# What is your asset allocation?



## james4beach (Nov 15, 2012)

I'd like to ask the forum, what are your current asset allocations? Ideally, not just in your brokerage account but across all of your accounts (including banks & mutual funds)?


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## james4beach (Nov 15, 2012)

I'll start out with my weirdo allocations:

64% fixed income - bonds & GICs
27% cash (includes savings accounts)
6% precious metals
3% stocks


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## SkyFall (Jun 19, 2012)

My current asset allocation is not what I'd like it to be, I am very heavy on cash because I cashed a few IPO trades and didn't have the opportunity to reinvest the proceeds.

32% Equities (stocks, options and mutual funds) -------> of which a very large portion is securities related to the oil sector
68% Cash (thats only the cash in my trading accounts)


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## My Own Advisor (Sep 24, 2012)

100% equities.

No mutual funds.


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## GreatLaker (Mar 23, 2014)

65% Equity / 35% FI

20% Cdn Equity / 5% Cdn REIT / 20% US Equity / 15% Global Developed Equity / 5% Emerging Market Equity
25% GIC ladders / 10% Bond ETFs (The ETFs give flexibility to rebalance into equities in case of a bear market)

Those are my target allocations and right now everything is within 1% of target.

At 57 I'm getting close to retirement, and at this time that is the asset allocation I feel comfortable with for life.

Edit: The above is retirement investments that are about 90% of my total investments. I also have a cash emergency fund (3% of total) and a "Vegas" account that is 100% equity mutual funds (7% of total).


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## mediaman (Feb 16, 2015)

GreatLaker said:


> ... 20% Cdn Equity / 5% Cdn REIT....


I like your allocations very much... 

Quick question - any reason why you singled out the REIT sector from your other Canadian equities?


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## GreatLaker (Mar 23, 2014)

mediaman said:


> I like your allocations very much...


 Thanks



> Quick question - any reason why you singled out the REIT sector from your other Canadian equities?


A number of sources I have read including The Four Pillars of Investing by William Bernstein (my all time favourite investing book) and All About Asset Allocation by Rick Ferri indicate that REITs are a good portfolio diversifier that can lower correlation and increase returns.

The Role of REITs for Long-Term Investors

I am not sure it is the perfect strategy today when interest rates cannot go much lower and seem poised to rise, but I am not a market timer and my investing timeline is 30+ years.


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## Spudd (Oct 11, 2011)

Current allocation (haven't rebalanced for a while):
21% bonds
10% cash
9% REITs
21% Canadian equity
19% international equity
21% US equity

That may not add to 100 due to rounding. Cash is super high at the moment because I cashed in my ESPP shares and haven't invested the cash yet. I'm happy to take the 2.5% from Tangerine for the time being. I use a rebalancing bands method, and currently everything is within its band so I'm thinking I will most likely just hang on until something exits its band.


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## cainvest (May 1, 2013)

Don't have the exact figures for right now but for all my accounts I'd estimate,

40% FI
58% Equities
2% cash


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## mrPPincer (Nov 21, 2011)

32.1% FI (97% of which is in HISAs following teaser rates)

Fixed income can theoretically vary between 0% and 50% depending on what the equity component is doing, based on a disciplined mathematical approach.
I say theoretically because it would take a 65.4% drop in equity valuations to go to 0% FI, and an infinite rise in equity to go to the full 50% FI based on the current algo, (which would actually be readjusted after another 2008 event or similar.. giving away all my secrets here lol)

Of equity component alone, target allocations are

46% Can. indexes & stock
22% US indexes
16% EU indexes & ADRs
10% EM index
6% Jap. index

with 10% in REITs (Can., EU, & US)

Pretty well right on target allocations right now.


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## crazyjackcsa (Aug 8, 2010)

Classic couch potato.

25% Canada Equity
25% US.
25% International 
25% Bond

Rebalance yearly. Note, there is a fair amount I keep in cash, but that's "operating capital" for the household and not for investing. I'd say I have about 9 months emergency fund saved up.


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## rebel_ins (Apr 6, 2009)

Target allocation:

5% Emerging Markets
10% Canadian REITs
15% Canadian Equity
20% Canadian Bonds
25% International Equity
25% US Equity

So, 80% Equity, 20% Bonds (I'm 34 and single). Index ETFs only. I usually rebalance once a year, right after my tax return has been assessed.


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## fatcat (Nov 11, 2009)

roughly 55% individual equities (1 etf) and 45% fixed income (bond etf, gic's, hisa's)


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## livewell (Dec 1, 2013)

My asset allocation:-
65% Equities
10% FI (Mostly provincial strip bond ladder, a few GIC's and preferred stock ETF)
25% Cash

Am trying to move from 25%/10% cash/FI to 15%/20% cash/FI by building GIC ladders, have been procrastinating due to low rates. Want ~15% cash as a 3-5 year cash wedge (Currently ~6+ yrs) for if/when I experience "sequence of returns" issues with a market crash/correction. I am in early retirement (No CPP/pensions) - dividend income is ~60% of my cash flow income.

My equity is split
70% Canadian (Mostly dividend stocks)
17% US
10% Europe
~3% other (With US and Europe held mostly in $US)

By sector:-
Broad market ETF's 16% (XIC, VCX probably should do the math and break out the allocations to individual sectors)
Telecom 8%
Utilities 16%
Industrials 7%
Resources 5% (I include energy stocks in here)
Healthcare 7%
Financials 19% (Bit overweight here target is 15% good dividend growth stocks in Canada gravitate here)
Consumer 13% (Dont split consumer into staples and discretionary)
REITS 10%
Technology 0% (Do have target of 2-5% but cannot find stocks I like here)

I don't re-balance by sector but do keep an eye on allocations when making new purchases. I re-balance equity - FI keeping at 65% equities annually if needed. With the cashflow thrown off by the dividends I have not needed to rebalance in past 18 months.


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## nathan79 (Feb 21, 2011)

62% equities
20% bonds & gics
18% cash


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## Afp (Mar 19, 2013)

My Own Advisor said:


> 100% equities.
> 
> No mutual funds.


Mine is similar. All equities, no Mutual Funds, no Fix Incomes. My way of rebalancing is adding into positions with my monthly saving. For each $4 that I save, I would spend $3 to buy stocks and put aside $1 into ING direct for the rainy days. Up to today, my rainy days fund has grown to a nice 5 digits. Yes I know I make no money on this amount but having cash gives me a sense of security and to me, it's totally worth it. 

Among my equities, I have 3 categories: core holdings 60%, supporting holdings 30% and speculative holdings 10%. Core holdings are stocks that I plan and hope to hold for life. I set DRIP on all of them. They are CVX, XOM, ABT, KMI, KO, PG, and JNJ for US market; RY, ENB, IPL, MRU, CU and CMG for CAD market. For my supporting holdings, I want to keep them as long as I can but will sell if I ever need to. I also DRIP those that I could. Among my supporting positions are V, MA, COST, ROST, SBUX, WFC, and AAPL for US; and for Canada are the like of RCI.B, T, IPL, KEY, TFI, QSR, CM, PZA, KEG.UN, CM, BNS,... I have no rule for my speculative holdings and also don't DRIP. At the moment, in my speculative holdings, I have: FTT, NBD, FR and recently bought LRE on Mar 19. On this board, I pay attention the most to trades made by hboy43 and Toronto.Gal.

QED.


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## larry81 (Nov 22, 2010)

Current AA:


25% US stocks
26% Intl. stocks
23% CDN stocks
20% Bonds
6% REIT
0% Cash

Target: 25/25/25/20/5/0 (same order as above)

52% in USD, 48% in CAD

Portfolio up 9.11% YTD !


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## AltaRed (Jun 8, 2009)

Asset allocations need to be qualified in terms of stage of life, whether in withdrawal or accumulation and whether there is a DB pension that is imminent or actually being drawn on. Otherwise, the data is fairly meaningless.


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## gibor365 (Apr 1, 2011)

> Portfolio up 9.11% YTD !


 In CAD$ ?! Just US MM would give you 8% return 

I'm about 55% equities (around 40% in US$) and 45% FI (mostly cash and GIC)


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## larry81 (Nov 22, 2010)

gibor said:


> In CAD$ ?! Just US MM would give you 8% return
> 
> I'm about 55% equities (around 40% in US$) and 45% FI (mostly cash and GIC)


Yes YTD return expressed in CAD. The YTD USD/CAD exchange rate impact account for almost half (47.3%) of the 9.11% YTD return !


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## RBull (Jan 20, 2013)

AltaRed said:


> Asset allocations need to be qualified in terms of stage of life, whether in withdrawal or accumulation and whether there is a DB pension that is imminent or actually being drawn on. Otherwise, the data is fairly meaningless.


Totally agree.


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## gibor365 (Apr 1, 2011)

> Asset allocations need to be qualified in terms of stage of life, whether in withdrawal or accumulation


 True! I don't think there are many investors around 50 y.o who has 100% allocaton to equities


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## gibor365 (Apr 1, 2011)

larry81 said:


> Yes YTD return expressed in CAD. The YTD USD/CAD exchange rate impact account for almost half (47.3%) of the 9.11% YTD return !


This is why I'm trying to compare my US$ equities return to SPY and Canadaian to XIC


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## larry81 (Nov 22, 2010)

gibor said:


> This is why I'm trying to compare my US$ equities return to SPY and Canadaian to XIC


Get yourself portfolioslicer and have fun tracking a bunch of interesting stats about your portfolio !


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## Synergy (Mar 18, 2013)

AltaRed said:


> Asset allocations need to be qualified in terms of stage of life, whether in withdrawal or accumulation and whether there is a DB pension that is imminent or actually being drawn on. Otherwise, the data is fairly meaningless.


1+



gibor said:


> True! I don't think there are many investors around 50 y.o who has 100% allocation to equities


There are some, i know a few crazy old farts in their late 70's & 80's and they don't have any pensions (DB, etc.). Living off dividends, reinvesting whatever they don't spend, etc.


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## AltaRed (Jun 8, 2009)

Synergy said:


> There are some, i know a few crazy old farts in their late 70's & 80's and they don't have any pensions (DB, etc.). Living off dividends, reinvesting whatever they don't spend, etc.


There are always outliers from the norm. Those to whom you refer have a level of assets that far exceed their needs and can withstand almost anything Mr Market throws at them. Call them 1%ers.


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## leeder (Jan 28, 2012)

Current allocation:

Equities: 76.14%
Cash and fixed income (including cash in savings account): 23.86%

Equities breakdown (76.14%) includes:

Cdn: 24.77%
US: 23.49%
EAFE: 17.89%
Emerging: 5.54%
REITs: 4.45%

Cash and fixed income breakdown (23.86%):

GICs: 5.01%
Cash on hand: 18.85%

I'm comfortable with the equity to fixed income allocation. Within the equities, I'd like to rejig the allocation and add more US and EAFE exposure.


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## Synergy (Mar 18, 2013)

AltaRed said:


> There are always outliers from the norm. Those to whom you refer have a level of assets that far exceed their needs and can withstand almost anything Mr Market throws at them. Call them 1%ers.


That's likely the case for the most part, but the two examples I had been thinking about don't seem to fall into the 1%ers. Small town mechanic, single never married, worked hard, likely lived well below his means and saved his penny's and invested wisely. The other example was quite similar, but formerly married with kids (wife never worked other than a few yrs of daycare), managed a section in grocery store (never finished high school, lucky enough to work his ways up the food chain, etc.). That was back when some of the grocery stores had unions and paid decent salaries. Still far from a 1%er I'd think.


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## scorpion_ca (Nov 3, 2014)

Fixed Income - 38% (Cash, HISA, GIC, Bond & Preferred Shares)
Equity - 51% (Canadian 42%, US & International 29%)
REIT	- 11%


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## Moneytoo (Mar 26, 2014)

Current asset allocation (not on target yet - in the process of rebalancing: sold CBO, plan to use most of the cash to increase international developed markets equities portion):

12.2% Cash (in RRSPs)
8.3% Peoples Trust TFSA

5.6% Preferred shares
5.6% Canadian REITs
3.1% Global REITs

14% International equity (5.9 % developed, 8.1% emerging - target 16 and 8)
20.7% Canadian equity (Mostly dividend stocks)
25.9% US equity (approximately 50/50 stocks and ETFs)

4.6 % gold bullion ETF

Don't plan to buy any bonds until the rates go up (we'll be 47 this year, but are young at heart lol)

Also, my husband joined a group RRSP plan at work, we picked two MFs for him (one is balanced income - north American equities with a little bit of bonds, the other Mawer International fund), but I'm not tracking it yet. And we just opened a Peoples Trust e-savings account (took a lot of convincing as my husband prefers to keep a lot of cash in checking accounts that don't pay anything) - not included in the asset allocation above, would be about 10% of the overall investment portfolio to start.


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## AltaRed (Jun 8, 2009)

P


Synergy said:


> That's likely the case for the most part, but the two examples I had been thinking about don't seem to fall into the 1%ers. Still far from a 1%er I'd think.


They made themselves into 1%ers simply by the level of assets accumulated. How many retirees at the current time rely on nothing but dividends, CPP and OAS? Less than 1% I would think. People who earn in the top 1% of the population but have little to show for it at retirement are really not 1%ers.


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## supperfly17 (Apr 18, 2012)

james4beach said:


> I'll start out with my weirdo allocations:
> 
> 64% fixed income - bonds & GICs
> 27% cash (includes savings accounts)
> ...


Why only 3% stocks?


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## gibor365 (Apr 1, 2011)

scorpion_ca said:


> Fixed Income - 38% (Cash, HISA, GIC, Bond & Preferred Shares)
> Equity - 51% (Canadian 42%, US & International 29%)
> REIT	- 11%


Just wondering why you count Preferred Shares as fixed income? (just look what happened with preferred in 2008)...

Many mention REIT separately.... is it provate REIT or just stocks like REI.UN?


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## Moneytoo (Mar 26, 2014)

gibor said:


> Many mention REIT separately.... is it provate REIT or just stocks like REI.UN?


In the rebalancing spreadsheet for multiple accounts that I downloaded from here last year and use it with some modifications, REITs are part of "Other Income" (along with Preferred Shares ) 

My husband has XRE in his RRSP for Canadian REITs portion, I have RWX (international REITs ETF) and Slate Retail REIT (US Groceries) for Global in mine


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## gibor365 (Apr 1, 2011)

Maybe "other income", but I doubt you can count preffered, high yield and some other bonds as "fixed income".... and imho REIT is just one of the equity sectors


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## Moneytoo (Mar 26, 2014)

I agree, and even though they are in "Other Income", I account for REITs in equities allocations. For example, here're my targets:

20% Canadian Equity (+6% REITs)
24% International Equity (+2% REITs)
25% US Equity (+1% REITs)

= 26% each


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## gibor365 (Apr 1, 2011)

Moneytoo said:


> I agree, and even though they are in "Other Income", I account for REITs in equities allocations. For example, here're my targets:
> 
> 20% Canadian Equity (+6% REITs)
> 24% International Equity (+2% REITs)
> ...


So , you same age as me and have about 80% in equities  too agressive for me  even with my GRRSP (can hold only MF there) and my wife's RSU/ESPP , we have a bit more than 30% in "pure" cash


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## Moneytoo (Mar 26, 2014)

gibor said:


> So , you same age as me and have about 80% in equities  too agressive for me  even with my GRRSP (can hold only MF there) and my wife's RSU/ESPP , we have a bit more than 30% in "pure" cash


I had my doubts about bonds from the get go (was arguing here with esteemed members of the forum last summer ), but after reading "The Single Best Investment" (downloaded a free PDF) that starts with:

*chapter 1 THE FIRST HURDLE: SAY GOODBYE TO BONDS AND HELLO TO BOUNCING PRINCIPAL*

and making 4% on CBO (despite the formula advocated here and everywhere that bond ETF returns Avg Yield to Maturity minus MER), decided to go bondless for the time being. As for cash, we have more than enough for emergencies and vacations, so would like to keep our portfolios fully invested. Time will tell of course, but we seem to be perfectly fine having some stocks and ETFs down 20-80% (with an overall portfolio up 10%), so don't feel like we need the extra protection that cash and bonds provide and believe that a bit of gold makes more sense in current low rate environment. And since I keep adding cash almost every month, will be able to buy more equities should the markets turn downhill


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## scorpion_ca (Nov 3, 2014)

I have ZPR and found ZPR under fixed income asset in the MoneySense magazine. http://www.moneysense.ca/invest/etfs/the-best-etfs-for-2015

I only buy index fund or ETF.....individual stock/private REIT is not good for my health.  ....I also have ZRE in my TFSA. I agree that REIT should be counted under Equity.



gibor said:


> Just wondering why you count Preferred Shares as fixed income? (just look what happened with preferred in 2008)...
> 
> Many mention REIT separately.... is it provate REIT or just stocks like REI.UN?


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## lonewolf (Jun 12, 2012)

99.9 % GICs
.01 % long 2016 SPX puts


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## Soils4Peace (Mar 14, 2010)

6% Canadian bonds (gliding to 14%)
11% Alternatives (REITs, commodities, infrastructure)
83% stocks (gliding to 75%)

Stocks are 1/3 each Canadian, US, International; 40% are large; 60% small-medium value.


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## marina628 (Dec 14, 2010)

Finally figured out our joint investment allocations :
25% Cash
5% fixed Income
30% Candian dividend paying stocks
20% US Dividend Paying Stocks
10% td international e-series
10% tdb911 US Index
We are both 48 years old.


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## m3s (Apr 3, 2010)

I never sell anything to balance but I use this as a guide for allocating contributions.

Target
30% Canadian equity
30% US equity
25% International equity
5% Emerging Markets
5% REIT
5% Fixed income

31 years, 13 years into DB


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## gibor365 (Apr 1, 2011)

I noticed many have big allocation in International equity... wondering what equities do you hold in this sector? I hold just VEA and UL


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## larry81 (Nov 22, 2010)

gibor said:


> I noticed many have big allocation in International equity... wondering what equities do you hold in this sector? I hold just VEA and UL


VXUS (and the 5,800+ company in his index) is all i need !


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## AltaRed (Jun 8, 2009)

larry81 said:


> VXUS (and the 5,800+ company in his index) is all i need !


I agree that is all one needs to cover ex-North America. That said, since I do not like Asia and EM that much, I also have a VGK holding.


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## gibor365 (Apr 1, 2011)

What is the difference between VEA and VGK?


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## mrPPincer (Nov 21, 2011)

gibor said:


> I noticed many have big allocation in International equity... wondering what equities do you hold in this sector? I hold just VEA and UL


VWO
VGK
TDB907
TDB906
BT
DRG.UN
BBL

(in that order), might buy another ADR or two in the TFSA next year.


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## mediaman (Feb 16, 2015)

CPA Candidate said:


> The problem with geographic exposure calculations is just because a company is on a certain exchange, it doesn't mean that's where its business comes from. The international/US/Canadian distinctions are artificial creations of a indexers mind. Nearly all very large companies are global multi-nationals.





RBull said:


> With regards to the discussion of international and US some food for thought. Right now the "smart money" with US money managers is at the lowest end of their range in US equity, and plenty of professional managers are now looking at international/europe where valuations are lower, QE is taking place and they "think" there may be more opportunity. The US and Canada have had a 6 year run up. International has not. However the current Euro currency weakness also is a factor that will affect future results. FWIW





My Own Advisor said:


> The U.S. is a huge part of the global economy and U.S. multinationals (see top-25 holdings of VTI) sell their products and services around the world so I have a bias to VTI rightly or wrongly!


Great topic.

Reading the above comments (from related threads), I too believe that a portion of Canadian and US equities inherently ALREADY give you international exposure for the reasons noted above. *Does anyone though have a feel for what percentage that exposure is? Do you factor that in when deciding on your allocation?*

For example, suppose one currently had what appeared to be an unbalanced allocation:

40% Fixed income 
40% Canadian Equity (eg stocks and/or VCN/XIC)
15% US equity (eg stocks and/or VTI/VUN/XUU)
5% International equity (eg VXUS/XEF/XEC)

Just as an exercise, suppose one assumes (you can use your own numbers) that:
- for Canadian equities, that 20% of the holdings were a proxy for US exposure and 10% were a proxy for international exposure
- and that for US equities, 30% of the holdings were a proxy for international exposure

Doing the math the* 'effective' allocation* is:

40% Fixed income 
28% Canadian exposure
19% US exposure
13% International exposure

which lo and behold looks more balanced afterall !

Again, do you factor any of this in when deciding on your allocation?


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## mrPPincer (Nov 21, 2011)

gibor said:


> What is the difference between VEA and VGK?


VEA is mostly Europe and Pacific, VGK is just Europe, I keep Europe separate just for rebalancing purposes when the correlation is not the same (have a big chunk in Japan with TDB907).


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## mrPPincer (Nov 21, 2011)

@mediaman yes I factor that in, which is why my Can. allocation looks overweight, but it is supplemented with stocks intended to add sector diversity over the index as well as more international exposure, while still being eligible for the dividend tax credit.


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## birdman (Feb 12, 2013)

Somewhat embarrassed to say that I don't hold any foreign investments and with the high US$ am hesitant to invest there at this time. Anyways, wife and I are in our late 60's and here it it:

Cash and GIC's 48%
Cdn. Div. stocks 28% (45% banks, balance in BCE, T, GEI, FTS, TRP. IFC, ZWU, VDY, SLF, AX.un, IPL, CHE.un,)
MIC's 16% (working on divesting myself of these)
Other (private loan, bullion, etc) 8%


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## mediaman (Feb 16, 2015)

frase said:


> Somewhat embarrassed to say that I don't hold any foreign investments and with the high US$ am hesitant to invest there at this time...


Just an an fyi, you don't need US$. You can buy with CDN$ off the TSE like any other stock for international exposure, eg XEF/XEC or VDU/VEE , or XAW or VXC


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## Moneytoo (Mar 26, 2014)

mediaman said:


> Just an an fyi, you don't need US$. You can buy with CDN$ off the TSE like any other stock for international exposure, eg XEF/XEC or VDU/VEE , or XAW or VXC


+1 

We have XEF and VEE. I was thinking to start buying VEA in my RRSP (to save a bit on MER), but it's so much easier to rebalance in CAD...


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## m3s (Apr 3, 2010)

mediaman said:


> Just as an exercise, suppose one assumes (you can use your own numbers) that:
> - for Canadian equities, that 20% of the holdings were a proxy for US exposure and 10% were a proxy for international exposure
> - and that for US equities, 30% of the holdings were a proxy for international exposure


I'm conscious of this but I don't treat it as allocation. The international ADRs I hold also do global business as well.. that negates this logic I think. It's also for currency and political diversification etc. Emerging markets counted separately.

If SK increases taxes it might affect POT and if NL increases taxes it might affects UN etc. I'm glad to be diversified in USD now. Interest in USD is up lately but the beauty of asset allocation is to be diversified beforehand!..


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## james4beach (Nov 15, 2012)

supperfly17 said:


> Why only 3% stocks?


In a word: "QE/ZIRP stimulus". I don't want to hold much in stocks. I think the stock market is over-valued and the world economy as a whole is artificially stimulated by central bank actions including their direct purchases of stocks.

The other cause of my low stock exposure is tax turmoil caused by moving from Canada to US. I had to get rid of non-registered ETFs and my TFSA, which meant that I got rid of most of my stocks. I will likely start holding stocks directly in my non-registered account.



lonewolf said:


> 99.9 % GICs
> .01 % long 2016 SPX puts


I'm going to laugh so hard if this out-performs. The only problem is the option expiry date.


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## james4beach (Nov 15, 2012)

For those of you posting 100% equity allocation, I'm curious if you actually have no cash anywhere? Or do you have cash but aren't including it within your totals?

What will you do if you lose your job? How will you pay your bills and expenses?
Or if you have a sudden medical problem or other expensive emergency?


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## none (Jan 15, 2013)

^ you sell some equities. It really is that simple.

That's what I think is so silly about emergency funds. Just have an emergency fund that is 30% greater than you think you'll need and if you do need to use it just cash out. Done, simple.


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## cainvest (May 1, 2013)

none said:


> ^ you sell some equities. It really is that simple.
> 
> That's what I think is so silly about emergency funds. Just have an emergency fund that is 30% greater than you think you'll need and if you do need to use it just cash out. Done, simple.


Exactly ... it's not like its locked in, money is only 3 days away.
Most people have a credit card (and/or LOC) if you need cash faster than that.


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## james4beach (Nov 15, 2012)

But tapping stock positions for short-term cash really hurts long-term returns.

For instance job loss tends to come along with a poor economy, which tends to come with stock market distress. Think of all the layoffs in 2008. Do you really think it's a good idea to liquidate stocks during rough times? Imagine that you lose your job and will be facing half a year without employment. You start living off your LoC/CC, racking up interest charges, and eventually are forced to liquidate some stocks as the price is plummeting by the day.

Call me crazy but that's a damned ugly scenario I'd like to avoid. Maybe we just have philosophical differences here but I'm really shocked that some of you folks really have no cash reserves.


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## Afp (Mar 19, 2013)

james4beach said:


> For those of you posting 100% equity allocation, I'm curious if you actually have no cash anywhere? Or do you have cash but aren't including it within your totals?


Your question is a legit one. I have cash but didn't include it within my investment total just because its return is so minimal, yet having to pay tax 45c on a dollar on this return make it even worse.




james4beach said:


> What will you do if you lose your job? How will you pay your bills and expenses?
> Or if you have a sudden medical problem or other expensive emergency?


My cash portion in BMO AAT770 and ING direct can help me live this same lifestyle for over 3 years without touching my dividend or/and RRSP withdrawal. However, in the event of job lost, taking out a small portion of my RRSP should be the first option. I would love to reduce the size of this massive giant tax bomb. My small mortgage was paid off along with my HELOC with capital gain when I sold off my Smith-Maneuver portfolio last year. Pluto's article about the Greek Army crossing the river had some influences over this decision. Big thanks to Pluto. In hindsight, I would have had a lot more paper gain with more growing dividend income if decided to keep this portfolio instead of selling but I have absolutely no regret. I have been feeling great being 100% debt free at just under 35 year old. I'm having a huge capital gain tax bill to pay in a couple of weeks but that's okay, it's a fair game, it's expected and I am well prepared.


How do I prepare to pay my bills and expenses? Or if I have a sudden medical problem or other expensive emergency? These are all big tasks and I can't prepare for them in a day, a month or even a year. Living well below my mean for many years is my answer. Since my graduation in 2003 with the Software Engineering degree from UWO, I have had 3 jobs in total for 3 NYSE/TSX listed corporations in the GTA. My first 2 jobs, I rented close to work. In my 3rd and current job in which I have been with since 2006, I bought a place within 5 minutes drive from work. I can bike to work in a good day too. Living close to work is just one of examples. Keeping my life simple helps me to have less stuff to move, less things to worry about so that I can spend more time reading investment books and playing the piano. Hboy43 once said "... Given all the **** and misery I have seen in my life and the lives of others (and I make no claim on the rank of my **** vs. anyone else's), finances really can be very close to a certainty once your *** has land in a first world country. Way better than say a marriage lasting, or having good health...". It's just so true. I came here alone all by myself to this country when I was 18 from a 3rd world country. I took these words to my heart.




james4beach said:


> But tapping stock positions for short-term cash really hurts long-term returns.


This, I totally agree with you. Having have to sell your investment in unfavourable market conditions is the worst. Therefore, my investment strategy is never to put myself into this situation. I simply don't wish to sell shares to generate cash to live of. I want to live off the dividend and leave the principle alone. When you sell shares, the amount of income then generated is lower while the shareowner collecting the dividend only continues to see the income stream rise. With dividend growth investing, my income goes up whether the market is up, down, open or closed! 


Taken from this blog: http://theconservativeincomeinvestor.com/2014/04/13/charlie-munger-the-first-100000-is-a-btch/ a quote of "Charlie Munger".
At an old Berkshire Hathaway shareholder meeting (back from the 1990s), a young guy asked Munger for the most intelligent financial advice he could give him. This was towards the end of the era when Buffett and Munger would say very specific things at the Berkshire meetings (as opposed to the “I don’t know you and your circumstances, and can’t tell you how to live your life so just try to learn what you can and get a little bit smarter each day” that has become the default response to such questions in recent years). 

For a while, Munger would give the explicit advice: “The first $100,000 is a b*tch, but you gotta do it.” And then he would go on to say (my paraphrase from memory): “I don’t care what you have to do—if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.” The logic was that $100,000 is the mark at which your money really starts working for you (to fast forward Munger’s advice two decades, it might be more appropriate to use $150,000 as the figure). 

Munger's advice is something for the people who don't believe in investing can lead to wealth to think about.


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## londoncalling (Sep 17, 2011)

james4beach said:


> But tapping stock positions for short-term cash really hurts long-term returns.


What effect does not having the stock position to begin with have on long term results? What type of return does cash get over any time period? The answer is simple: the cash value - the rate of inflation. If I had $20k emergency fund which I may or may not use ($10k in cash/HISA and $10k in equities) for 20 years which do you think would have a greater chance of getting a better return over time.

The purpose of an emergency fund is to act as a security blanket when times are good and to be a cash reserve when times are bad. Trying to factor in the impact of withdrawal on long term results is pointless. Not all uses of an emergency fund are from job loss during an economic downturn. Some use an emergency fund for replacing a furnace. Others may need to draw from the emergency fund due to a critical illness or disability. These could occur during a market top for all we know. Now I believe that it would be foolish to have your emergency funds tied up in an RRSP. One last thought How many people include the $ in their emergency funds when calculating the return on their assets? I believe those that have their emergency fund in cash do not include it as part of the calculation. Most people will skew stats to suit their benefit. I personally don't believe in an emergency fund and I went over a year without out income due to a medical illness. My wife needs that security blanket so we have a couple months salary in a HISA in her TFSA. Her being happy beats my desire to have my way in this case. We do have the luxury of 2 incomes so the chances that we could both lose our jobs does exist but unlikely. We also are fortunate to have short term disability and carry critical illness insurance. 

Cheers


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## cainvest (May 1, 2013)

james4beach said:


> But tapping stock positions for short-term cash really hurts long-term returns.
> 
> For instance job loss tends to come along with a poor economy, which tends to come with stock market distress. Think of all the layoffs in 2008. Do you really think it's a good idea to liquidate stocks during rough times? Imagine that you lose your job and will be facing half a year without employment. You start living off your LoC/CC, racking up interest charges, and eventually are forced to liquidate some stocks as the price is plummeting by the day.
> 
> Call me crazy but that's a damned ugly scenario I'd like to avoid. Maybe we just have philosophical differences here but I'm really shocked that some of you folks really have no cash reserves.


Sure, you can paint a worst case senario ... but what about the yearly returns you'd miss because you just kept a lot of cash? You may also have EI coming in, severance pay or you get another job. Also, why would one automatically rack up interest charges?


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## CalgaryPotato (Mar 7, 2015)

I'm partway through the process of moving the last of my money that was in actively managed funds to ETF's so I'm a little out of balance:

Canadian Equity 26%
US Equity 25%
Intl Equity 21%
Bonds 18%
Cash/GIC 10%


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## capricorn (Dec 3, 2013)

no DB.

30% cash
30% individual equities (mix of US/Cdn/global FTS/RCI.B/TD/BNS/RDS-B/COS/T/SFTBY/HDB/ENF )
30% mawer balanced

I did not bother to look at mawer balanced breakdown of cash/bond/equity breakdown


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## My Own Advisor (Sep 24, 2012)

Agreed James: tapping stock positions for short-term cash really hurts long-term returns.

We try to avoid that at all costs by keeping a small cash/chequing account position for the "what ifs" in life.


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