# Advice on portfolio!



## Getafix (Dec 29, 2014)

Hi guys,

So i'm new to investing and have spent the last few months reading, researching and educating myself. My wife and i have around $22k contribution room in our TFSA's. I have already purchased a few Canadian stocks for a long term hold: BMO, FTS & BCE. I also bought CVX which i might sell depending on how the situation goes. 

I came up with this portfolio of Canadian dividend stocks which i plan on buying with this $22k:








Then i plan on investing $1500 each month in TD e-series (U.S & International) index funds, using my non-registered accounts. Every year i will try to max out my TFSA and keep adding/re-balancing this portfolio. I will also keep around $5k of 'play' money in the non-reg account, which i will use for swing trades and to keep myself busy. 

In total these investments will be around 35% of my total savings, so i am willing to take on risk for higher returns. I would like to get some feedback from more experience investors on the companies i've picked and the plan in general. Thanks for the help!


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## none (Jan 15, 2013)

I don't like it but that's because I index. Index fees are so close to owning individual stocks I don't see why anyone would bother buying them anymore.

As for play money???? Why? Because you're the magical unicorn that can predict the stock market? Don't. Just index - buy on allocation and rebalance yearly. That maximized the probability of ending up at the end of the game with the most money.


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## Getafix (Dec 29, 2014)

I know the odds of returns are probably the same, but i prefer a more active approach which is why i would like to pick my own stocks. 

As for predicting the stock market, i am not going to pretend that i can but there are certain times where opportunities arise that you just can't pass on!


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## none (Jan 15, 2013)

Lesson #1. Your gut is an idiot. Ignore it.


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## Moneytoo (Mar 26, 2014)

none said:


> Just index - buy on allocation and rebalance yearly. That maximized the probability of ending up at the end of the game with the most money.


Even Graham (who, IMO, wrote the most boring book on investing!) understood that "Index funds have only one significant flaw: They are boring." - that's why people who prefer to get some emotions out of their portfolios (in addition to money) prefer a mixed approach (individual stocks and indexes)

But, no offense to OP, I personally find his picks even more boring than indexes - too defensive and not really diversified... Maybe play money would add some fun to this "retired grandma" selection


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## none (Jan 15, 2013)

I know right? Whenever I give someone the 'INDEX TALK' I say:; get ready, this is going to be reeeeallly boring. It's a challenged to fight that this isn't a game - this is business.

Then after the boring boring I just pull out the:

10000*(1.05)^25 vs 10000*(1.05)^25 comparison and they don't seem nearly so bored anymore.

I know it's boring but honestly i believe (and this is supported by evidence) that: An indexing approach will likely provide you with the highest probability to end your investing life with the most money. Hard to beat that if you believe that statement.

Now if I could only believe that and buy a bunch of VTI tomorrow. But it's soooo high (ARG!!! STUPID GUT!!!).


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## Moneytoo (Mar 26, 2014)

none said:


> Now if I could only believe that and buy a bunch of VTI tomorrow. But it's soooo high (ARG!!! STUPID GUT!!!).


Why stupid gut? Just look at the charts! I bought VTI 10 days ago for $102.50 (with USD from the sale of individual stocks that did great) - and no way in hell I would be buying it now for $108! It's earnings and RRSP season, it'll come down in a week or a month. Besides, not a good time for currency exchange - when oil goes up, CAD goes up. Even if it's just for half a day - enough time to jump in and buy DLR for less  I.e. I'd rather wait a few weeks and have a better entry point than follow the couch potato strategy blindly - just to start losing money right after the purchase and hope that in 20 years it won't matter


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## none (Jan 15, 2013)

Yeah that's dumb.

The efficient market hypothesis is a good approximation of stock prices. What things cost doesn't matter as all the information of future worth is already incorporated in them. Thinking otherwise you'll end up at least as wrong as right. You'll just be making up signals in the noise.


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## Moneytoo (Mar 26, 2014)

none said:


> Yeah that's dumb.
> 
> The efficient market hypothesis is a good approximation of stock prices. What things cost doesn't matter as all the information of future worth is already incorporated in them. Thinking otherwise you'll end up at least as wrong as right. You'll just be making up signals in the noise.


Looks like your gut is smarter than your brainwashed head lol But go ahead, be "smart" and buy VTI tomorrow - and then watch it dip on some random bad news


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## My Own Advisor (Sep 24, 2012)

@Getafix,

I like your boring stock picks. It's hard to predict the future, but your choices should provide passive income for decades to come. Many of those companies increase their dividends, so your cash flow will keep up with inflation. BCE hiked their dividend this month, FTS will do the same in another 10 months and TRP should increase their dividends soon.

Other than many Canadian blue-chippers, like many other CMFers I index invest. VTI is a stellar product but too bad it has gone up in price.


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## Getafix (Dec 29, 2014)

LOL at retired grandma picks! Maybe it's better to rely on the grandma for a guaranteed meal whenever you visit, rather than the hot girlfriend who is entertaining for sure but has a tendency to do damage to your wallet! 

Btw guys, how do you suggest buying Vanguard products? I'm interested in VYM, VIG & VTI but i've already been burnt by the FX rate when buying come Chevron. I'd like to hold these in my US TFSA account. Is it best to do a norbert gambit?


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## Moneytoo (Mar 26, 2014)

Getafix said:


> LOL at retired grandma picks! Maybe it's better to rely on the grandma for a guaranteed meal whenever you visit, rather than the hot girlfriend who is entertaining for sure but has a tendency to do damage to your wallet!


True, true - and I hold some of those stocks as well (and mostly regret about not buying some "hot stocks" like Alibaba when they go up after the IPO - but not so much when they drop few months later )



Getafix said:


> Btw guys, how do you suggest buying Vanguard products? I'm interested in VYM, VIG & VTI but i've already been burnt by the FX rate when buying come Chevron. I'd like to hold these in my US TFSA account. Is it best to do a norbert gambit?


Norbert's gambit for currency conversions for sure - but in RRSP, no point to hold USD ETFs in TFSA as you will be charged withholding taxes anyway and they're not recoverable. Look at the Appendix on Page 12: https://www.pwlcapital.ca/pwl/media...Foreign-Withholding-Taxes_v04_hyperlinked.pdf

*Total cost of VTI in RRSP is 0.05% (same as MER), but it's 0.32% in TFSA (MER + withholding taxes)*

Might as well just buy VUN (0.44%) or VFV (0.46% - should be less now as they lowered their MER after the paper was written) - and save yourself the conversion hustle


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## 0xCC (Jan 5, 2012)

Moneytoo said:


> *Total cost of VTI in RRSP is 0.05% (same as MER), but it's 0.32% in TFSA (MER + withholding taxes)*


Can you break down the math on those numbers? Is that assuming a 2% or so yield and then 15% withholding tax on that yield?


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## Moneytoo (Mar 26, 2014)

0xCC said:


> Can you break down the math on those numbers? Is that assuming a 2% or so yield and then 15% withholding tax on that yield?


There's an example for VOO (it's similar to VTI with the same MER) on Page 4 of the same paper - and yes, it assumes the 2% dividend:

*Total Estimated Cost of VOO in TFSA: 0.05% + [15% x (2% - 0.05%)] = 0.34%*


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## Eclectic12 (Oct 20, 2010)

Moneytoo said:


> ... Norbert's gambit for currency conversions for sure ...


When setting up the accounts, one probably should review what the broker offers (ex. USD RRSP & TFSA? Easy gambits? Favourable FX rates so that gambit is not needed as much?).




Moneytoo said:


> ... no point to hold USD ETFs in TFSA as you will be charged withholding taxes anyway and they're not recoverable...


YMMV ... this is likely true where there is RRSP room available.

Where the choice is a TFSA or a taxable account, paying 15% on the dividends (ex. 4%) year by year may be a drop in the bucket when compared with the final capital gains tax in the taxable account.

Then too ... if one is in Ontario at the higher marginal tax brackets - US stock dividends will be taxed at 28% or higher *by Canada*. 
So yes - one will get the 15% paid to the IRS back but the higher Canadian tax means there's little or no advantage compared to paying 15% on dividends to the IRS and *no taxes* to Canada in a TFSA.




Moneytoo said:


> ... *Total cost of VTI in RRSP is 0.05% (same as MER), but it's 0.32% in TFSA (MER + withholding taxes)*


I'll work through the details later to see if I am misunderstanding something. At a first glance, I don't believe this is accurate ... this seems to be adding the 15% withholding tax to the MER. As I understand it, the MER applies to all units bought whereas the withholding tax applies to the dividends portion of the cash payments.

If a unit is $108, then $108 x 0.05 = $5.40 would be the MER. That unit paid $1.86 in dividends over the last year so that $1.87 x 0.15 = $0.28 is the withholding tax.

Total cost in the RRSP = MER = $5.40
Total cost in the TFSA = MER + withholding taxes = $5.40 + $0.28 = $5.68 ... which is not close to six times the MER that is quoted above.


Cheers


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## Moneytoo (Mar 26, 2014)

Eclectic12 said:


> Where the choice is a TFSA or a taxable account, paying 15% on the dividends (ex. 4%) year by year may be a drop in the bucket when compared with the final capital gains tax in the taxable account.


Nowhere did I suggest buying VTI in a taxable account if RRSP is not available, just that holding a CAD-denominated ETFs for US equities in TFSA might be better (especially since OP has "already been burnt by the FX rate when buying come Chevron" )

The math is quite simple, it's explained in the white paper, and I gave the example for VOO above. And your calculations are all wrong starting with 0.05% of $108 is 108 x 0.0005 = 0.054


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## My Own Advisor (Sep 24, 2012)

I believe...since MER applies regardless...

VTI in US $$ TFSA = 0.05% MER + withholding taxes (assume 2% distributions x 15% withholding taxes = 0.30)

VIT in US $$ RRSP = 0.05% MER. You get to keep all distributions


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## gardner (Feb 13, 2014)

Eclectic12 said:


> If a unit is $108, then $108 x 0.05 = $5.40 would be the MER.


You slipped a few decimals here. %0.05 of $108 is only $0.054


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## Getafix (Dec 29, 2014)

Moneytoo said:


> Might as well just buy VUN (0.44%) or VFV (0.46% - should be less now as they lowered their MER after the paper was written) - and save yourself the conversion hustle


Thanks, i'm thinking that's a better idea rather than trying to figure out all this tax/fx business! 

VFV has 0.16 & VUN has 0.17 MER according to the Vanguard website, both seem pretty low compared to the TD U.S index 0.35 that i was planning on. However with the TD index i could keep adding at no extra cost and VFV and VUN it would be better to invest in one go.


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## Moneytoo (Mar 26, 2014)

Getafix said:


> VFV has 0.16 & VUN has 0.17 MER according to the Vanguard website, both seem pretty low compared to the TD U.S index 0.35 that i was planning on. However with the TD index i could keep adding at no extra cost and VFV and VUN it would be better to invest in one go.


VFV is 0.08%: https://www.vanguardcanada.ca/individual/etfs-detail-overview.htm?portId=9563 - planning to buy some in my TFSA later this year  We're with Questrade where ETF purchases are free, but some people at TD DI accumulate TD index funds and then convert them to ETFs once a year. If you do the math, the difference in dollars is really not that big on a few K worth of shares, so do whatever is simpler - to ensure that you'll keep doing it


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## Getafix (Dec 29, 2014)

You're right it's only $30 difference on $11'000 funds. The performance of TD U.S index and VFV is virtually identical, so i guess i'm better off just sticking with TD since i can save on trading costs in the long run.


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## Moneytoo (Mar 26, 2014)

Getafix said:


> You're right it's only $30 difference on $11'000 funds. The performance of TD U.S index and VFV is virtually identical, so i guess i'm better off just sticking with TD since i can save on trading costs in the long run.


Good luck!


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## Getafix (Dec 29, 2014)

Thank you, you've been very helpful! I have one last question if you don't mind! I have already maxed out my TFSA and want to contribute $11000 to my wife's TFSA, which i want to invest once and forget about it for a year. 

Since she doesn't have an account yet, would it be better off opening one with Questrade since buying ETF's will be free? TD D.I will probably charge an annual fee since i won't be making any trades on it for the rest of the year. Does Questrade also have an annual fee?


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## Spudd (Oct 11, 2011)

There's no annual fee on TDDI TFSA's, I believe. I don't know about Questrade.


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## RBull (Jan 20, 2013)

My only comment is too many positions for that small an account. 3-5 would make more sense considering trading costs and ease of maintaining some kind of balancing formula. Use your other accounts to diversify more with your equities.


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## Getafix (Dec 29, 2014)

Spudd said:


> There's no annual fee on TDDI TFSA's, I believe. I don't know about Questrade.


You're right it's only for non-registered accounts. Thanks!


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## Getafix (Dec 29, 2014)

RBull said:


> My only comment is too many positions for that small an account. 3-5 would make more sense considering trading costs and ease of maintaining some kind of balancing formula. Use your other accounts to diversify more with your equities.


Thanks for the feedback, so far i've only committed to four stocks (CVX, BMO, FTS & BCE). As for the rest i'm still trying to decide whether it's worth going through with it or will i be better off buying Index funds / ETF's and calling it a day.


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## Moneytoo (Mar 26, 2014)

Getafix said:


> Thank you, you've been very helpful! I have one last question if you don't mind! I have already maxed out my TFSA and want to contribute $11000 to my wife's TFSA, which i want to invest once and forget about it for a year.
> 
> Since she doesn't have an account yet, would it be better off opening one with Questrade since buying ETF's will be free? TD D.I will probably charge an annual fee since i won't be making any trades on it for the rest of the year. Does Questrade also have an annual fee?


My husband and I moved our accounts from TD DI to Questrade last summer - and loving it there (you might find the "Authorized Traider" feature helpful - you'll be able to monitor your wife's account and make trades on her behalf ) There's no annual fee, and they only charge inactivity fee on accounts with less than 5K, so you should be fine. 

One ETF that I'm considering for my husband's "set it and forget it" Questrade TFSA is *Vanguard Total World Stock ETF (VT)*: https://personal.vanguard.com/us/funds/snapshot?FundId=3141&FundIntExt=INT - but it's in USD, so we'll see...


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## humble_pie (Jun 7, 2009)

*apropos de rien*

i think, said Eeyore dreamily, gazing into his empty honey pot, That when it comes to USD holdings in canadian TFSAs with no withholding tax ...

yes? asked Christopher Robin, anxiously

i believe there are 2 kinds of holdings that are suitable, whispered Eeyore

first there are ADRs traded in USD on new york for overseas companies with head offices situated in countries that do not levy non-resident withholding taxes. Great Britain is the best known among these countries. 

yay! said Christopher Robin

http://topforeignstocks.com/foreign-adrs-list/, replied Eeyore

what else? asked CR

second, there's no withholding tax on US stocks that don't pay dividends in TFSA, said Eeyore

Google it, said Christopher Robin


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## Eclectic12 (Oct 20, 2010)

Moneytoo said:


> Nowhere did I suggest buying VTI in a taxable account if RRSP is not available, just that holding a CAD-denominated ETFs for US equities in TFSA might be better (especially since OP has "already been burnt by the FX rate when buying come Chevron" )


Fair enough ... I wasn't reading closely enough apparently .... :biggrin:




Moneytoo said:


> The math is quite simple, it's explained in the white paper, and I gave the example for VOO above. And your calculations are all wrong starting with 0.05% of $108 is 108 x 0.0005 = 0.054


 ... that I did ... :frown:


Cheers


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## gardner (Feb 13, 2014)

humble_pie said:


> USD holdings in canadian TFSAs with no withholding tax


Also Canadian stocks that pay dividends in $US.


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## humble_pie (Jun 7, 2009)

gardner said:


> Also Canadian stocks that pay dividends in $US.



but then the TFSA owner has to be coached to be sure to keep those stocks on the USD side of the account, said Christopher Robin

what's the big deal about these anyway? asked Eeyore. All those canadian-stocks-paying-USD-dividends aren't subject to US withholding tax anyhow, no ways, when they're held on US side of any registered or non-registered account.

there are exceptions, said Christopher Robin, loftily

what you talkin about man? there are always exceptions, cried Eeyore

i mean those arty boutique brokers are often exceptions, their mainframes can't handle such fine data, said CR

who you talkin about now, asked Eeyore

IB is one, you put you Potash in US account & they gone charge you 15% withholding on you canadian stock PLUS they no gone give you any correct T5

bof, not going there now, TGIF, said Eeyore


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## Getafix (Dec 29, 2014)

So a small update guys, I have already maxed out my TFSA and want to contribute another $11k to my wife's TFSA. Once her account is also maxed out i'm planning on investing another $10k in my cash account by purchasing an ETF. 

I will add around $3k every month by buying TD e-series index funds (TDB902/911) then convert them into ETF's at the end of the year. I will also keep using up all the contribution room in our TFSA's and add Canadian stocks every year. Eventually the plan is to be invested equally in Canadian, U.S and International markets. 

The long term aim is to achieve some steady dividend income from the Canadian stocks and diversify a little with the rest. I'm not sure on what the the best ETF options are to invest the $10k in and to convert to e-series every year, so i'm open to better suggestions. I'm thinking of either VFV + XEF or just XAW. What do you guys suggest and any advice on the plan?

You can see the stocks i've already bought (TFSA-1) & the one's that i'm planning on buying:


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## humble_pie (Jun 7, 2009)

fix i think your basic plan looks great.

2 tiny concerns. A tiny number of shares - 20 BMO, for example - adding up to six different stocks in each of 2 small TFSA plans is a lot of stocks to look after. They are well diversified & well chosen, but in future surely you'd never want to add to their number? surely you'd add to TFSA by topping up existing holdings? 

also, perhaps brush up on what is an e-fund & what is an ETF? with the new $10k in cash account that you are planning to invest, it's not clear whether you wish to start e-fund, then change to ETF or vice versa.

the 2 types of holdings both have appeal for small accounts, but e-funds usually come before ETFs. ETFs cost broker commissions to buy, balance & top up. This is why ultra-small accounts such as $10k often commence with e-funds, because there are no purchase commissions.

the transition amount to "graduate" from e-funds to ETFs is usually around $25-50k. So if you would be setting up e-funds in a small initial cash account, the issue would be which e-funds, not which ETFs.

i rather tend to believe that a new canadian who has not yet settled where, exactly, he is going to live & work might divide that $10k destined for the cash investment account into a HISA for emergency purposes plus a small proportion into an equity e-fund. Or i might think to place the entire 10k in a HISA account.

as for how to develop investment savings accounts in the future, it was an excellent move to set up & max out TFSAs as a first step. You might like to consider how your overall portfolio(s) should balance out, over the years to come? will you have any fixed income? at the moment, you seem to have decided that the TFSAs are to hold common stock including stock that presently pays good dividends. IMHO this is a good choice for TFSAs that are under $50k.

if, eventually, you would be setting up RRSPs, then fixed income would normally go into these. Also US dividend-paying stocks would go into these.


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## Getafix (Dec 29, 2014)

Yes exactly, the plan is to keep adding to the positions in the TFSA over time. I know some of the shares are pretty small in number, BMO was my very first purchase and in hindsight i should've bought more shares as i got in at a good time. 

With the $10k cash, i could purchase an ETF in one go, let's say XAW. However with the monthly purchases i was thinking of buying e-series to save trading costs. Then maybe at the end of the year selling those and buying an ETF (should be above $25k by then).

I do have spare cash saved up for emergencies, so i'm not investing 100% of my savings. I still have an extra $30k after investing according to the plan above. So once i'm settled in i'll decide what i want to do with that. Thanks for the help!


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