# Vbal, vgrow or ....



## Bobcajun (May 15, 2018)

Hello 
I have been watching here how many have started shifting to vbal after many years of investing in individual stocks. In many cases it seems to be in order to allow our less investment minded spouses to be able to manage joint investment accounts, should we become disabled.

i have to say that I like that idea. The only problem is that we have already a number of stocks with high capital gains that i would be unwilling to sell in order to employ this plan.

but, my wife just came into an inheritance of $100,000. We were wondering what to do with it and decided to open a separate brokerage account just for this money. That way she could learn from scratch how things work. We even thought of buying vbal and vgro to make things easier.

i balk at that, though, since we altready hold many of the best stocks in the indexes. So, we would be paying mer fees for little benefit, since we have no intention of selling our individual stocks.

so, the question becomes whether there is any value in a mixed approach, some stocks and some vbal? The only plus I can think of is that she would have access to something that she easily sell,without a lot of understanding.

I would appreciate any comments that people on this forum might have. 
thanks bob


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## AltaRed (Jun 8, 2009)

It is a perfect time to commit to a simple AA ETF portfolio that your spouse can see for herself. Why not just VBAL or VGRO? Why expand stock picks with new holdings? Why be half pregnant? There is nothing wrong with paying MERs of 25bp to have a total hands off approach. IF I was to do it over again, I'd be fully indexed with one of those AA ETFs.


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## Bobcajun (May 15, 2018)

AltaRed said:


> It is a perfect time to commit to a simple AA ETF portfolio that your spouse can see for herself. Why not just VBAL or VGRO? Why expand stock picks with new holdings? Why be half pregnant? There is nothing wrong with paying MERs of 25bp to have a total hands off approach. IF I was to do it over again, I'd be fully indexed with one of those AA ETFs.


I agree with you. If I was to do it over again i would go with all vbal or vgro. The problem is that I am, as you colourly put it, already half pregnant, if i buy the etf. I already own the stocks that are in it. I would not be buying new stocks, just more of the ones we already own. The mer doesn’t really bother me. It is just that i would be getting nothing for it, unless Im missing something. In buying the etf i would truly become half pregnant.
My wife hates to look at stocks, though, and so we may have to go that way. I would just like to have a better reason for doing it.


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## james4beach (Nov 15, 2012)

Bobcajun said:


> The problem is that I am, as you colourly put it, already half pregnant, if i buy the etf. I already own the stocks that are in it. I would not be buying new stocks, just more of the ones we already own.


I think AltaRed misunderstood your post. I don't see any problem with this duplication in holdings. I think you're talking about how (for example) buying VBAL gets you a bunch of Royal Bank, but you already hold RY shares somewhere else. I don't see that as a problem.

Since you're sitting on some large cap gains it makes perfect sense that you can't just dump all that existing stock.

_But with your new money_, I think buying VBAL or XBAL makes perfectly good sense. I wouldn't mix VBAL and VGRO, but rather, decide on a single one that matches your risk tolerance. You mentioned that your wife is new to all of this as well so having a self-contained account, with a single VBAL (or whatever) position, seems like a good idea to me.

And part of that learning experience for her will be learning to handle market volatility, not freak out about declines or scary market news. Plus the mechanics of buying new units and all that.

I have something similar myself, with some older positions (individual TSX stocks) that I've held for a long time. This has not stopped me from buying other index ETFs even though it duplicates some of the holdings.


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## AltaRed (Jun 8, 2009)

I didn't misunderstand but my choice of words may have been poor. Buy the ETF and forget about the fact the OP already owns individual stocks that are in the ETF. IOW, buy the ETF anyway with that $100k. The duplication is ultimately relatively minor and it will make no difference whatsoever.


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## cainvest (May 1, 2013)

Bobcajun said:


> I would just like to have a better reason for doing it.


Simplicity ... do you need a better reason than that?


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## MrBlackhill (Jun 10, 2020)

Simplicity as @cainvest said and most people end up on the losing side of the game when picking stocks.


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## londoncalling (Sep 17, 2011)

I agree with the reasons stated above. I plan to move to an AA etf in retirement and my wife has already begun buying VGRO this year. She does not like to do the research that many of us do but realized an equity allocation is needed and can be found without a high MER. When I begin investing in non registered I will likely go the ETF route as well but will have to figure out how to reasonably limit cap gains. Unless you can find an valid counter to @cainvest 's post I think you have what you need. It's not so much what you would do with the $100k but what your wife would do when left to manage the portfolio without you.


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## Ukrainiandude (Aug 25, 2020)

HISAs


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## Bobcajun (May 15, 2018)

Thanks everyone for your thoughtful replies. I really appreciate your taking the time to answer. We are still not completely decided what to do. Some of the responses don’t apply to our situation. For instance, we have quite a long proven record at winning the individual stock picking game. We would just buy a handful of the same stocks we already hold. Regarding simplicity. Adding a new etf in a way adds complexity rather than simplicity, since there will still be a large portfolio of individual stocks that she will have to deal with anyway, as well as vgro. That being said, she can easily understand and deal with the etf. We have been discussing your answers in this thread. I think we are close to deciding to largely follow your suggestions and put the majority in vgro. I could not resist trying to convince her, though, to buy at least one stock that has been beaten up and has the potential to rise. One i like in this regard is Boyd Autobody repair. So, once again thankyou for your suggestions. They have very much influenced our decision. 
bob


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## AltaRed (Jun 8, 2009)

I dont know what your ages are but if you become incompetent or die, it will be almost a 99% certainty that a stock portfolio will be turned over to a "% of AUM" advisor. With a simple couch potato portfolio, somewhat less risk.

Now in my 70s, I am making every effort to clean out the oddballs in my portfolio such as GIC and bond ladders, pref stocks and a few smaller than large cap Cdn equities. That will make it easier for my POA to perhaps decide to continue to manage the portfolio rather than hand it over to a full service advisor.

Added somewhat later: Meant to originally include a comment that at some point later in a person's investing journey, the objective should likely become certainty of index performance rather than trying to obtain alpha and messing it up royally...either through diminishing competence of oneself, lack of skill or interest of others such as a POA or surviving spouse, or the portfolio being skimmed off by a full service advisor. Make it somewhat error proof.


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## Bobcajun (May 15, 2018)

AltaRed said:


> I dont know what your ages are but if you become incompetent or die, it will be almost a 99% certainty that a stock portfolio will be turned over to a "% of AUM" advisor. With a simple couch potato portfolio, somewhat less risk.
> 
> Now in my 70s, I am making every effort to clean out the oddballs in my portfolio such as GIC and bond ladders, pref stocks and a few smaller than large cap Cdn equities. That will make it easier for my POA to perhaps decide to continue to manage the portfolio rather than hand it over to a full service advisor.
> 
> Added somewhat later: Meant to originally include a comment that at some point later in a person's investing journey, the objective should likely become certainty of index performance rather than trying to obtain alpha and messing it up royally...either through diminishing competence of oneself, lack of skill or interest of others such as a POA or surviving spouse, or the portfolio being skimmed off by a full service advisor. Make it somewhat error proof.


Thanks AltaRed. It continues to be an interesting and useful discussion. I appreciate very much your added commentary. It makes me more aware that i should be cleaning up the messier parts of the portfolio. When my wife mentions how complicated it is and why don’t i sell this or that because it seems more of an encumbrance than an aid, she says that I always say that I can’t clean it up right now and we need to wait for a recovery or some other event. Maybe for the reasons you mentioned, i’d just better bite the bullet and do it now. Also, you mentioned this time a very good reason to go the etf route is because, even if we have done well with individual stocks in the past, some kind of loss of cognitive powers could make that problematic very quickly. All of this worry about what to do with your money is tiring. But, i guess it is a lot better than the worries you would have if you didn’t have money.


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## Spudd (Oct 11, 2011)

Your wife should have this money in an account on which you are not joint. That will protect her in case of a marriage breakdown.


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## AltaRed (Jun 8, 2009)

Spudd said:


> Your wife should have this money in an account on which you are not joint. That will protect her in case of a marriage breakdown.


Agree that should normally be the case if the amount is substantial and the beneficiary doesn't want the assets commingled. That way, the record keeping will always ensure that $100k is not counted in division of assets (though gains on that $100k would be in most provinces I think absent a pre-nup or cohab saying otherwise).


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## cainvest (May 1, 2013)

AltaRed said:


> That way, the record keeping will always ensure that $100k is not counted in division of assets (though gains on that $100k would be in most provinces I think absent a pre-nup or cohab saying otherwise).


Inheritance is normally excluded from division IIRC as long as you have proof that's where it came from.


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## AltaRed (Jun 8, 2009)

cainvest said:


> Inheritance is normally excluded from division IIRC as long as you have proof that's where it came from.


The key part is the record keeping. Keeping it in a separate account does that with most ease. If the funds got 'used' in some fashion jointly, that exclusion is lost.


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## Bobcajun (May 15, 2018)

Good points. As it is, we already have seperate accounts. I end up managing them. But, half of them are in her name already. these things are good to know, though. Although we have seperate accounts, we are generally co-mingled quite a bit. It would be difficult to seperate us at this point.
bob


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