# Asset Allocatiion / Portfolio Rebalancing - ~$200k @ 25



## oob (Apr 4, 2011)

Hi guys,

I recently took a hard look at my asset allocation, and realized it's very suboptimal. I'm 25 - about 3 years out from school with $195K in liquid assets, no debt, and no other assets. For simplicity I'm excluding tax liabilities on investments.

Rough breakdown is:
Cash in checking/savings accounts: $72,000
of which $49,000 is in a credit union account earning 1.9%

Investment Accounts
RRSP: 43,000 of which 24,000 is invested (Mostly US$ dividend paying stocks and former employer stock)
TFSA: 28,000 of which 18,000 invested - I've really mismanaged this account and it pains me to look at it
Non-Registered account 1: 31,000 of which 26,000 invested. Individual stocks where I'm mostly sitting on gains.
Non-Registered account 2: 22,000 of which 15,000 invested. Mostly HXT and VEE index funds tracking TSX and Emerging markets respectively. 

All in, only $83k is invested out of a total liquid assets of roughly $196K. Some of this was intentional as I've liquidated some positions that got fully valued, and think markets are generally pretty over-heated. Of course I did this before doing the math accross accounts. At the time, I would have guessed I was ~80% invested and definitely wasn't thinking about the credit union. 

I haven't done a good job with my portfolio. I am active with it when I have time, but ignore it for long periods of time when I get busy again with work/life. For instance, spring 2012 I figured the S&P was headed for a correction and liquidated a lot of my positions but then never got back in, which was the original intention! I know I should probably invest most of the cash in passive strategies since my investment horizon is long, and I don't plan on touching this until retirement, but I have strong reservations about pulling the trigger where things are trading. I'd also like to have a little more fix income for balance, but it's pretty tough where rates are.

Also, I didn't have a lot of money growing up, so sometimes the amounts "feel" huge. I.e. Until 6 months ago, I was still taking $1k positions in stocks. Looking at the bigger picture, even these $2k positions I'm taking now are probably too small for my portfolio.

I'm in a high tax bracket in a high tax province. Absolutely getting murdered here. As far as I know, I can't change anything about tax on my paychecks, but I'd definitely like to minimize the tax on my investments. 

It took me a while to figure all this out, but now the plan is to hold US$ stocks in my RRSP since all-in tax on US$ stocks is pretty heavy in a non-registered account. In my non-registered accounts, I will add to index funds over time. I like how HXT is structured to avoid incurring the tax liability on dividends while replicating TSX total returns. It's pretty painful to be taxed at the top bracket on my accelerate savings account when the pre-tax returns don't even keep pace with inflation.

Beyond that, I may be looking at making a move to the U.S. in the short to medium term with the view of coming back to Canada eventually. It's a challenge to project far into the future, but i'd like to structure everything to avoid any unncessary tax liabilities moving accross the border and back... I know TFSAs are not 
recognized in the U.S.

I'm pretty happy with how things are in general, but would appreciate general guidance members of the forum have for me. Thanks!


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## Spudd (Oct 11, 2011)

I would figure out how much of your cash is your emergency fund, and treat that separately (i.e. that should not be included when calculating the cash % of your portfolio). 

Since you ignore it for long periods at a time, a couch potato strategy is definitely your best bet. You only need to look at that once a year or so. I have no input on the cross-border question. Regarding your reluctance to invest at the moment, I know how you feel. But I think given the long time horizon it's best to just hold your nose and do it. The general trend of the market is upwards over history, so even if it goes down immediately after investing, you have time for it to recover.


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## MasterCard (Aug 2, 2013)

25 years old with $200k...?


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## Jagas (Feb 11, 2013)

MasterCard said:


> 25 years old with $200k...?


Yes, this is pretty awesome.


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## the-royal-mail (Dec 11, 2009)

LOL @ this thread, I mean here is OP has this kicka-s networth and is asking US for advice? Should be the other way around. 

OP, how the heck did you come into this much money at your age? You are doing exceptionally well.

Only thing really obvious is to suggest you max out your TFSA and RRSPs and get everything in them invested ASAP. At your age and being flush with cash I see no reason why you can't buy some good quality stocks for long term investing. No need to take a passive approach as you could potentially grow your assets even further!

Well done on your success.


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## marina628 (Dec 14, 2010)

OP has been a member over 3 years so I believe it is possible as he obviously cared about finances at a very young age.He said he is getting murdered on income tax ,maybe lives with mom and dad and saving 90% of his pay


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## uptoolate (Oct 9, 2011)

As TRM says - great work. And agree with getting TFSA and RRSP filled if not already done. However, I would think that there is an argument for going passive, especially in your registered accounts (RRSP moreso than TFSA). The longer your time horizon, (and yours is hopefully very long!) the more likely a Couch Potato approach will outperform an active investor. Also, with your apparent ability to save, you're definitely going to win and market returns will seal the deal without taking undue risk. That said, if you think you would enjoy trying your hand at stock picking then take some portion of your portfolio (say 20%?) and go for it. 

Again, very well done indeed.


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## oob (Apr 4, 2011)

Thanks for the support. Fortunate enough to have a high paying positions, and have maxed out on merit raises/incentive pay thus far.
I'm running at a pretty high savings rate, but have not lived with mum and dad since I was 18-19, but they did fund the first 2 years of uni for me which obviously helped a ton and I am very thankful for.

I'm very much still learning, and it was easier to post this on an an anonymous forum than speak to friends/family in person.
I just wanted to solicit opinions to see if there was anything obvious I was missing, and how you guys thought about fully investing today since I'm young or more short-term issues like valuations right now.

@marina628- Definitely have thought about money since I was a kid.


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## My Own Advisor (Sep 24, 2012)

Crazy good oob.

You're still learning, yes, but you're a quick study at 25. Very, very well done.

For sure and for what it's worth, I hold US divi stocks and US ETFs in RRSP. CDN REITs, CDN divi payers and CDN ETFs in TFSA. The Non-reg. has only CDN dividend paying stocks. 

Max out the registered accounts (RRSP and TFSA) if you haven't already done so. After that, fill up the non-reg. account and stay out of debt in the process. You'll be set if you follow that formula for the next 20 years.

Not sure what else to say, you know most of this


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## cashinstinct (Apr 4, 2009)

Congrats !

I know your pain on not wanting to invest too much at same time.... I have too much cash too in % of my assets, I invest each month automatically to reduce my cash. I should lump sum it, but psychologically it's rough...


(For your US project: you should think about owning Vs renting and your time horizon, might be a downpayment?)


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## oob (Apr 4, 2011)

I'm posting here again to try and enforce some semblance of discipline on myself, and leave a record for future reference. A little over half a year since I last posted, and liquid assets are now sitting at ~$236k, of which $132k is invested. (~56%). Not thrilled with my deployment progress, and it's a drag on NW growth. Late new years resolution is to deploy 50k of unregistered cash into passive funds before the summer and stop thinking about it.

I've done well on the individual stock ideas I manage to generate, but there aren't enough of them and I'm not taking big enough positions relative to the size of my portfolio. I think I will leave ~20K in my RRSP for individual positions in the future - seems like the most tax efficient place to house this piece right?


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## GreedIsGood (Dec 4, 2013)

I'm just curious as to how you have $200k at 25??? Are you an engineer getting paid 100k?


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## oob (Apr 4, 2011)

Yes I've relatively done well pay wise and have made north of 100k every year since graduating.


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