Your Complete Guide to Index Investing with Dan Bortolotti

Announcing Some Site Updates

2012-03-20T22:08:41+00:00March 20th, 2012|Categories: Indexing Basics|14 Comments

Spring is a time for renewal, so I am happy to announce that I have freshened up some of the permanent pages on the blog to make them more useful.

When I launched this blog more than two years ago, there were just few dozen Canadian ETFs, so it was practical to catalogue them on a single page. No longer. Today there are more than 300 exchange-traded products on the TSX, with so many being added that it is impossible for me to keep the page up to date.

Moreover, I feel that I can do far more service by helping readers navigate the dizzying array of choices. So the new ETFs page includes a small number of recommendations for each of the major asset classes. I have also included US-listed ETFs among these recommendations, where appropriate.

The situation is different with index mutual funds. The sad truth is that most index funds in Canada are so expensive that they’re not worth recommending to anyone. So my new Index Funds page includes only those that are genuinely useful, as well as some guidance about which fund family may be appropriate for different circumstances.

Finally, I have deleted the Cheapskate’s Portfolio from my Model Portfolios page. The appearance of Vanguard in Canada has made this portfolio mostly obsolete. I’ve also come to believe that any portfolio large enough to be meaningfully affected by a few basis points in cost should be more diversified anyway. The Complete Couch Potato would be a better choice.


  1. Linda March 20, 2012 at 10:30 pm

    Hi Dan – thanks for the updates. Currently I have 22% cash; 27% bonds (CBO, XSB and some corporate bonds maturing over three years); 30% Canadian equity (XIC, XEG, XFN, XMD and Sunoco Shares); 10% US equity (XSP and XSU) and 11% international (XIN, CWO). I am in my mid-50’s and want to “model” my portfolio to the Complete Couch potato. As you can tell, I have a home bias, but all the literaturw suggests US and international equity. Should I decrease my Canadian equity to 20%?
    With respect to the the bonds,how does the US bond ETF (e.g. XIG) compare to the real return bond XRB? I would also like to add some REIT, would you agree that a global REIT or a Canadian REIT or a combination of both? And, can you refresh my memory regarding the advantages/disadvantage of buying ETFs on the US stock exchange for an RRSP/TFSA account. Thanks so much.

  2. Canadian Couch Potato March 20, 2012 at 11:01 pm

    @Linda: The difference between 20% and 30% Canadian equity is not necessarily a big deal. I would be more concerned that you are hugely overweight in banks and energy. The Canadian market is already undiversified enough, and to add XEG and XFN on top of that seems excessive.

    XIG tracks US corporate bonds, while XRB tracks Canadian government inflation-protected bonds. If you’re interested in the Complete Couch Potato, you could add a small allocation of XIG, but it is not a substitute for XRB: they are completely different asset classes.

    A very large portfolio might split the real estate component between Canada and foreign REITs, especially if you’re already in danger of being overweight in Canadian equities.

    US-listed ETFs are fine for both RRSPs and TFSAs, as long as you can control currency conversions costs.

  3. Adam March 20, 2012 at 11:19 pm

    Hi Dan, I see the Vanguard ETFs haven’t yet taken over the iShares ETFs in your model portfolio section. As you outlined in a previous post, the Vanguard ETFs have lower MERs but are still very new. Any reason to purchase iShares over Vanguard as a new investor? I noticed the monthly dividends for VCE are lower than XIC, for example. Do you think this will change?

  4. Canadian Couch Potato March 20, 2012 at 11:26 pm

    @Adam: I would have no hesitation recommending any of the Vanguard Canada ETFs, but I’m not in a huge rush to replace XIC and XBB just yet. As for the dividend, are you looking at the dividend per share (dollar amount) or the yield (percentage)? I would be surprised if the yield was very different, since the VCE essentially holds the top 100 stocks in XIC. Has VCE even paid a distribution yet?

  5. Bondage March 21, 2012 at 12:56 am

    XIC vs XHY vs HYG vs LQD vs CHB for high yield bonds in a non-registered account?

  6. Andrew F March 21, 2012 at 9:21 am

    Bondage: what is your marginal tax rate? I would consider CHB only if you:

    1) Intend to hold it for some period of time, ie, 10 years (taking advantage of CG tax deferral)
    2) You face a high marginal tax rate, and you intend to hold it in a non-registered account.

    CHB has higher fees, including a ‘hidden’ swap fee, which will tend to act as a drag on performance. The tax benefits might make up for it.

  7. Canadian Couch Potato March 21, 2012 at 9:32 am

    @Bondage: I agree with Andrew. The Advantaged ETFs are most useful for those who would otherwise face a very high tax bill. HYG and LQD trade in Us dollars, which may also add transaction costs.

    XIC, as a Canadian equity ETF, is totally different asset class.

  8. Peter ZQ March 21, 2012 at 11:23 am

    Hi Dan, thanks for all the info, as well as the site update. As a new investor I’ve found your pages and blog postings very educational and useful. Very much appreciated!

  9. Canadian Couch Potato March 21, 2012 at 11:29 am

    @Peter: Thanks for the comment, and glad you’re finding the site useful. Cheers.

  10. adam March 21, 2012 at 11:56 am

    @Dan, I was looking at it wrong.. you are right, VCE hasn’t paid out a distribution yet. I should have been compared XSB and VSB, which both pay out monthly. On $1000 worth of shares, XSB is paying out about $2.42/month (about $0.07 for each $29 share) while VSB is currently paying out about $1.72 for the same amount (about $0.043 for each $25 share). In my mind this will add up to be significant over time unless the distributions of VSB catches up. I haven’t been doing this for long enough to know if we should expect the monthly payouts to balance out soon or not. Any thoughts?

  11. Bondage March 21, 2012 at 12:07 pm

    Thanks Dan and Andrew for above comments. Seems the choice is to either pay taxes or fees :(
    Great site. Wish I had seen the spreadsheet from 2 posts ago earlier. Would have saved a lot of time and yelling at the computer when I set up my spreadsheet last fall.

  12. Charlotte S March 21, 2012 at 6:52 pm

    While you are spring-cleaning the index funds pages, I believe the MERs of the TD e-series funds have also increased slightly since they were posted.
    TD Canadian Bond Index Fund 0.51
    TD Canadian Index Fund 0.33
    TD International Index Fund 0.50% (same)
    TD International Index Currency Neutral Fund 0.53%
    TD U.S. Index Fund 0.35%
    TD U.S. Index Currency Neutral Fund 0.51%

  13. Canadian Couch Potato March 21, 2012 at 7:22 pm

    @Charlotte: Thanks, you’re right. I have updated all of these, as well as the Model Portfolio costs.

  14. Brian March 22, 2012 at 4:52 pm

    I was curious why for your suggested index fund portfolio you chose the combo of RBC funds over using the Altimira funds which in gerneral have lower MERs. It seems mostly for diversification (TSX comp vs. TSX 60 for example). Also it looks like you prefer non-hedged US funds but hedged international (RBF559 vs NBC839)?

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