# Portfolio Feedback



## whiteknight (Jan 21, 2012)

Hey everyone,

I've been reading these forums for a while, but I've never contributed—so here goes.

First, a little backstory. I'm 29 and married. I don't have any debt, including no mortgage (currently renting for $750/month), and around $300K in savings spread across my accounts. I used to have a financial advisor, but I found he never really paid any attention to my portfolio. He also enjoyed filling them with poorly performing mutual funds. So, about 3 years ago I took matters in to my own hands. I like to buy and hold (I'm not looking to day trade), and have always favoured buying solid companies that pay a good dividend and let everything DRIP. After a while, my portfolio started to look a bit like a dog's breakfast. I had a fairly wide range of stocks, some CLF, some CPD, a couple REITs, no ETFs... it performed, but I wanted to have more concrete investment strategy. After a lot of research, with influence from people in this forum, Couch Potato, and other sources, I'm thinking of settling on the following allocation:

- 15% CDZ, Claymore S&P/TSX Canadian Dividend ETF
- 15% XDV, Dow Jones Canada Select Dividend Index Fund
- 10% CPD, Claymore S&P/TSX CDN Preferred Share ETF
- 15% VTI, Vanguard Total Stock Market ETF
- 10% ZRE, BMO Equal Weight REITs Index ETF
- 5% CHB, Claymore Advantaged High-Yield Bond ETF
- 5% XHB, DEX HYBrid Bond Index Fund
- 20% XBB, DEX Universe Bond Index Fund
- 5% Cash

That gives me: 55% equity, 30% bond, 10% REIT, and 5% cash with an 80/20 split for Canadian vs US holdings. I know I'm devoid of emerging and other markets, but wondering if that is really a major issue.

I'd love feedback on the portfolio before I pull the trigger this week and sell everything I have en masse.

Thanks!


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## slacker (Mar 8, 2010)

I personally never understood the concept of actually allocating a portion of a buy and hold portfolio into cash. Buy and hold means you believe the market will go up over the long term and therefore rationally should be fully invested as much as it is convenient to do so.


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## whiteknight (Jan 21, 2012)

Thanks for the feedback slacker. I probably shouldn't have included cash in this list as it is really just my rainy day fund. I want to be sure I have some set aside for major purchases, etc. It's not really a part of my portfolio per se.


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## Jungle (Feb 17, 2010)

Too many funds for my liking, I like 3-4. 

CDZ and XDV are going to hold the some/most of the same stocks. Why pay comission twice and hold two funds? 

Also preferred shares tend to perform more like higher rated bonds-but bonds are paid first when company goes bankrupt. . then you have 3 bond funds so maybe your fixed income is over diversified.


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## larry81 (Nov 22, 2010)

whiteknight said:


> Hey everyone,
> 
> I've been reading these forums for a while, but I've never contributed—so here goes.
> 
> ...


- too complex
- too much funds

VTI for us equities
VXUS for international equities
XIU or XIC for canada equities
XBB for bonds

is really all you need !

you can add REIT if you want but i would pass on CDZ, XDV, CPD, CHB, XHB. etc... unless you have 1M$ to deploy and are looking to slice and dice.


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## uptoolate (Oct 9, 2011)

Would agree with larry81 and jungle. It seems like quite a few funds. You don't say how large the portfolio is but unless it is really large I would tend to scale back the complexity along the lines larry81 suggests. Throw in the ZRE if you want. 

I have both XIU and XIC but am putting new money into VCE. You might also consider VAB over XBB but not a big deal. I am sure you have checked out the Canadian Couch Potato site but if not, have a look. Good luck in the potato world! Cheers.


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## whiteknight (Jan 21, 2012)

Wow—you guys have been immensely helpful. And thanks for being candid. Coming from a portfolio with 22 securities, you can see I've struggled a little to moving to passive management. 

Based on your feedback, I'm now thinking of:

- 35% VCE (thanks for the recommendation—wasn't aware of the new Vanguard offerings)
- 15% VTI
- 10% VXUS
- 10% ZRE
- 20% VAB

To answer some questions:
- Total portfolio size is just over $300K
- I have definitely checked out Canadian Couch Potato... that's actually where I got the idea for the CDZ/XDV split (from the yield-hungry model portfolio). I was concerned about tracking a Canadian index that was overly skewed to financials, energy, and materials.

And three more questions:
- I picked VAB over XBB because of the MER, and they seem to be comparable in what they are aiming to achieve, but they use different indexes. Any benefit of one index over the other?
- Where should I hold VXUS? I understand the rules around US withholding tax, but not sure how global equity is treated. I'm wondering if it is better in a taxable account vs. RRSP.
- Any recommendations or tips for selling 22 securities at once?

Thanks again. You guys have been really helpful.


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## andrewf (Mar 1, 2010)

Why two high yield bond funds? 

You also have no international ex-US equity exposure.


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## Spidey (May 11, 2009)

I also agree with the comments regarding ETF overlap. I also wouldn't be too quick to sell what you have, particularly if it's working. For example, if you have a couple of good REITs, especially if they are a couple of the larger ones (eg. Riocan, Calloway) you may just want to add a couple of more REITs to your mix rather than paying MERs for an ETF and potentially incurring capital gains from the sale. Canadian REIT ETFs have a fairly small amount of holdings and if you hold perhaps 4-6 of the larger REITs you will probably have a pretty good proxy for them. 

I would also consider the amount of contributions, withdrawals and rebalancing you might be doing before going the ETF route. If it is minimal then this is the best way to go. If it is significant, your commissions will probably eat into your returns and you may be better off paying the slightly higher MER for TD "e" index funds that are commission-free unless you cash them in within 3 months of a contribution.


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## fatcat (Nov 11, 2009)

> 15% CDZ, Claymore S&P/TSX Canadian Dividend ETF
> - 15% XDV, Dow Jones Canada Select Dividend Index Fund
> - 10% CPD, Claymore S&P/TSX CDN Preferred Share ETF
> - 15% VTI, Vanguard Total Stock Market ETF
> ...


 i would go:

25% XIC
25% VTI
15% VWO
5% XRE
15% XBB
15% Cash

spidey, cash is an asset class ... current volatility dictates that we should have more than the average amount of cash on hand ... IMO


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## larry81 (Nov 22, 2010)

fatcat said:


> i would go:
> 
> 25% XIC
> 25% VTI
> ...


why no VEA ? Euro equities exposure are an essential part of any portfolio.

And why pick VEA/VWO when you can have VXUS


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## fatcat (Nov 11, 2009)

larry81 said:


> why no VEA ? Euro equities exposure are an essential part of any portfolio.
> 
> And why pick VEA/VWO when you can have VXUS


 agreed, probably better ...


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## Spidey (May 11, 2009)

fatcat said:


> spidey, cash is an asset class ... current volatility dictates that we should have more than the average amount of cash on hand ... IMO



??? I didn't mention cash or specific asset classes.


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## MrMatt (Dec 21, 2011)

larry81 said:


> why no VEA ? Euro equities exposure are an essential part of any portfolio.
> 
> And why pick VEA/VWO when you can have VXUS


There are quite a few ETF options that are like this.
If the MERs are similar and the underlying assets are highly correlated, unless you want to be relatively overweight, there is no reason not to hold something simple like VT.
If you want to be overweight in one area, the MERs stack up cheaper, or you want to take advantage of poor correlation, then you would load up on the various sectors.

I'm seriously considering just holding VT for my non Canadian, at least until my portfolio becomes a bit larger.


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## slacker (Mar 8, 2010)

I don't like VT and VXUS hold Canadian equities in a tax inefficient manner.


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## whiteknight (Jan 21, 2012)

Looks like I'm getting moderated, so my replies are rather delayed... 

In reply to everyone's great feedback, and from other advice on this forum, I made a few final tweaks to my plan:

- 25% VCE -> Taxable
- 20% VTI -> RRSP
- 15% VXUS -> Taxable
- 10% REITs (no ETF for my REITs and I already own REI) -> TFSA
- 25% VAB (lower MER than XBB) -> RRSP
- 5% Cash

I also had a look at the TD e-series, but the MERs just don't make sense. The overall MER for my portfolio is looking to be ~0.12%. Total portfolio size is $300K.

I have definitely checked out Canadian Couch Potato... that's actually where I got the idea for the CDZ/XDV split (from the yield-hungry model portfolio). I was concerned about tracking a Canadian index that was overly skewed to financials, energy, and materials and I've always been a fan of dripping dividend paying stocks.


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## Spidey (May 11, 2009)

whiteknight said:


> Looks like I'm getting moderated, so my replies are rather delayed...
> 
> 
> I also had a look at the TD e-series, but the MERs just don't make sense. The overall MER for my portfolio is looking to be ~0.12%. Total portfolio size is $300K.


I hold both the ETFs and some "e" funds. The ETFs are the core that I don't touch and that I rebalance or add to infrequently. (And in larger amounts.) I use the "e" funds if I want to add or rebalance smaller amounts because it would take quite a long time to make up those commissions by the reduced ETF MERs. eg. suppose I want to add a spare $250 to CDN equity index. The $9.99 commission (I realize some have a lower commission with different brokers) would be 4% of that trade with the ETF.


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## fatcat (Nov 11, 2009)

Spidey said:


> ??? I didn't mention cash or specific asset classes.


 right, sorry, i should have said slacker


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