Your Complete Guide to Index Investing with Dan Bortolotti

Remodelled Portfolios for 2014

2017-12-02T23:18:34+00:00January 6th, 2014|Categories: Indexing Basics, New products|Tags: |159 Comments

Another new year is upon us, and it’s time review my model Couch Potato portfolios. I’ve been at pains to discourage investors from tinkering with their portfolios every time a new fund comes along, but 2013 did see the launch of some significant ETFs. In a couple of other cases, it was just time to replace the incumbents with less expensive choices. You can visit the Model Portfolios page for full details, but here’s a summary of the changes:

Global Couch Potato

  • I’ve added the ING Direct Streetwise Balanced Portfolio as a simple option for the Global Couch Potato. While using individual index mutual funds allows for lower costs (especially if you use the TD e-Series option) and more flexibility, the Streetwise Portfolios are ideal for investors who have small portfolios in registered accounts.

Complete Couch Potato

  • I’ve added a note suggesting that investors who do not want to trade in US dollars should consider VUN, XEF and the iShares MSCI Emerging Markets IMI (XEC) instead. All three of these funds were launched in 2013, finally providing low-cost options for foreign equities without currency hedging. Outside an RRSP (where these Canadian-listed ETFs are less tax-efficient) the case for using US-listed ETFs is not as strong as it once was.


Don’t rush to make changes

I can’t stress enough that there is no need to implement any immediate changes if you happen to follow one of my model portfolios. It makes little sense to incur two trading fees to switch to a fund that has a slightly lower MER, especially in a small portfolio. Consider, for example, the cost of switching to VAB from the iShares DEX Universe Bond (XBB). The difference in MER is seven basis points, or just $7 annually on a $10,000 investment. Meanwhile, the switch may cost you $10 per trade, and perhaps a couple of cents per share on the bid-ask spread.

In a taxable account it is almost certainly a mistake to swap out an equity ETF now. Given the markets’ performance over the last couple of years, you’d likely incur a significant taxable capital gain. For example, XWD has risen in price almost 45% over the last two years. Taking a huge tax hit to save 0.22% in MER is madness. If a tax-loss harvesting opportunity arises in the future, that’s the time to make any switches in a non-registered account.

That said, many people will be making RRSP and TFSA contributions this time of year. And since 2013 was a huge year for stocks and a lousy one for bonds, chances are it’s time to rebalance your portfolio. If you’re planning to make a few trades in your account anyway, that’s a good time to make any product switches you’ve been considering.


  1. Canadian Couch Potato October 1, 2014 at 9:07 am

    @Michael: Foreign withholding taxes are lost in a TFSA no matter what type of product you use. The combination of VUN and XEF is about as good as you can do.

  2. Jackie November 10, 2014 at 12:29 am

    Hi Dan
    I understand the logic in not switching funds to capitalize on small differences in fees. However, I’m re-balancing my portfolio not by selling off, but by purchasing in the deficit areas. I’ve been buying the new funds with this years contributions.
    Is there a reason to do, or not do that? besides the mess holding all of the different funds makes of my spreadsheets? :)


  3. Canadian Couch Potato November 10, 2014 at 8:11 am

    @Jackie: This is really just a personal preference: I like to keep things simple by avoiding multiple holdings in the same asset class. keep in mind that in your situation, where you are making new purchases anyway, selling your older holdings actually makes more sense. It would just mean one additional commission.

  4. Bibi April 9, 2015 at 9:53 am

    “I’ve added a note suggesting that investors who do not want to trade in US dollars should consider VUN, XEF and the iShares MSCI Emerging Markets IMI (XEC) instead.”

    I’m trying to compare VWO and XEC. What could be the reason why XEC shows much better returns than VWO?
    2014 = 4.82 and YTD = 12.35
    2014 = 0.60 and YTD = 2.08

  5. Canadian Couch Potato April 9, 2015 at 9:55 am

    @Bibi: VWO reports its returns in US dollars and XEC reports in Canadian dollars:

  6. Bibi April 9, 2015 at 11:19 am

    Thank you.

    XEC holds 99.99% of us-listed IEMG. If I’m not mistaking it falls into your third “Canadian-listed ETFs that hold US-listed ETFs” category. Wouldn’t VWO for that reason still a better choice for an RRSP account?

  7. Canadian Couch Potato April 9, 2015 at 3:49 pm

    @Bibi: If your only criterion is reducing foreign withholding taxes, then yes. But the decision needs to be weighed against the cost of converting CAD to USD to purchase VWO:

  8. Sebastien October 5, 2015 at 6:15 am

    @CPP: I have TD mutual funds (TDB909, TDB900, TDB902, TDB911) in my TD Direct Investing account. I would like to know what you suggest as ETF or mutual funds for real-return bonds, Canadian real estate and Emerging markets equity.

    I was thinking about ZRR, ZRE and XEC, but I would like to get your advice on that.

    Thank you.

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