# Helping my 66yr family member choose ETF's



## Augie1489 (Mar 22, 2021)

I'm looking for advise to help a family member choose ETF's. She is retiring in May and has around $700k in RRSP'S. Currently she invested in TD mutual funds where she is paying an exorbitant 2.2% MER. I've suggested she bail on the Mutual funds and move her retirement funds into ETF's. I'm wondering what a good balance would be? Should she put everything into a conservative ETF like VCN? Should she look at a broad market all stock ETF with dividend yields like VTI? Perhaps and S&P 500 ETF like NOBL? Or maybe a mixture of different ETF's? Any advise here is welcome. Thanks.


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## cainvest (May 1, 2013)

You could base your ETF balance off the existing mutual funds which, I'll assume, she is alright with the risk profile. So the simple thing is to mirror the mutual funds with ETFs just to lower the fees. Another option, depending on the asset allocation she currently has, it to buy "all in one" ETFs (VCNS,VBAL,etc) if they match up to minimize the number of purchases needed.

If you want more detail post up the current mutual funds she has and what percentage of each.


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## Augie1489 (Mar 22, 2021)

cainvest said:


> You could base your ETF balance off the existing mutual funds which, I'll assume, she is alright with the risk profile. So the simple thing is to mirror the mutual funds with ETFs just to lower the fees. Another option, depending on the asset allocation she currently has, it to buy "all in one" ETFs (VCNS,VBAL,etc) if they match up to minimize the number of purchases needed.
> 
> If you want more detail post up the current mutual funds she has and what percentage of each.


That sounds like a good idea. What about Dividend focused to ETF'S as well. To help with generating income within her RRSP's?


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## zinfit (Mar 21, 2021)

Augie1489 said:


> That sounds like a good idea. What about Dividend focused to ETF'S as well. To help with generating income within her RRSP's?


If she has a US account I like the Vanguard US Total Market ETF [VTI] or the Canadian version VUN. One could balance this with a couple of the diversified corporate bond ETFs. VBAL might be a good choice. You have everything in one ETF at a very low cost. I really like Vanguard when it comes to ETFs. A very solid record and low fees.


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## cainvest (May 1, 2013)

There are many methods, each with pros/cons and risk factors. Some portfolios will require more "hands on" work while others are super simple ... it really comes down to what the investor is comfortable with. You can also look at TFSA as well for future "tax free" growth as you only mentioned RRSPs, this may even help for future tax considerations.


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## AltaRed (Jun 8, 2009)

It is virtually impossible to make a recommendation without knowing the asset allocation of her current portfolio. Volatility will/can be a key issue if the portfolio is too heavily skewed to equities and even more so if concentrated in a few markets. Dividend ETFs are not necessarily the best choices, e.g. the Canadian dividend ETFs could even more concentrated bets than plain old XIU with only marginally higher yield. Yield is not everything.

It may well be that Vanguard's new VRIF could be a decent choice for at least half of her portfolio. VRIF is designed to deliver ~4% income stream off a 50/50 equity/bond asset allocation into perpetuity. Much has been written about this offering, designed for retirees looking for reliable income streams.


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## james4beach (Nov 15, 2012)

AltaRed said:


> It may well be that Vanguard's new VRIF could be a decent choice for at least half of her portfolio. VRIF is designed to deliver ~4% income stream off a 50/50 equity/bond asset allocation into perpetuity. Much has been written about this offering, designed for retirees looking for reliable income streams.


VRIF is a very interesting new option. Do you know if the income stream is inflation-adjusted, or is it just a constant amount every month? In any case, this looks like a good fund which should be very suitable for retired people. Some useful articles on VRIF:









The lowdown on Vanguard's Retirement Income ETF: can you rely on its 4% payout target? - MoneySense


While a targeted return is NOT a guarantee, Vanguard expects the product will attract a fair amount of money from income-oriented investors suffering sticker shock when their GICs mature.




www.moneysense.ca













Where Does VRIF’s 4% Payout Come From? | Canadian Couch Potato


In my last post, I introduced the new Vanguard Retirement Income ETF Portfolio (VRIF), an asset allocation ETF designed for people drawing down their portfolio to meet regular expenses.



canadiancouchpotato.com


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## james4beach (Nov 15, 2012)

One possibility, building on the suggestion from @AltaRed above, might be to diversify into a couple different portfolio ETFs. You could choose them from two different fund companies to get a bit of a diversification in management. One idea might be equal amounts of XBAL and VRIF

*XBAL* is an iShares 60/40 fund which should have reasonably strong growth. It's well diversified and has 0.20% MER. With 350k invested in this, there would be annual distributions of roughly 7k or 8k

*VRIF* is the Vanguard Retirement Income fund. The fees are a bit higher at 0.32% MER. With 350k invested, the annual distribution would be 14k.

Combined, on 700k this gives 21k distributed annually in well-diversified, low fee portfolios from two of the world's best ETF managers. Even without knowing what she is currently invested in, I think I can confidently say that this would be a big improvement. It's a 88% reduction in fees!


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## AltaRed (Jun 8, 2009)

This Vanguard VRIF Q&A does not address this specifically, but does suggest next year's payout will be +/- 5% of current year payout depending on how the market reacts. Under point 7), they are aiming for 5% return overall, which is a buffer for the 4% payout. That tells me it is NOT inflation indexed BUT implicitly to the extent the fund enjoys higher than expected returns, payouts will increase. One would expect that to happen if inflation increased, i.e. one eventually gets higher CAGR from the bond component and asset inflation from the equity component.


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