Your Complete Guide to Index Investing with Dan Bortolotti

Put Your Assets in Their Place

2018-06-16T10:11:32+00:00March 5th, 2010|Categories: Asset Classes, Portfolio Management|Tags: |199 Comments

Couch Potato investors hear a lot about asset allocation, but asset location is also an important consideration. Asset location refers to the type of account you use to hold the stocks, bonds, cash and real estate in your portfolio. It’s important because the growth and income from your investments are treated in different ways by the taxman:

Interest from bond funds and bond ETFs (as well as individual bonds, GICs and money market funds) are taxed at your marginal tax rate, just like employment income.

Dividends from Canadian stocks are eligible for a generous dividend tax credit from the federal government. For the 2009 tax year, eligible dividends are first grossed up (increased) by 45% and declared as income; the investor then receives a tax credit of 19% on the grossed-up amount. Some provinces offer an additional dividend tax credit.

Foreign dividends are taxed at your marginal rate. In addition, many countries (including the US) levy a withholding tax on dividends, often between 10% and 15% (this may be recoverable in non-registered accounts).

Capital gains are profits earned from selling a security for more than you paid for it. You report 50% of your capital gains as income and pay tax on that amount. Mutual funds and ETFs must also pass along their capital gains to unitholders, although index funds are usually more tax-efficient.

Here’s a table highlighting the dramatic differences in how each type of investment income is taxed, assuming a marginal rate of 22%:

Interest Canadian Dividend Capital Gain
Amount received $1,000 $1,000 $1,000
Taxable income $1,000 $1,450 $500
Federal tax (at 22%) $220 $319 $110
Dividend tax credit (19%) -$275.50
Total federal tax owing $220 $43.50 $110

The tax rates above apply to securities held in non-registered investment accounts. Registered accounts offer several opportunities to defer or avoid paying tax on investment growth and income:

  • If your retirement savings are in an RRSP or RRIF, you pay no tax on interest, dividends or capital gains until you withdraw the funds. At that time, you pay tax on the entire withdrawal at your marginal rate. (You can’t claim the dividend tax credit or enjoy the lower tax on capital gains.)
  • With a Registered Education Savings Plan (RESP), you pay no tax until you withdraw the funds. At that time, all the growth is reported as income in your child’s hands. You pay no tax on the amount you put into the account, since contributions were made with after-tax dollars.
  • In a Tax-Free Savings Account (TFSA), all the growth is tax-free, and no tax is payable when the funds are withdrawn.

So, what’s a Couch Potato to do with all this information? If you’re able to hold all your investments in an RRSP or other tax-deferred accounts, you don’t need to worry much about this at all. However, if you also hold ETFs or index funds in a taxable account, review your asset location to make sure you’re not paying more tax than you need to:

Canadian equities deliver their returns from lightly taxed dividends and capital gains. So if you need to hold some of your investments in a taxable account, start with Canadian stocks.

REITs pay generous distributions, but these are not considered dividends. The bulk of the payouts are classified as income and taxed at your full marginal rate. (The rest is usually return of capital.) REITs are therefore best held in a tax-sheltered account.

Bonds (as well as GICs and money market funds) are best held in a tax-sheltered account, since their interest is fully taxable at your marginal rate.

Preferred shares are sometimes considered fixed-income investments, but they pay dividends, not interest. For income-oriented investors who have no more RRSP or TFSA room, Canadian preferred shares may be a good choice in a taxable account because they’re taxed more favourably than bonds.

Canadian-listed ETFs that hold international stocks include the popular iShares XSP and XIN. Although these are traded on the TSX, their underlying holdings are foreign stocks, so the dividends are not eligible for the tax credit. These ETFs are best held in a tax-sheltered account. However, as Canadian Capitalist has pointed out, XSP and XIN (which simply hold US-listed ETFs in a Canadian wrapper) are still subject to the US withholding tax even if they’re held in an RRSP.

Dividends from US-listed ETFs are fully taxable in Canada and get dinged by the additional withholding tax unless you hold the funds in an RRSP. Note that you still pay the withholding tax if the fund is held in an RESP or a TFSA. The good news is that you may be able to recover the withholding tax if you hold them outside an RRSP. A taxable account also allows you to buy and sell ETFs in US dollars and avoid currency exchange fees—most discount brokers do not allow you to hold US dollars in an RRSP. (Questrade and QTrade are the exceptions.)

Pulling all this together, here’s an example of how you might divvy up an ETF portfolio across different accounts with an eye toward keep taxes to a minimum:

Vanguard Total Stock Market (VTI)
Vanguard FTSE Developed Markets (VEA)
Vanguard FTSE Emerging Markets (VWO)
iShares Canadian Universe Bond (XBB)

iShares S&P/TSX Capped REIT (XRE)

Taxable account (assuming no more RRSP or TFSA room)
iShares S&P/TSX Capped Composite (XIC)
iShares S&P/TSX Canadian Preferred Share (CPD)

As you can see, tax planning is complicated, so if you have a large portfolio, consider seeking help from a financial or tax advisor.


  1. Kelly August 18, 2015 at 5:44 pm

    Looking at the simple couch potato portfolio with Vanguard ETFs I need some help with “location”.
    Your answer to Mike (feb 7) above is probably the most similar, except I hope to max out my TFSA and RRSP soon so I am planning what is best in non-registered.

    Let’s assume you are using up all your TFSA and RSP and then NEED to locate some investments in unregistered. Also, assume tax rate is higher today than when withdrawing RSP.

    This is what I have figured out. Please help if my logic is wrong.

    VAB: Focus on this in your RSP, (Why? Because bonds have lower growth and future tax expected)
    VXC: Focus on TFSA (Why? Because foreign equities are better in the TFSA)
    VCN: First top-up either RSP or TFSA but only if you have ample room. Put overflow in unregistered. (Why? Can be good in either TFSA or RSP but, there is a Canadian dividend tax credit if unregistered, so it is best to focus on the above two first.)

    What about some of the other Vanguard funds one may want to add to their portfolio?

    VCE: Locate with the same philosophy as VCN?
    VDY: Keep unregistered. (Why? Because there is a Canadian dividend tax credit)
    VRE: I don’t know where this is best or how to prioritise it.

    There are about 10 more but it gets complicated… If someone else has figured out where it is best to put all of these I would be interested in seeing your preferred “location”.


  2. Canadian Couch Potato August 18, 2015 at 10:40 pm

    @Kelly: There aren’t many hard and fast rules for asset allocation: a lot depends on your specific situation. But in general, Canadian equities are generally the most tax-efficient asset class, so they would likely by your first choice in a non-registered account, not your last. VCE and VCN are largely redundant: no need to hold both. REIT ETFs such as VRE are very tax-inefficient and should generally be held in a registered account or not at all.

  3. RW September 1, 2015 at 9:40 pm

    Similar to Kelly, I plan to use VAB VCN and VXC across RRSP, TFSA, and unregistered accounts.

    Is it basically VAB in RRSPs, VXC in RRSPs (to avoid US div withholding),and the fill rest of RRSP with VCN with overflow going into TFSA and then unregistered?

    I am still unclear on the US div withholding taxes. If VXC is inside the RRSP can I just forget the withholding and be unaffected and “safe”? The “may be able to recover” outside of rrsp sounds like too much work/hassle if I can avoid it.

    Also, I have never really though about what “short-term” meant since retirement is far away for me. Is 10 yrs too short to be thinking about a etf aggressive portfolio? This would be for the RESP account which is now itself past 50k, but my daughter graduates from high school in 10 yrs and it’s sitting in cash now.

  4. Parin Sunderji September 4, 2015 at 4:18 pm

    you have VTI as being appropriate to hold in an RRSP account. I believe it is not subject to U.S. withholding tax. However, it is in U.S. $. I am considering investing in VUS which is the Canadian $ equivalent of VTI. Does it enjoy the same exemption from withholding tax as VTI?

  5. Canadian Couch Potato September 4, 2015 at 9:16 pm

    @Parin: No, VUS does not enjoy the same exemption as VTI. To be exempt from the withholding taxes in an RRSP it must be a US-listed ETF:

  6. Walter December 10, 2015 at 11:19 pm

    Hi there,
    I’m interested in how to best allocate investments across registered and non-registered accounts. This is a useful post, but it is a 5 years old now. Other than the obvious of keeping CDN dividend paying stock or Preferred shares in non-registered accounts, I’m wondering if there are other recommendations that have become available more recently as there are so many new ETF products out there? Also, I find it useful that you have model portfolios described that people can follow…do you have something similar but that focuses on investors who need to factor in non-registered accounts as well? Perhaps you have this elsewhere on the site?
    Thanks very much.

  7. Canadian Couch Potato December 10, 2015 at 11:23 pm

    @Walter: Thanks for the comment. The basic ideas have not changed since this post was written, though you’re right that some newer products can help improve tax efficiency. I’d suggest starting by clicking “Taxes” in the Categories list at the right and browsing those articles first.

  8. Sebastien December 10, 2015 at 11:49 pm

    @Walter: You can also download my workbook to get an idea of how to invest your money for tax efficiency. It should help you a lot to understand all the concepts you’ll find on this website. I did put all the stuff I learned on CCP, CPM, MoneySense and PWL Capital in this single workbook.

    Here is the download link:

    You need Excel 2007+ to use it. Don’t use Google Sheets as there is missing features.

    Note: If you try the example on this page (, you’ll find out my results are differents. Read my comment in this page to understand why. CPP also gave a reply to this question on page ( Check for older comments with this date: October 30, 2013 at 8:19 am. I made a speadsheet to compare both scenarios and I found out that in most cases, there is a real advantage to put the lowest growing assets in the RRSP and the others in the TFSA. I am not saying that this apply to 100% of situation, so make sure you check with a professionnal to make sure.

    I wish my file can help you understand the concepts you’ll learn on this website.

  9. Chris W December 21, 2015 at 1:58 pm

    Hi everyone,

    I have a question about asset allocation.

    I currently have $65,000 in stocks spread across my TFSA and Margin account. I also have an RRSP but we’ll keep that out of this question for now since the RRSP serves a different investment goal.

    I have the following allocation:

    $15,000 VSB (TFSA)
    $13,000 VXC (TFSA)
    $13,000 VCN (TFSA)

    $15,000 VXC (Margin)
    $9,000 VCN (Margin)

    My TFSA is capped out at $41,000. Based on what I have read, I feel like VCN is best held in a non-registered account due to the tax advantages. Would it make sense for me to move my VCN investments over from my TFSA to my Margin, so I can put more VXC in my TFSA (in 2016 once I get the contribution room back), and keep the VCN all together in my Margin account? This would increase my TFSA contribution room come January 1st, and I would be able to re-contribute and fill my TFSA back up within 3-4 months.

    Or is it better to keep everything where it is now, because it’s more important to have my TFSA filled up and the VCN shares within it growing tax-free, than it is for me to move my VCN over to my margin, to have my assets be “in the best place”?

    Looking forward to your speedy response, as if I need to make any changes, it needs to be this week.



  10. Sebastien December 22, 2015 at 10:26 am

    @Chris W: You own less than $15,000 of each ETF in your non-registered account. That mean you could sell your ETF with not much capital gain. It could be a good time to do it now if really needed. You must consider that you have commission fees to pay that will be over 0.06% of your annual performance to buy or sell an ETF, and you’ll have to pay taxes on any capital gain in your non-taxable account. Add to it, you lose compounding on each 10$ you spend on transactions. The equation is not simple.

    Here are my tips:
    – Try to fit each ETF into an unique account. That make rebalancing the assets way easier to manage.
    – Try to see the future of your portfolio. What ETF wil you have to buy in your non-registered account in the next 3 years? Will you need to buy VXC back in your non-registered account later if you sell it today? If so, why sell it today and occur unnecessary fees?

    I like when things are easy (as much people do). In investments, I like when it is boring.

    Here are some recommandations (check with your professional):
    – You should fill your RRSP and TFSA first.
    – When both RRSP and TFSA are full, keep lowest growth investments like government bonds in the RRSP to maximize tax saving.
    – Try to hold Canadian equity only in your non-registered account. If you can’t, add US and international equity in this order.
    – If needed, try to have nothing else than GIC as fixed income in your non-registered account.
    – Do not hold real estate in a non-registered account.

  11. Sebastien December 22, 2015 at 12:30 pm

    @Chris W: If you want to understand why I think lowest growth investment should be held in RRSP, I made a spreadsheet to test the different scenarios. Here is the link:

  12. Freddie January 6, 2016 at 11:50 pm

    I have been going along with the placement of assets as described above until I read the following article and thought about it a bit and then ran some numbers myself.

    Basically you need to look at your asset allocation in terms of after-tax $ when allocating. This would mean, for example, if you are in the 50% tax bracket and you want a 50% bond, 50% equity portfolio that whatever you put in the RRSP would require twice the dollar value of that in the non-registered account.

    $50k bonds ($50k after tax) in non-registered and $100k equities ($50k after tax on withdrawal) in RRSP
    leaves you will the desired 50/50 porfolio. When you look at it this way, which in my mind makes more sense, it makes way more sense to hold the equities in the RRSP rather than in the non-registed account.

    It may also provide different results depending on the tax rate chosen on withdrawal and the amount of dividends that make up the portion of the equity annual return rate.

    Just a bit of a different thought process.

  13. Sebastien January 7, 2016 at 3:20 am

    @Freddie: The benefit of RRSP is that it gives you a tax return of about 38% (middle-class) of the amount you invested. It’s a good idea to reinvest that money into your RRSP as it will give another tax return next year and so on.

    You can invest 1 000$ in government bond or equities. You still get the exact same tax return. You won’t get more money because you decided to invest in equities instead of government bonds.

    In your RRSP at retirement in 10 years, you’ll have to pay 0,39$ in taxes on each dollar you invested at 7%. In your TFSA, you have 0.00$ to pay back and 0,14$ for capital gain in your non-registered account.

    Whatever you do, whatever money you use (yours or the one from government), you will buy the exact same amount of equities using any money if you want to keep your portfolio in balance. The important thing is to get the free money from government, then you have to think about how to invest your money. I think that the wise way to go is to put the lower-growth investment where you’ll pay the more taxes at retirement. You also have to follow some rules like the fact that REITs are not tax efficient and should not be kept in a taxable account at all.

    If you invest 1.00$ in a RRSP at 0%, it costs you 0.62$ after tax return and it will cost you about 0.20$ in taxes at retirement. That mean each dollar costs you 0.82$ at withdrawal if you made no interest. In a non-registered account, each dollar would cost 1,20$ while in TFSA the cost is 1.00$. There is a real advantage to get the tax return for the RRSP. The disadvantage is the amount of taxes you have to pay on each dollar at retirement. Even if we have a lower tax bracket at retirement, RRSP is the most tax expensive for middle-class.

    Keep things simple and follow your plan. Here are my recommandations if you’re in the middle-class:
    – Always fill your RRSP room first
    – When RRSP is full, fill your TFSA then non-registered accounts
    – Put lowest-growth investments in RRSP
    – Put Canadian equities, US equities then International equities in this order in your non-registered account

    This post is not to be construed as advice. It is for information purposes only. Consult a tax accountant or financial professional for proper advice.

  14. Freddie January 9, 2016 at 12:24 pm


    I have to disagree on the placement of assets. Let me go with a simple example:

    $50k in Non-registered account, $50k in RRSP and you want 50% allocation to bonds. So, the question comes down to bonds outside or inside RRSP.

    Here’s my logic:

    Bonds say get a return of 2%. At MTR of 50% you’d have to pay 1% of your initial amount in tax.

    Equities say get a return of 7%…all cap gains to keep it simple. That would mean you would have to pay 7% x 50% (taxable capital gains) x 50% MTR = 1.75% of your initial amount in tax.

    Wouldn’t you want to defer paying the 1.75% tax rather than defer the 1% tax?

    Tradition wisdom says keep bond inside as they are taxed at MTR. Yes that is true but bond returns are much lower and thus the net deferral is much lower.

  15. Freddie January 9, 2016 at 4:35 pm

    Made a nice spreadsheet that I hope you can see what I did.

    Comments? Questions?

  16. Sebastien January 9, 2016 at 5:31 pm

    @Freddie: Only half the capital gain is taxed. If you made 50 000$ in capital gain, 25 000$ will be taxed at your marginal tax rate.

    See the changes I made:

  17. Freddie January 9, 2016 at 6:03 pm

    Thanks Sebastian,

    I found the mistake. I had the 50% taxable capital gain but for some reason the equation was using the wrong starting funds. It was using “b53” instead of B37. Thanks for finding that for me. Now I’ll have to look more closely over my conclusions. I see you simplified my SS just for my example but MTR, ratio of funds in RRSP to outside, and % allocation do play a role from what I can tell.

    Let me play with this a bit more over the weekend.

    thanks again,

  18. Freddie January 9, 2016 at 6:22 pm


    One small mistake on yours. Beginning value each year for N-R bonds should have tax removed from previous year.

  19. Sebastien January 9, 2016 at 6:34 pm

    @Freddie: Why? You pay taxes on the interest every years, but the fund value does not drop. You make 2% on the fund value each year. The taxes you paid with your own money does not affect the value of the fund unless you want to withdraw money from your bond fund every year to cover the cost of interest. The net amount does take all the previous years interest into account.

    Sorry if my English is hard to understand. It’s not my first language.

  20. Freddie January 9, 2016 at 6:43 pm

    I assume that you pay the taxes out of the N-R account as there has to a way to account for that fee otherwise it is not included in the overall evaluation. If it comes from somewhere else then you are loosing the opportunity cost on those funds and that needs to be accounted for.

    You need to somehow include all the associated costs.

  21. Sebastien January 9, 2016 at 6:43 pm

    @Freddie: Also, all taxes paid for interest is money you can’t use to buy more funds. You’re losing compounded interest on each amount you spend to pay taxes. You should not have bonds in a non-registered account at all unless you use special structures like HXT (

    What’s important is to save money. The younger you start and the more you save, the more wealthy you get and the faster you should reach your goal. If you want to get more for your buck, you should use very easy strategies. Not something that will need complicated formulas.

  22. Freddie January 9, 2016 at 6:55 pm
  23. Sebastien January 10, 2016 at 8:13 pm

    @Freddie: Asset allocation is not an exact science. Nobody knows what’s the best asset allocation to get the more for your buck. I don’t think it is that much important to find new “optimal” % allocation for your RRSP. What I would suggest is that you find out if you make more after-tax money in your RRSP, TFSA or non-registered and buy what you think will be the most profitable into that account. You don’t really need to complexify things by adjusting the % allocation because you hold the fund in a specific account.

    What if bonds grow by 2% annually then grow by 7% for several years? Will you find new % allocation specific to your RRSP for every changes that happens?

    Sure you can do it, but rebalancing should not give headaches. It should be as simple as it can be.

  24. Freddie January 10, 2016 at 8:34 pm

    Thanks for the feedback.

    No I’m not trying to find the optimal % allocation. I already have figured out what I want for allocation long ago and adjust to a higher bond holdings as I get older. I’ve got a good spreadsheet now setup to calculate my after-tax asset allocation and that is pretty simple. I just rebalance based on that rather than on the traditional route and I inclued my wife’s pension not OAS or CPP. Just one or two extra columns to calculate the after-tax total for each asset in each account. Quite easy actually.

    I’ve been using this same spreadsheet for quite awhile, very simple. Just added the after-tax component this year. Will result in same # of trades as normal just larger $values this year for a couple to accommodate the difference between after-tax and not actual %.

  25. Sebastien January 10, 2016 at 8:46 pm

    @Freddie: What’s important is that you find it easy to manage and you understand what you’re doing. Not everybody would feel confortable trying to find % allocation based on the type of account.

  26. Pat January 23, 2016 at 11:30 am

    ”However, as Canadian Capitalist has pointed out, XSP and XIN (which simply hold US-listed ETFs in a Canadian wrapper) are still subject to the US withholding tax even if they’re held in an RRSP.

    Dividends from US-listed ETFs are fully taxable in Canada and get dinged by the additional withholding tax unless you hold the funds in an RRSP.”

    Dan, the first paragraph says that XSP and XIN would be subject to US withholding tax in an RRSP but the second paragraph seems to contradict it. Could you please explain? Much appreciated.

  27. Sebastien January 23, 2016 at 11:58 am

    @Pat: If you buy a US-listed ETF on US stock exchange, you won’t have to pay the US withholding tax if you’re a Canadian.

    If you buy a Canadian wrapper as XIN, you don’t hold the US-listed ETF directly. In this case, you’ll be subject to the US withholding tax.

    You have to see it this way: the US-listed ETF charge the US withholding tax to the person or company that buy it. If you buy the US-listed ETF yourself, you are the one who get the tax slip and you’re elligible for the US withholding tax “refund”. If a company buy it for you (the Canadian wrapper like XIN), they are the one who get the tax slip from the US-listed ETF company. iShare is not a person and then must pay the US withholding tax. The tax slip they send you are in Canadian dollar and don’t tell how much US withholding tax you paid. So you can’t get a “refund”.

  28. Pat January 24, 2016 at 10:04 am

    Thanks Sebastien

  29. Canadian Couch Potato January 24, 2016 at 11:02 am

    @Pat: Re: Sebastien’s comment, “If you buy a US-listed ETF on US stock exchange, you won’t have to pay the US withholding tax if you’re a Canadian.” This is an incomplete answer. That statement only applies to RRSPs. In a non-registered account, the withholding tax will be levied, but it can be recovered by claiming the foreign tax credit on your return. In a TFSA or RESP, the tax applies and cannot be recovered.

    This is a complex topic I have covered in several previous articles and a white paper co-authored with my colleague Justin Bender:

  30. Pat January 25, 2016 at 4:38 am

    Thanks Dan!

  31. Ari March 23, 2016 at 1:35 pm

    For my TFSA, I’m planning to have 20% on Canadian Bond VAB, 30% on US Bonds VBU, and 50% on International Bond VBG in total 100% bond investment. Considering all in bond is this a good split? Also, from the withholding tax point of view are there any withholding tax for VBU and VBG in TFSA?

  32. Canadian Couch Potato March 24, 2016 at 10:16 am

    @Ari: There is no withholding tax on blind interest, only dividends, so if you want to hold foreign bonds you don’t need to worry about that.

  33. Ari March 28, 2016 at 4:46 pm

    @CCC I’m new to ETF investments. I see from your blog that it’s better to put bonds etf into TFSA. I’ve 250K to invest. My family TFSA limit is $93K and $50K for RRSP and rest is Non-Reg. Do you have a recommended portfolio suggesting funds for each of these investment accounts? Or based on my investment do you recommend a strategy which ETF funds to invest?

  34. Sebastien March 28, 2016 at 7:07 pm

    @Ari: I entered your parameters into my Excel Workbook so you can have an idea of what kind of asset allocation you could make. I suppose a 40% allocation to bond and 60% to equity. Here is a screenshot:

    If you would like to download and use my Excel Workbook to do as many simulations as you wish, here is the link:

    This workbook contain all what I learned on CCP and MoneySense, both very reputable sources. I prefer to have bonds in RRSP as RRSP will be fully taxable at retirement when TFSA won’t be. I already made the demonstration why I think it is more tax effective that way. Just read my comments from January, 6th with Freddie if you need more informations.

  35. Mike October 21, 2016 at 11:31 am

    Great article thanks!
    The only thing I do not understand is you state “If you’re able to hold all your investments in an RRSP or other tax-deferred accounts, you don’t need to worry much about this at all.” Which suggests putting everything in RRSP if possible? However my understanding from the rest of the article is that Canadian Equities are better off in a non registered account because “You can’t claim the dividend tax credit or enjoy the lower tax on capital gains.” when you finally take the money out of your RRSP.
    I hope I’m just misunderstanding a small point. It might be helpful to provide a guide where to put yearly contribution when A) you have $0 in RRSP, TFSA or non registered account assuming you wish to use a suggested Model Portfolio of three ETF’s (Canadian bond VAB, Canadian Equity VCN, Global Equity VXC).
    Then B) you have just maxed out both or either RRSP &/or TFSA.
    Finally C) you maxed out RRSP & TFSA some time ago and the Non Registered accounts are now much bigger.

    Also, should you leave an RESP out of this thinking because you wish the money in the RESP to grow to the max (therefore it needs equities) while having enough bonds to reduce volatility especially as you get closer to the time your child will use the money. I can appreciate that if you wish to diversify 50%/25%/25% the RRSP/TFSA/Non-Registered do not individually need to match this but should when combined, whereas the RESP must match this all the time?

  36. Canadian Couch Potato October 21, 2016 at 11:41 am

    @Mike: This is pretty big topic, but in general, if you have room in your tax-sheltered accounts you should not need a non-registered account at all. The misunderstanding you allude to is “Myth #2” in this article:

    Remember that in all cases the first decision is which account is right for you: TFSA or RRSP. If you have maxed out both of these (or you’ve deemed an RRSP to be inappropriate), then you can contribute to a non-registered account. The decision about which funds to buy in each of these accounts comes at the end.

  37. Manny April 19, 2017 at 12:37 pm


    I am 48, have $80k in RRSP that want to move to my own itrade account and invest in ETFs like this:

    55% US and international Stocks (VXC or XAW)
    25% Canada stocks (VCN)
    20% aggregate bonds (VAB or ZAG)

    I planning to live a modest retirement life in central america where I own a house and will need less than $1k per month to have a modest life.

    I am not afraid to go a aggressive for a few year and go more conservative when I reach 60.

    1) Any suggestion on the allocation %?

    2) Would you suggest VXC or XAW now that XAW have lower Mer?

    3) What about VAB or ZAG now that ZAG has lower Mer?

  38. Lawrence March 3, 2018 at 12:09 pm

    Is there any asset class that should be priorised in a personnal taxable account vs. corporate taxable account ? Canadian equities ?

    Suppose someone with a portfolio 100% in a corporate account opening a personnal taxable account, what asset should be placed in the personnal account for maximum tax efficiency ?

  39. Canadian Couch Potato March 4, 2018 at 1:00 pm

    @Lawrence: As always, it depends on the details, but it can often make sense to keep international equities in a personal account rather than in a corp. Foreign withholding taxes are not fully recoverable in corps, as they are in personal non-registered accounts, and currently international equities have a higher yield than US equities. In many cases, personal tax rates will also be lower than corporate tax rates in investment income, so it makes sense to keep the highest-yielding asset in the account with the lower tax rate.

  40. Ashish Bhat July 12, 2018 at 11:04 am

    Dear Dan / CCP author,

    Thank you for explaining the tax implications of various investments. In conclusion, I am still confused about this –
    If I hold a TFSA account, an RRSP a/c and a non-registered account – where should I buy/hold/sell 1) US-listed ETF / Equities / mutual funds, 2) TSX listed ETF investing in US/Foreign equities?

    I did understand though that if I am investing in Canadian Equities/ ETF, I would benefit from dividend tax credit – so I should hold those in a non-registered account, whereas any GIC/bonds should be held in a registered / TFSA accounts.

    Thank you.

  41. Canadian Couch Potato July 17, 2018 at 10:55 am

    @Ashish: Unfortunately there is no simple answer to your question: determining the most appropriate asset location depends on many factors. A couple of general points:

    – There is little benefit to using US-listed ETFs except in an RRSP. If you are holding US or international equities in a TFSA or taxable account, a TSX-listed fund is usually a better choice.

    – In general, it makes sense to use your TFSA to hold your high-growth assets (e.g. equities, not GICs).

  42. Ai August 5, 2018 at 12:44 am

    Hello CCP,

    I’m not sure if I got this right, but assuming I’m following your model etf portfolio. I should then put ZAG and XAW at my RRSP while VCN on my TFSA?


  43. Canadian Couch Potato August 5, 2018 at 8:54 pm

    @Ai: That depends (as always) on your specific situation, including your asset allocation, the relative size of the two accounts, whether you have available contribution room in either account, and so on.

  44. Ashish August 6, 2018 at 3:23 am

    Hi Dan,
    Thank you for your reply – what struck me most was your advice – “it makes sense to use your TFSA to hold your high-growth assets”. Am I correct in concluding that Canadian wrapped TSX listed ETFs dealing in US-equities are not subject to US-withholding Tax? Hence it is better to hold them in TFSA first. Then if I am buying any US-listed ETFs, they could go in RRSP – since US withholding Tax is recoverable in RRSP accounts.

    I know for sure, I am going to max out on allowable limit in TFSA account. I do want to put only a fractional amount in RRSP account (since I can’t touch it until I would be old) and the rest into a non-registered taxable investment account.

    Thank you once again! :)

  45. Canadian Couch Potato August 6, 2018 at 2:47 pm

    @Ashish: Any ETF that holds US equities is subject to foreign withholding taxes in a TFSA, whether it uses a wrap structure or not. The same is true for international equities. But that is not a reason to avoid holding foreign equities in a TFSA. I would encourage you not to get too focused on foreign withholding taxes:

  46. Justin Sheppard October 12, 2018 at 2:29 pm

    Hi Dan,

    I’m wondering how you would handle the following ETF’s in regards to TFSA and RRSP location to minimize tax impact.

    ZAG Bond
    VCN Canadian All Cap
    XAW All Markets Ex Canada

    Would it be right to have the ZAG in the RRSP and then hold the VCN and XAW in my TFSA?

    Thank you for all of your continuous inspiring content, it has helped me a lot.


  47. Canadian Couch Potato October 14, 2018 at 7:08 pm

    @Justin: In general it can make sense to favour equities in a TFSA and bonds in an RRSP, but this is complicated by the details. What if your target asset is 40% bonds and 60% equities but your RRSP is much larger than your TFSA? If possible, consider holding your target bond allocation in the RRSP, and then fill up the rest of the of the RRSP and all of the TFSA with equities. To make rebalancing easier, hold both Canadian and foreign equities in both accounts.

  48. Snow October 15, 2018 at 7:23 pm

    Hi Dan,

    A question that has been bugging me over the years is that, it becomes impossible to re-balance a portfolio if your margin account starts to grow to become larger than RRSP/TFSA..etc combined, because then you would be forced to buy those tax inefficient ETFs in the margin account eventually. I see a lot of info about keeping the balance but not how across several accounts, is there a particular article on this by any chance?


  49. Canadian Couch Potato October 15, 2018 at 10:14 pm

    @Snow: You’ve hit on one of the major reasons why there is no perfect asset location strategy. Keep in mind, however, that there is nothing wrong with keeping fixed income in a taxable account, as long as you use a relatively tax-efficient product, such as a discount bond ETF or GICs. This article may also help:

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