# Spud portfolio, looking for comments/suggestions/insight



## thepitchedlink (Feb 17, 2014)

Hello all. Been lurking on the boards here all summer, trying to learn about the CP method. Done lots of reading this summer and got a fees based Financial Planner to help me get things set up. Just about everything is sitting in cash now....

Background, 42, wife, 2 little kids. TSFA's set up, RRSP's set up, RESP set up, all with iTrade. House is paid off. My wife is working part time now, and I'm trying to scale back work a bit now to be home more often while the kiddlets are small....so income will be low for the next few years, but there is a good bit of cash there now that I want to get working...

Threw my advisor I was shown the Ryan Mortgage Income Fund. I liked it and set up and RRSP and put some money in there....

So my plan was:
Can Eq XIC 20%
US Eq VTI 15%
Int Eq XIN 15%
Real Bond XRB 10%
Can Bond VAB 30%
Ryan MIC 10%

But I don't like bonds right now....in fact I don't really like them at all.....but I probably should have some...but right now I wonder if a GIC ladder would be smarter?
So maybe :
XIC 20%
VTI 15% Might look at holding a different US Eq if I run out of RRSP room for this one....
XIN 15%
GIC's 40%
MIC 10%

Any comments on my choice of ETF's or the % allocations? Looking at it now I feel that 40% is alot for the GIC/Bond part...but being 42 my horizon isn't quite what it use to be!!:biggrin:

Bring on the comments please


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## thepitchedlink (Feb 17, 2014)

Nobody??


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## cashinstinct (Apr 4, 2009)

Why XIN? Hedging on an International fund in many currencies might not be Worth it. If you have capital gains in unregistered I can understand... I would look for another ETF but it's based on your decision to hedge or not.

40% GIC seems a little high, but it respects the Age = fixed income equation... you must be comfortable. 

VTI is good choice for RRSP and it's also a good choice for TFSA or non-registered.

% allocation seems OK between CAD/USA/INT... it's a personal choice but it seems reasonable. I like to have same % in USA and INT since they have about the same market cap. Make sure to read about allocation between RRSP-TFSA-unregistered to know where to put funds.

You have International Developped, but no emerging markets. Is it a personal choice? or it's because of the ETFS you picked currently don't include it ?

I don't love Mortgage income fund... what is the rational? Explain what you like.


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## thepitchedlink (Feb 17, 2014)

Hey, thanks for your reply. Yes, to tell the truth, I made theses choices back in the summer, when I had some time to devout to it.....the "Plan " has been sitting idle until now when work has slowed down and I can get back into it.....With the correction going on now and a bit more free time, I want to get this ball rolling and am looking for second opinions/ideas for my choices.

I'm trying to follow the Complete spud which recommends VXUS for the Int Eq......i have to dig back through my notes to see why I choose XIN....

40% GIC seems high to me too, but as I'm not crazy about bonds, especially right now, I was considering a GIC ladder instead. Complete Spud recommends 40% bonds, hence I looked at 40% ladder...but it seem like too much $ sitting idle to me as well.

The lack of Emerging Market is b/c the ETF does not hold any.....I had looked at VWO in the past, but just trying to keep it simple with not too many ETF's

Why MIC? Well, it was recommended to me, it seemed different, the track recored is good and the rate of return seems decent as well.....Can you tell me what you don't like please?


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## cashinstinct (Apr 4, 2009)

MIC seems popular these days, when there is a fad, I don't like. Nothing against the product in particular, but I Wonder about risks Vs rewards.

See article: http://www.moneysense.ca/columns/mics-make-money-on-debt

For Emerging markets, I can understand why you don't plan on any yet, just wanted to point it out. I have XEC (which is equivalent to IEMG in USA), pretty close to VWO but it's a personal choice.

I understand you are not crazy about bonds, I am not either... don't hold any of them.


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## thepitchedlink (Feb 17, 2014)

Thanks again for the info, I like the MIC link. I found it hard to find any info about them when I was first looking to invest in the product. I didn't know they where a "fad", I just thought they where something a little different....my Dad always invested directly in mortgages so to me it seems normal. Anyway, I liked the 25 year track record, I liked the rate of return they have shown, I liked that they where mostly in western Canada, I liked that the managers have their own $ tied up in the MIC. When I called them to ask quiestions, the head manager talked to me for 10 minutes, told me he didn't want to get to big, he emailed me more info and them called me back to make sure I got it and understood it.....so, I felt I'd done my DD...talk to me in a few years

I will drop my GIC %....not sure to what yet


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## Woz (Sep 5, 2013)

Replacing bonds with GICs:
The positive is you can probably get GICs with higher yields than bonds. The negative is you lose out on liquidity so it may make it harder to rebalance. If you’re setting up a GIC ladder and are only going to rebalance once a year then it probably doesn’t matter too much.

Replacing REIT with Ryan MIC:
I don’t want to advocate for or against the Ryan MIC, but it seems counter to the couch potato philosophy you’re trying to implement. Both are impacted by real estate, but you’ve decided to select a single MIC which would be like replacing your VTI component with an individual US stock. In addition, they charge a 2% administration fee which seems a bit on the high side (1% seems to be more typical). 

For the increased yield you’re taking on additional risk. The following link has some information about their 2012 offering (https://eservices.bcsc.bc.ca/Inc/ViewDoc.asp?DocNum=M7P2U6G1X7W7O7O8L6KDA7FAR7L3&s=False). The key things that stand out to me from that document are they’re fairly concentrated in a single market (38% Vancouver, 65% BC). They have a high percentage of secondary mortgages (23% 1st, 57% 2nd, and 20% 3rd). The average LTV of 54% seems reasonable. The mortgage loans are not insured (they aren’t typically for MICs, but worth mentioning).


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## Woz (Sep 5, 2013)

Also, I may just be overly distrustful, but ... despite what the head manager told you, they would clearly like the fund to become bigger. They have more shares available to purchase then people are willing to buy so it’s not like it’s a closed fund or anything. 

Management may have skin in the game but it’s not a huge amount. They own 3.27% of the issued shares. Considering that Ryan MIC pays Alpine Credits $750k a year in administration fees (1.7% of the total mortgage value) and that the Ryan MIC directors all have positions with Alpine Credits, 3.27% is not a large stake.


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## thepitchedlink (Feb 17, 2014)

Thanks Woz, great insight


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## My Own Advisor (Sep 24, 2012)

I don't own MICs, so I can't really comment on them....

FWIW, 

I think the allocation is pretty decent:

Can Eq XIC 20% (great product)
US Eq VTI 15% (great product for RRSP)
Int Eq XIN 15% (I prefer VXUS for RRSP)
Real Bond XRB 10% (I don't own any but yes, maybe a small allocation is OK)
Can Bond VAB 30% (OK, based on CCP model portfolios)

Ryan MIC 10% (would avoid personally) and buy a REIT ETF like XRE or ZRE or VRE with this 10%.


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## Ihatetaxes (May 5, 2010)

Similar age, also have two kids, house is also paid for and I own a business and a couple of investment properties. Have had a couch potato portfolio for 5 years and its been a work in process but our portfolio looks like this:

XIC 30%
VTI 20%
GICs 15%
XSB 5%
VWO 7%
VEA 7%
DEM 7%
XRE 5% (lower as we have lots of equity in residential and commercial reality already)
XEG 3% (just added this holding this week as energy getting killed)
Cash 1% (was 13% a couple of weeks ago but have deployed almost all of it with this correction)

This excludes quite a bit of US cash I need to do something with plus my wife's work RSP/DPSP which is a Blackrock balance fund and some company stock/stock options.

The US dollar holdings, GICs and XSB all within RSP. RESP and TFSAs almost all XIC (plus a good chunk of XIC in RSPs). I use Norberts Gambit to exchange any Canadian $$ to US $$ for purchase of VTI/VWO/VEA/DEM.

Plan is for my wife to retire in the next few years and work for my company and for us to be all done by 50ish with income still coming from the company assets/commercial properties for another 8-10 years.


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## thepitchedlink (Feb 17, 2014)

Sounds like a great position there IHate.....

I'm starting to think more like:

XIC 30%
VTI 20%
XUS 15%
VWO 10%
MIC 5%
REIT 5%
GIC's 15%

The MIC/VTI/XUS held in RRSP
The REIT in RRSP/TFSA
XIC in non reg


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## Eder (Feb 16, 2011)

In XIC you own businesses like banks,stores that own their own real estate as well as 4% exposure to Canadian real estate sector ...not sure if 5% REIT has any point other than complicating things.


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## thepitchedlink (Feb 17, 2014)

Eder said:


> In XIC you own businesses like banks,stores that own their own real estate as well as 4% exposure to Canadian real estate sector ...not sure if 5% REIT has any point other than complicating things.


Interesting....thank you


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## Soils4Peace (Mar 14, 2010)

My Own Advisor said:


> Can Eq XIC 20% (great product)
> US Eq VTI 15% (great product for RRSP)
> Int Eq XIN 15% (I prefer VXUS for RRSP)
> Real Bond XRB 10% (I don't own any but yes, maybe a small allocation is OK)
> ...


The one change I would make to My Own Advisor's advice is ZRR (lower MER) instead of XRB; or if you have a large portfolio just buy the bonds. There aren't that many different issues.


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## thepitchedlink (Feb 17, 2014)

Soils4Peace said:


> The one change I would make to My Own Advisor's advice is ZRR (lower MER) instead of XRB; or if you have a large portfolio just buy the bonds. There aren't that many different issues.


so, your meaning just buy the bonds directly instead of using an ETF.....


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## Soils4Peace (Mar 14, 2010)

thepitchedlink said:


> so, your meaning just buy the bonds directly instead of using an ETF.....


Yes, it's mostly government of Canada, long term, with different maturity dates, typically 5 years apart.

http://www.bylo.org/rrbs.html
http://www.bankofcanada.ca/markets/government-securities-auctions/real-return-bonds/


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## thepitchedlink (Feb 17, 2014)

And the advantage being not having an MER at all.....any down side? Why do you suggest the portfolio has to be large to make it worth it?


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## GoldStone (Mar 6, 2011)

I would skip RRBs altogether. Yields are too low. See BoC link - it quotes 0.56% real. This is pitiful.

http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/

Equities is the best protection against inflation in the long run. 

Cash (HISAs) is the best protection against short inflation spikes. Savings accounts will quickly pick up the new rates if inflation spikes.


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## HaroldCrump (Jun 10, 2009)

^ +1. RRBs are completely useless for inflation protection for the retail investors (i.e. us).
Best for inflation are stocks that can increase their earnings in line with inflation, ideally with some dividend as well.

If you expect stagnation or deflation, then just pure cash and government bonds are the better asset classes.


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## GoldStone (Mar 6, 2011)

Found the link to the article that I had in mind when I wrote my post #19.

Mixed Record Of Inflation Hedges



> Many of our clients are concerned about a rise in inflation. So, I thought I’d take a hard look at various supposed inflation hedges.
> 
> We will find that the lowly Treasury bill, the least sexy asset on the planet, is in some ways the best addition as an inflation hedge.


Use HISAs if you buy this argument.


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## My Own Advisor (Sep 24, 2012)

So Harold, 

Are you saying that to fight inflation:

a. dividend stocks are great because they can increase prices (earnings) in line with inflation and ideally some of their dividends as well, and

Are you saying as a hedge against stagnation:

b. use some cash and a mixture of government bonds?


Just curious...as I would agree with a) (I'm biased probably because I invest this way) but for b) to be honest I, don't know what the best stagnation or deflation fighter is.


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## HaroldCrump (Jun 10, 2009)

My Own Advisor said:


> Are you saying that to fight inflation:
> a. dividend stocks are great because they can increase prices (earnings) in line with inflation and ideally some of their dividends as well


Not all dividend stocks, though.
Only those companies that have the capability to increase their earnings with inflation.
Not just their revenue, but net shareholder earnings.

These would be companies that produce staple products, with more or less inelastic demand, and have so-called "moat" such as patents, monopolies, preferential supply agreements, govt. contracts, etc.
You know, companies like P&G, J&J, Glaxo, AT&T, our own telcos like Bell & Rogers, well capitalized banks like TD & BNS, high end product manufacturers like Apple, and so on.

If the stock is also a dividend payer, that'd be ideal of course.
But not too high yield, there should be room enough in the payout ratio to grow.

Hard assets like your house, condo, vacation home, car, etc. are also relatively good inflation hedges, but would vary with local market conditions.



> Are you saying as a hedge against stagnation:
> b. use some cash and a mixture of government bonds?
> Just curious...as I would agree with a) (I'm biased probably because I invest this way) but for b) to be honest I, don't know what the best stagnation or deflation fighter is.


Deflation means the purchasing power of money is going up (inverse of inflation).
Therefore, idle cash in your mattress has a real yield i.e. its value will go up each year.

Bonds would be great too, even if the nominal yield appears to be low, because the real value of that cash flow from the coupon payments will be worth more and more each year.

Stagnation is the state of low (or zero) organic growth, sideways markets, and very low inflation.
Cash & bonds are alright in this scenario.
Stocks and real estate won't do well.

The worst IMHO is stagflation i.e. where we have low organic growth, low wage growth, but rising prices, esp. of essential goods and services like food, housing, energy, etc.
The stagnant wages and lack of growth causes standard of living for most people to go down.


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## thepitchedlink (Feb 17, 2014)

well, I'm starting to think about:
25% XIC
25% VTI
25% XUS
15% GIC's
10 MIC/REIT

Just so I'm clear.....
XIC in the non-reg
VTI and XUS in the RRSP (the MIC is in there as well)
REIT and GIC in the TFSA? Guess I'd stick these in the RRSP as well if there is room


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## wayne1234 (Nov 21, 2015)

*ryan mortgage fund*

Hi
I'm looking at putting funds into Ryan Mortgage Fund and also Capital Direct, which both indicate past returns over 8%
I am trying to find out from current & past investors in these funds what their experience has been.
I am currently investing with a broker & when I tell him that I wish to consider this investment he indicates that they are risky and when one want their money out they may not be able to do so. I am just wondering if my broker is correct or is just trying to scare me in order to keep getting his commission money from me.

Please advise- thank you


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## thepitchedlink (Feb 17, 2014)

Ive been in it for a year now, no problems. I've never tried to get $ out, so can't comments....the track record is there...so I feel confident with it in the allocation that I have


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