013)

Pretty much everything is tax-efficient in a TFSA. As for the composition it depends on your goals. Anywhere from 1 - 4 ETFs will cover everything you really need. How long can you leave this portfolio untouched?


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## andrewf (Mar 1, 2010)

http://canadiancouchpotato.com/model-portfolios/


Canadian equity	20% Vanguard FTSE Canada All Cap (VCN)
US equity	20% Vanguard US Total Market (VUN)
International equity	20% iShares MSCI EAFE IMI (XEF)
Canadian bonds	40% Vanguard Canadian Aggregate Bond (VAB)

Not a bad way to go.


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## MoreMiles (Apr 20, 2011)

CBD or CBN

Buy it and forget it. One tax slip at year end to report, easy peasy lemon squeezy.


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## liquidfinance (Jan 28, 2011)

MoreMiles said:


> CBD or CBN
> 
> Buy it and forget it. One tax slip at year end to report, easy peasy lemon squeezy.


They seem to be expensive for what are simply a basket of other funds.


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## andrewf (Mar 1, 2010)

The tax slips are irrelevant in a TFSA. The only benefit is automatic rebalancing.


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## jargey3000 (Jan 25, 2011)

thanks for replies so far.
let's say it wont be touched for at least 5 years.
i did see the couch potato model- thanks.
One other question - what about dividends or income from these ETFs . Can I set it up to have dividends & income automatically re-invested? If yes - how / when is this done? Thanks.


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## richard (Jun 20, 2013)

There's still a big difference between 5 years and 20 years. If this is a down payment for a house and you're just waiting a few years it pays to be conservative. If 5 years is the absolute minimum and there's very little chance that you'll need to take anything out for 20 years then you can go for higher returns. It also depends if you're comfortable with risk. If you're uncertain about the markets then the couch potato portfolio is good. If you're more confident and you have a very long time to invest then you could reduce the bond holdings.

You can ask your brokerage to set up a DRIP program so that dividends are used to buy new units. For example if I do this with ZCN and get a dividend for $45 while the current price is $20, the brokerage will give me two new units of ZCN and $5. This is a good idea unless you have free ETF purchases, you make regular contributions to the account, or you have some reason that you really don't want to add to your holdings in a certain fund. You can ask to have a DRIP for only some holdings.

CBD isn't necessarily the allocation I would choose. It looks like what an uninformed investor would select over several years of taking advice from the media. But it doesn't seem like it's taking any big risks so at least holding that long-term would do better than most investors.


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## andrewf (Mar 1, 2010)

A lot of brokers do allow synthetic DRIP (use distributions to buy additional shares), but you will still get cash instead of partial shares. If you want to fully avoid having to reinvest, your only option is a MF. TD e-series aren't bad.


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## jargey3000 (Jan 25, 2011)

thanks . all good info.
another question -if you dont mind - re withholding taxes. I thought I read somewhere that there are some ETFs you can hold in your TFSA that avoid US (or other?) witholding taxes. Am I right on this? If so -which ones are they? Help?


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## leeder (Jan 28, 2012)

jargey3000 said:


> thanks . all good info.
> another question -if you dont mind - re withholding taxes. I thought I read somewhere that there are some ETFs you can hold in your TFSA that avoid US (or other?) witholding taxes. Am I right on this? If so -which ones are they? Help?


HXS is the only one that I know, which tracks the S&P 500 index. The structure of the ETF is different than the others, in that HXS is a swap based ETF. See Cdn Couch Potato's post here. Because of the structure, it doesn't actually pay any distributions. Rather, the distributions are reinvested within the product. So what you're getting is an ETF that tracks the total return of S&P 500 (including distributions). There are more risks associated with this product. There are plenty of posts on this forum about this product.


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## eulogy (Oct 29, 2011)

leeder said:


> HXS is the only one that I know, which tracks the S&P 500 index. The structure of the ETF is different than the others, in that HXS is a swap based ETF. See Cdn Couch Potato's post here. Because of the structure, it doesn't actually pay any distributions. Rather, the distributions are reinvested within the product. So what you're getting is an ETF that tracks the total return of S&P 500 (including distributions). There are more risks associated with this product. There are plenty of posts on this forum about this product.


HXS has a swap fee based in it which is the approx. cost of the withholding tax. VTI would be more tax efficient with the withholding tax.


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## leeder (Jan 28, 2012)

eulogy said:


> HXS has a swap fee based in it which is the approx. cost of the withholding tax. VTI would be more tax efficient with the withholding tax.


VTI is cheaper overall. And you're right in that the swap fee makes up the cost of the withholding tax. However, strictly speaking, the withholding tax is not recoverable for VTI in TFSA, as the OP had asked.


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## eulogy (Oct 29, 2011)

Yeah. I was just trying to let the OP know that the cost of avoiding the dividend probably isn't worth it. 

At the end of the day, the average yield is roughly 2%, which is about a 0.3% MER cost. I'd gladly pay the MER than stick it in a taxable account just for the sake of saving a tiny part of dividends and pay taxes. The TFSA isn't the perfect place for it, but it's always better than a taxable account.


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## banjopete (Feb 4, 2014)

So why would one hold VTI over VUN here in Canada when the currency issue is handled in a way but also chewed up I suppose with additional fees. Is there a point at which you're better off holding VTI in your RRSP vs VUN? I've never really understood this?


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## leeder (Jan 28, 2012)

I think Cdn Couch Potato's article may answer your question. It also matters how large your portfolio is, in my opinion. It's probably not suitable for someone to do Norbert's Gambit and purchase a US listed ETF with $2,000. It's also not best/convenient if an individual contributes and buys shares monthly. Otherwise, for large portfolios, it's worth the cost of buying the likes of VTI over VUN.


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## banjopete (Feb 4, 2014)

leeder said:


> I think Cdn Couch Potato's article may answer your question. It also matters how large your portfolio is, in my opinion. It's probably not suitable for someone to do Norbert's Gambit and purchase a US listed ETF with $2,000. It's also not best/convenient if an individual contributes and buys shares monthly. Otherwise, for large portfolios, it's worth the cost of buying the likes of VTI over VUN.


Thanks leeder, that's a great point at a very cool article, I follow his site a fair bit but never saw this one.


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## Rusty O'Toole (Feb 1, 2012)

Have seen this question answered by different very savvy investors like Warren Buffett.

First, learn to invest wisely and spend several hours per day studying the markets

Second, if you don't want to do that, buy low fee index funds. You will beat 90% of the money managers (who fail to beat the benchmark indices).

By index funds, they mean the S&P, Dow and Russell.


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## james4beach (Nov 15, 2012)

For a set it and forget it profile -- which sounds to me like you're not going to stay on top of current tax laws and changing tax rules -- I strongly suggest a portfolio weighted into Canadian domiciled ETFs.

The simple reason is that US tax laws have been rapidly changing in past years which intrinsically makes US based investments riskier. They are likely to keep changing, and especially to change in ways that hurt foreigners. That's not such an issue for someone who keeps on top of their investments, but you're asking about something you can buy and forget about. As a matter of principle, I avoid shares traded in the US.

The couch potato models are generally fine. Here's the model portfolio that I am slowly building up over the years

Cdn fixed income: XSB and bank GICs
Cdn benchmark: ZCN or XIU
Gold/silver bullion: CEF.A
USA benchmark: IVV

Of these, only IVV (S&P 500) is domiciled in the US and it will be my smallest holding. All of the above are well established, giant funds with a long track record except for BMO's ZCN which started in 2009. XIU has been around longer, but I think it's good to diversify out of iShares (since IVV is iShares)


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## My Own Advisor (Sep 24, 2012)

Within a TFSA, I like:

Canadian equity = VCN or XIC or XIU or ZCN
US equity = VUN
International equity = XEF
Canadian bonds = VAB or XBB or XSB

For RRSP:

Use VTI over VUN and use VXUS over XEF.

Throw about 10% ZRE for some real estate spice


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## jargey3000 (Jan 25, 2011)

Guys - great info. As always ... there's no ONE correct solution, but you've given good comments /advice. 
Feel free to keep'em comin'.
(Gotta love Warren too!)


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## leeder (Jan 28, 2012)

For smaller portfolios, XWD, which contains about 50% US and 50% international, is pretty good. Couple that with some Canadian exposure, like VCN, and you can literally just add to two ETF portfolio. XWD is a somewhat expensive than some cheaper alternatives, but fairly reasonable.


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## LongLiveTheMonarchy (Mar 20, 2014)

*VT vs XWD*

If you are willing to look at US-listed ETFs for your set it and forget it portfolio, I like the Vanguard Total World ETF (VT). It has exposure to the North American markets, ex-North America developed markets, and emerging markets. It holds a whopping 5416 stocks for an ultra low MER of 0.18%. I personally prefer it to XWD, which is more expensive and has no emerging markets exposure.


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## eulogy (Oct 29, 2011)

LongLiveTheMonarchy said:


> If you are willing to look at US-listed ETFs for your set it and forget it portfolio, I like the Vanguard Total World ETF (VT). It has exposure to the North American markets, ex-North America developed markets, and emerging markets. It holds a whopping 5416 stocks for an ultra low MER of 0.18%. I personally prefer it to XWD, which is more expensive and has no emerging markets exposure.


I really like VT. My entire RRSP is VT. I've debated whether to make my exposure in my TFSA to VT (just because my allocation requires more international). I know it's a little more expensive than VTI+VXUS combo, but I really like the one fund only.


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## OnlyMyOpinion (Sep 1, 2013)

Not an etf we realize, but if "set it & forget it" is the overriding priority, then MAW104 deserves mention.


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## gibor365 (Apr 1, 2011)

VT or VTI+VEA


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## james4beach (Nov 15, 2012)

OnlyMyOpinion said:


> Not an etf we realize, but if "set it & forget it" is the overriding priority, then MAW104 deserves mention.


Is that their Balanced Fund? If so I'll agree... the Mawer Balanced Fund is a pretty good, low MER, one-size-fits-all mutual fund. As I understand it, the MER is below 1% even after including all underlying fund fees (double check this please)


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