# Larry 2016 portfolio consolidation recap (went All canadian !)



## larry81 (Nov 22, 2010)

Last week i performed a rather unusual portfolio consolidation and want to share my rationale. One of my primary goal was to move from US based ETF to canadian domiciled ETF. As many of you know, i have a rather large unregistered portfolio and was a frequent user of norbert gambit currency conversion method.

Before you all tell me about the ~0.10% lower MER in saving from US based ETF, understand that i have a few good reasons to move my holding from USD to CAD, notably:

1. I am approaching US estate tax territory
2. I had a large chunk of tax loss harvest opportunities
3. I found that regular gambit are stressful and make frequent portfolio re-balancing more complex
4. There are now Canadian domiciled ETF's comparable (if not better) to what is offered on the US side
5. My USD appreciated quite a bit, in fact i converted large chunk at near parity (market timing hohoho)

Here is a summary of what i did with the pros/cons for each operation:

*Sold VCE and bough VCN*
[+] Tax loss harvest, about 80k
[+] Better diversification, went from 60 to 230 stocks
[=] MER stay the same at 0.05%

*Sold VTI and bough VUN*
[+] Canadian ETF, no more currency conversion !
[=] Same diversification, VUN is simply a wrapper around VTI 
[=] Same tax efficiency, i invest in corporate non-reg so there is no difference
[-] Realized capital gain, about 20k
[-] MER went up, from 0.05% to 0.15%

*Sold VXUS and bough VIU/VEE*
[+] Canadian ETF, no more currency conversion !
[+] Tax loss harvest, about 120k
[+] Better diversification, went from 6,010 to 6,947 stocks
[+] Better tax efficiency, Since VIU hold stocks directly i save the US tax. VEE is a wrapper around VWO, no gain here.
[+] More precision, VXUS held about 7% Canadian stock
[-] Added complexity, two ETF's instead of one
[-] MER went up, from 0.14% to 0.20%

So yes my weighted MER went up a bit but i also achieved better tax efficiency and diversification and above all, i am now holding 100% canadian ETF's. I could have picked a 3 fund portfolio (VXC or XAW) but i prefer the extra diversification/efficiency of splitting US and Intl.

Comments and critiques are alway welcome


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## GoldStone (Mar 6, 2011)

larry81 said:


> 5. My USD appreciated quite a bit, in fact i converted large chunk at near parity (market timing hohoho)


Irrelevant, if you reinvested back in the same asset class.

Otherwise looks good!


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## daddybigbucks (Jan 30, 2011)

but what about Suncor again?!


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## larry81 (Nov 22, 2010)

daddybigbucks said:


> but what about Suncor again?!


Sold TSE:SU a few years ago, I dont currently own any dogs but might get a few TSE:BBD.B in TFSA. Socialist Quebec said it might step in again to inject more capital and since you cant fight the gov it is better to simply hop on the bandwagon.


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## cn_habs (Oct 27, 2015)

larry81 said:


> Sold TSE:SU a few years ago, I dont currently own any dogs but might get a few TSE:BBD.B in TFSA. Socialist Quebec said it might step in again to inject more capital and since you cant fight the gov it is better to simply hop on the bandwagon.


Good luck riding it down till the reverse split if you do decide to buy it.


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## My Own Advisor (Sep 24, 2012)

The biggest reasons and benefits I see with your move:

1. You can avoid any US estate tax territory - with your CDN domiciled ETFs.
2. You can avoid the gambit headache.

Fees are important but not everything. Seems pretty smart to me


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## larry81 (Nov 22, 2010)

Thanks for the comment My Own Advisor, i am quite satisfied with my move !

I actually recalculated my weighted-average MER tonight, *went from about 0.142% to 0.174%.*

While simplicity would absolutely be worth the few extra bps, if i take into consideration the costs (mostly the spread) of the gambits operations i used to perform (about 10 largish gambit a year), i am quite sure that i am actually achieving a lower global cost with my all Canadian portfolio. Holding VIU over VXUS also save me a few bps without the extra us taxation layer, while this dont appear in the MER it still impact the portfolio return.


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## larry81 (Nov 22, 2010)

cn_habs said:


> Good luck riding it down till the reverse split if you do decide to buy it.


Anyone following this totally non-speculative play would have enjoyed a 11.11% return today


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## larry81 (Nov 22, 2010)

larry81 said:


> Anyone following this totally non-speculative play would have enjoyed a 11.11% return today


make that 40.74%


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## jdc (Feb 1, 2016)

I recently made the same adjustments to my portfolio after coming to the same conclusions as Larry. I'm mostly in non-registered accounts too.

Having Vanguard enter the Canadian market a few years ago (pushing MERs down) has made this a viable option. Its a lot easier too!


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## larry81 (Nov 22, 2010)

great news jdc, please post your portfolio !


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## cainvest (May 1, 2013)

larry81 said:


> 1. I am approaching US estate tax territory


That's some top notch saving/investing you've done if you are near 5.4 mil in global assets!


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## tygrus (Mar 13, 2012)

IMO, I would never invest in anything that illiquid and with a dividend under CPI. These things are trading under 50,000 shares a day on average and sub 2% dividend.

Ishares has a couple ETFs comprising the same sectors and with double the dividend and way more liquidity.


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## GoldStone (Mar 6, 2011)

tygrus said:


> IMO, I would never invest in anything that illiquid and with a dividend under CPI. These things are trading under 50,000 shares a day on average and sub 2% dividend.
> 
> Ishares has a couple ETFs comprising the same sectors and with double the dividend and way more liquidity.


ETF liquidity depends on the liquidity of the underlying holdings, not the ETF trading volume.


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## mf4361 (Apr 11, 2015)

Why does VTI/VIU/VEE has better diversification than VXC?

With the micro caps composing a few percent of the whole fund, is that even significant?


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## vi123 (Oct 29, 2015)

One more benefit: you no longer need to factor in the FX into your AC B calculations.

Also, didn't you previously own HXT/HXS/HBB?


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## larry81 (Nov 22, 2010)

mf4361 said:


> Why does VTI/VIU/VEE has better diversification than VXC?
> 
> With the micro caps composing a few percent of the whole fund, is that even significant?


Probably insignificant in the grand scheme of things but what not to love with extra diversification ?

VXC = 8,953 holdings
VUN/VIU/VEE = 10,666 holdings (3,719 + 3,481 + 3,466) 

But CCP said it best:


> _Think of it like adding a bucket of pebbles to a pile of boulders. Sure, there are now many more objects, but the overall proportion haven’t changed very much._


Personally i like to keep my US and International separated, its just a matter of personal preference. The extra-diversification and slightly lower MER is just a side benifits.


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## larry81 (Nov 22, 2010)

vi123 said:


> One more benefit: you no longer need to factor in the FX into your AC B calculations.
> 
> Also, didn't you previously own HXT/HXS/HBB?


I always just owned HBB for my bonds.

For my equities, i prefer the extra-diversification of the Vanguard ETF's to the tax-efficient structure of Horizon ETF's


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## My Own Advisor (Sep 24, 2012)

Smart way of looking at this Larry.

"Personally i like to keep my US and International separated, its just a matter of personal preference. The extra-diversification and slightly lower MER is just a side benifits."

You're not letting tax tail wag the portfolio dog. Besides, it seems you have "enough money" not to worry about the small stuff 

Well done.


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## larry81 (Nov 22, 2010)

My Own Advisor said:


> Smart way of looking at this Larry.
> 
> "Personally i like to keep my US and International separated, its just a matter of personal preference. The extra-diversification and slightly lower MER is just a side benifits."
> 
> ...


I always considered tax-optimization a secondary objective. IMHO, trading equities diversification for tax-optimization is not a good trade-off.


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## larry81 (Nov 22, 2010)

vi123 said:


> One more benefit: you no longer need to factor in the FX into your AC B calculations.


That was a total pain in the pass, i expect the move to an all Canadian portfolio to save a few bucks in accounting fee's.


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## larry81 (Nov 22, 2010)

I dont want to brag but with the recent upward push on equities it feel like i just "timed" my tax-loss harvest operations perfectly. i sold/bough february 11 

Of course it could crash tomorrow morning but bleh !


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