As long-time readers will know, I review my model portfolios once a year and, if necessary, make minor changes when better or cheaper funds have been launched. I made no updates for 2018 or 2019, except to add the new Vanguard and iShares asset allocation ETFs as a fourth option last year.
For 2020, however, I’ve done a little remodelling.
Before explaining the changes, I’ll offer my usual caveat. These models are intended to be a default choice for investors who aren’t sure how to build a diversified portfolio, or are confused by the enormous variety of funds available. The specific fund choices are not definitive: in almost all cases, the major ETF providers (Vanguard, iShares and BMO) have options that are very similar and equally good. The changes I’ve made over the years have usually been subtle, with minor reductions in cost or improved simplicity. If you’re currently using one of the older portfolios successfully, please don’t feel the urge to switch.
All right, on to the changes. The new portfolios and their backtested returns (now going back 25 years) can be found on the Model Portfolios page.
Tangerine gets squeezed
First off, I’ve removed the Tangerine Investment Funds, which had been a staple of my model portfolios for close to 10 years.
For investors with a small RRSP or TFSA and a desire to be almost entirely hands-off, the Tangerine mutual funds used to be an excellent choice. But there are now much more attractive options, even for those with modest accounts and a desire for simplicity. Despite the competition from robo-advisors and an industry-wide trend toward lower fees, Tangerine has stubbornly kept its fund MER at 1.07% for more than decade. It’s hard to justify that anymore.
The E-Series gets an A
For those looking for an alternative to ETFs, I’ve kept the TD e-Series funds, which are now more attractive than ever.
In 2019, the funds changed their structure and now hold underlying ETFs rather than individual stocks and bonds. This change came with a modest fee reduction of 0.05%, but that wasn’t the big news. More important was the announcement that these funds—which for almost 20 years were only available to TD customers—are now available through any online brokerage. For index investors who want the benefits of mutual funds over ETFs, the e-Series funds are the best choice, by far.
ETFs just get easier
Finally, my model ETF portfolios have been simplified even more, and I’ve bumped them up to Option 1, which means they should be the first one to consider.
ETFs still aren’t right for everyone, but the launch of “one-fund portfolios” (also called asset allocation ETFs), combined with the low- and no-commission trades at several brokerages, have made them more appropriate even for small portfolios. For the vast majority of DIY investors, I believe these one-ticket solutions are the best way to build a diversified portfolio that balances low cost with ease of maintenance.
To add more flexibility, I’ve also included options for balanced portfolios that don’t have a ready-made solution—for example, there is no single ETF with a 50/50 mix of stocks and bonds. So I suggest some two-ETF model portfolios, which combine a bond fund and a globally diversified equity fund. These, of course, can be used to build a portfolio with any asset mix you deem suitable.
For example, the Vanguard Balanced ETF Portfolio (VBAL) is 40% bonds and 60% stocks, while the Vanguard Growth ETF Portfolio (VGRO) is 20% bonds and 80% stocks. If you decide you want something in between, my new model portfolios suggest a 30% holding in the Vanguard Canadian Aggregate Bond Index ETF (VAB) and 70% in the Vanguard All-Equity ETF Portfolio (VEQT).
These two-fund portfolios will require occasional rebalancing, but the trade-off is they actually have slightly lower fees that the one-ticket asset allocation ETFs.
Models are not optimal
I’m expecting some pushback about the changes to the model ETF portfolios. After all, the MER on the one-fund solutions is up to 0.10% higher than that of the three-fund portfolios I’ve been recommending for the last few years. There are still many DIY investors who believe that MER is the only factor to consider when building a portfolio.
But let’s remember that a model portfolio, by definition, is not designed to be optimal—if such a thing even exists. It’s a default for investors who are looking for a place to begin. And indeed, even more experienced DIY investors may benefit from using asset allocation ETFs, since they enforce disciplined rebalancing, reduce transaction costs, and discourage tinkering. All of these benefits are easily worth a few basis points of MER.
If you’re managing a multi-ETF portfolio successfully now, you should continue to do so. But if you’re new to DIY investing—or if you’re struggling to maintain a more complex ETF portfolio with discipline—embrace the simplicity.
Hey Dan,
Why have you switched from zag to vab for the bonds portion? I know you say they are interchangeable but why haven’t you decided to stick with zag in this year’s model?
Thanks!
@Victoria: I simply present all-Vanguard and all-iShares options. BMO does not have an all-equity ETF comparable to VEQT or XEQT. But you could certainly pair ZAG with either of those.
Yikes, sure glad you provide the opportunity for uninformed people to ask questions and that you take the time to answer them.
Thanks very much, Dan!!!
Hi Dan,
Thank you for updating the couch potato model. I’ve been at it for a number of years now and am slowly converting to the |Vanguard one stop shop ETF. I re-balance twice a year but have not sold out most of the early ETF’s because many have dropped their MER rates to keep up to the competition!! Plus why incur selling fees if the ETF is doing well and is part of my balanced portfolio. Do you still think I should sell some of them (such as xaw, xef or xuu)?? Keep up the great reviews. Thank you,
@Other Ted: As long as you are comfortable managing your existing portfolio then there is no need to switch to a one-ETF portfolio.
If I’ve been using the “old” ETF Model Portfolio allocation in my margin account, how do you recommend transitioning to the new model? If I sell and reinvest in the new model, I will incur considerable capital gains tax.
Hi
Despite the higher MER, my understanding is that Tangerine Investment fund portfolios performed better overall the last decade compared to Questwealth or Wealthsimple. Why should I switch?
on rbc direct investing what do i search for? looked for TDB216 found MER at 0.8???
which symbol should i search if i am looking for high equity 20 year outlook??
thanks!
Hi Dan,
Need some advice.
I am 39 and for the past 8 months i started to contribute to my taxable account (business owner) 500$ per week in the TD – E series (Aggressive). I choose TD SERIES for their ease of use since i work 12 hours per day don’t have much time to trade these days. I plan to retire on the first day on my 59th birthday to travel the world ;)
My RRSP (100K) and TFSA(55K) are max-out with dividends stock.
I am just not confident about my knowledge on taxable account and just want to make the best decision.
Any suggestion would help my journey to financial freedom.
@cardiacjoe: The proper fund codes for the e-Series funds are in the Model Portfolios document:
https://canadiancouchpotato.com/wp-content/uploads/2020/01/CCP-Model-Portfolios-TD-e-Series-2019.pdf
Hi Dan, From what I kept reading it suggested to set up a Mutual Funds account through TD bank to then have the ability to access the e-series index funds. I just spoke with a TD Branch and they informed me that this is no longer allowed and that I must open a TD direct investing account in order to access investing online. On their website though they now actually call this the D-series through this platform – is this the same or is the e-series still existent and accessible through the direct investing via another means? Also is this associated with the new changes in 2019 you previously discussed or is this a separate change. If this is separate, what are the implications of this (different MER costs, fees now for buying and/or selling, or for reinvesting dividend?) Hoping all remains the same but just wanted some clarifications before I move forward. Thank you again!
@Rebecca: This is all part of the same suite of changes at TD. I have always preferred buying the e-Series funds through TD Direct Investing rather than through a TD Mutual Funds account anyway: TD Direct allows much more flexibility, such as the option of adding ETFs or GICs in the same account. Now you don’t have to limit yourself to TD Direct Investing: you can use any brokerage to access the funds.
My understanding is that e-Series funds still use that name: other TD mutual funds may be labelled D-Series, but the ones in my Model Portfolios are still e-Series. Make sure you use the correct fund codes, which are on the PDF:
https://canadiancouchpotato.com/wp-content/uploads/2020/01/CCP-Model-Portfolios-TD-e-Series-2019.pdf
Thank you very much!
Hi Dan,
Just about to convert my mutual funds and embrace simplicity and consolidate my RRSPs to your new CP2020 model but given the downturn in the markets today. should I wait?
Every time, I about to buy, I get “cold feet”.
@Sue: if you are already invested in mutual funds (as opposed to sitting in cash), then there is no real decision here. If you are buying high, you would also be selling high (or vice versa). There is never a bad time to switch from high-cost funds to low-cost funds.
Your TD e Series Model Portfolio is password protected and I am unable to print it for closer review. Can you help with that?
Hi Dan,
I have been following the Tangerine model portfolio for the last few years (through a TFSA). Since you no longer recommend it, what is the best option for someone like me who has already been investing there? Should they be looking at making the move to one of the more attractive options or just keep with it at this point? Also wondering where I could find more information on the other more attractive options – would they be as “hands off” as the portfolios at Tangerine?
@Ed: The PDF should be printable now.
@Laur: If you are happy at Tangerine, you should stay. I have tried to stress this every time I update the model portfolios. The updates do not mean that all previous versions should be abandoned.
If you do want to consider other options, this should help:
https://canadiancouchpotato.com/2020/01/28/how-to-set-up-a-hands-off-etf-portfolio/
I think the TD e-series is also password protected. I was able to print the iShares and Vanguard models, but couldn’t print the TD. I want to compare them all to see what is the best way to invest my son’s RESP. Thank you!
@Connie: The PDF has been unprotected and can now be printed.
Hi Dan!
Thank you for the information you provide! Using these blog posts and the recommended reading list, it’s helped me a lot to better understand how to setup a passive investing portfolio. Just wanted to drop a note of appreciation.
Best Wishes
Charles
Hi Dan,
You previously replied to a comment that the equity component of the recommended ETFs don’t evenly allocate funds between US, CAN, and International holdings. From this previous posts, as long as the Canadian component is between 20%-40% (vs a strict 33.3%) then the results should be similar in the long term: https://www.moneysense.ca/columns/bias-towards-canadian-stocks/
That said, will the one-fund ETFs maintain their current allocation over the long-term? For example: XBAL (CAD: 25%, USD 45%, Int/Emg 30%) and VBAL (CAD: 30%, USD 40%, Int/Emg 30%)
Also it seems for those that want to stick to a more traditional 33.3% distribution, going individual ETFs or eSeries would be the preferred option, rather than going with the one-fund solution.
Thanks,
– Will
@William: I don’t think anyone can predict whether Vanguard or iShares will maintain their current allocations. As the relative market caps of the different regions change, however, the funds may well adapt. For example, during the last 10 years the market cap of the US has became much higher relative to international stocks. If that changes then Vanguard and iShares might lower their targets accordingly.
I would not choose individual funds over an asset allocation ETFs only to keep the mix one-third each. It’s too a small a factor to make that the main driver of the decision.
Hi Dan,
I am currently managing a portfolio which reflects your former model portfolio and I am comfortable doing it.
With that said, I am trying to preach the importance of investing to my brother and feel that the new Vanguard ETF funds might be suitable for him. I am confident that I could teach him how to manage one of the old model portfolios but I am unsure whether or not it would be worthwhile.
My question regards how the fees work with these one fund solutions. Is the 0.25% MER with these new funds representative of the total fees you pay, or do you pay that on top of paying fees on the funds inside the fund. For example, I believe that VCN has an MER or 0.06%. Does this mean that you actually pay an MER of about 0.31% on that portion of your portfolio, or is the 0.25% representative of all the fees you are paying?
I am also unsure about how they take the fees. Are the fees always baked into the price of the ETFs?
Hi. Is it possible to buy TD e-series mutual funds using a self-directed Questrade account? I don’t see those listed there…
@William: The published MER of an asset allocation ETF is the total amount you pay: the cost of the underlying funds is included in that number.
Fees on ETFs and mutual funds are generally taken off before the fund pays its distributions (dividends or interest). So you never see them directly, but they are reflected in the correspondingly lower value of your holding.
@Raghvendra: The e-Series funds should now be available at all brokerages. If you don;t see them on the list, it would be worth a call to Questrade. Make sure you have the correct fund codes (for example, TDB900 for the TD Canadian Index Fund).
Hi Dan,
What do you mean by “For index investors who want the benefits of mutual funds over ETFs, the e-Series funds are the best choice, by far.”
What are the benefits of mutual funds over ETFs?
@Rick: See the Model Portfolios page for a table of pros and cons:
https://canadiancouchpotato.com/model-portfolios/
Hi Dan,
I am very new to this field and have opened a TD direct investing account few days ago. My plan is to follow your portfolio for the TD e-series. However, could I also buy the Vanguard (VBAL) ETF through the TD DI account? Do you recommend that? Or should I open up a Questrade account for that? Thanks a lot for all the info you provide !
@William: If you are new to investing I’d suggest sticking with the e-Series funds for a while until you are more comfortable. You can always switch to a one-ETF portfolio at TD Direct later, although I would not be in a rush to do so. Opening a second account with a different brokerage would likely just complicate your financial life for no good reason.
Is TD also free for buying ETF as well like Questrade? Would I be able to buy ETF while also holding the e-Series in the TD Direct account or would I need to sell them first? How much do you recommend putting into the e-Series before buying the ETF? I plan on maxing out my TFSA. I also have a few thousand in WealthSimple robo right now. Thanks
That’s it, i’m throwing in the towel. After a decade of following CCP investment advice, I simply can no longer stomach the disconnect between the stock markets and the global economy.
I’m baffled as markets keep climbing while ignoring all news. Many say the markets are inflated because they are solely based on corporate share buy backs. Recession talk has been thrown around for a year or so, seemingly with good reason. And yet, even with the recent events in China and weak U.S. consumer spending numbers, the markets continue to climb.
I know, i know……there are decades of proven statistics telling me i’m an idiot not to ignore the “noise” and stay invested. It’s just that nothing makes sense anymore…..how the heck do you invest in this mess?
Hi Dan
I am new to DIY investing. I have an advisor that handles my portfolio but eventually want to learn to manage my own. I have a lump sum in cash to start investing at this point. Roughly 300,000. Going to open an account at Questrade. Do you have any recommendations for a couch potato advisor in GTA west that can steer me in the right directions. Not sure where to start. Very much a newbie to all of this. Where do I begin?
@Julie: If you are looking for an advisor to assist you in setting up a DIY portfolio, unfortunately you’re not likely to find one. Only financial planners (who cannot make ETF recommendations or give investment advice) will work with investors who manage their own portfolios. Some background:
https://canadiancouchpotato.com/2016/12/15/podcast-2-planning-vs-investing/
Hello Dan,
I am currently investing with TD e-series but I am interested in opening up a questrade account and purchasing an all in one ETF such as VGRO to lower my fees (as I am a low income earning self employed person and need all the help I can get!). My question is, when one is approaching retirement (I am very far away from that point) how does one rebalance an all in one fund? Would you have to sell VGRO for example and purchase another all in one fund with a more conservative asset allocation? I’m a newbie investor and am torn between a one or two fund ETF portfolio for that reason. Please advise. Thanks for your quality content !
@Hen: If you eventually want to decrease your risk in retirement, then yes, you would need to sell all or part of your existing fund and purchase something with a higher allocation to bonds. But you would need to make a similar transition no matter what, so I’m not sure it makes any sense to use a two-ETF portfolio now with the expectation it would be easier many years from now. I’d suggest using a one-ETF portfolio now and then cross that bridge when you come to it.
First, thank you for what you do, this is amazing. I that started investing with the December 31, 2018 5 ETF portfolio (both in RRSP and TFSA) model in August 2019. Thinking about rebalancing stresses me as I still think I have to time the market to do so. Would you suggest I make the switch to the 1 ETF portfolio? Sure it would have a cost as I would need to sell 10 ETF across both my accounts and the MER would be .05 to .1 higher, but I see the benefit of not having to think about rebalancing and I’m trying to think about pros and cons here.
@Jon: From what you describe (“rebalancing stresses me”), it sounds like you’re the perfect candidate for a one-fund portfolio. There would be some initial cost when you make the switch, but going forward you’ll save far more in commissions because you’ll never need to rebalance. And you won’t have to worry about the stress. As you’ve found, rebalancing usually means selling what has recently done well and buying what has done poorly. Many people have a hard time doing that: it feels much easier to chase what has done well.
Hi Dan, I’ve been using the CCP system for 5 years now, and I am very happy with the approach. (Thanks!) For my RRSP, I’ve followed the Balanced (40/60 B/E) approach. As a 50yr old, in my TFSA account, is there a general comment you can make regarding adopting a higher risk approach (say; VGRO?). What are folks doing in their TFSA in general? Thanks, krazyk
Hi Dan,
I started following your model portfolios in around 2012(when I had next to no money), and a while back switched to a 3 fund model. It is an RRSP account. I had also opened a TFSA with TD, e-series, and am now planning to move that over to questrade and ETF’s. I recognize it is not a front and center issue, but at this point, with both my TFSA and RRSP having similar, comprehensive asset allocations, and I am planning to tilt the scales of my bond ETFs going in the RRSP and equity ETFs in TFSA. I am wondering if it makes sense to balance the overall portfolio by selling equivalent amounts of bonds in the TFSA/equities in the RRSP to get those assets where they are likely to be happiest from a tax perspective in the long run, or just leave things as they are and allocate between accounts going forward.
Also, to your point about there still being a place for the e-series, my example is that I am using them for my kids’ RESPs, and it is nice to have that all effecively automated, save for reallocating as they get older (even then should just be changing the automatic purchase amounts once a year)
Thanks a ton for all the help and info you have provided over the years!
Dan,
I started our self-directed RRSP’s following your couch potato portfolio t-series funds in I think 2009. I’m happy, happy, happy to say we are near retirement and thanks to you, have a very nice nest egg.
Now I need advice on a retirement portfolio. I’m considering moving from t-series to ETF’s, maybe one or two if possible. Can you give me some advice or direct me to where I can find some.
Thank you! Mary
@Mary: Glad to hear you have enjoyed a successful decade as a DIY investor. I’m not sure there is any need to make fundamental changes now that you’re approaching retirement. You might want to make the portfolio more conservative, but that does not need to involve moving from index mutual funds to ETFs. It sounds like you might benefit more from a financial plan rather than making changes to your investments.
Hi Dan,
Thank you for always updating your content to serve the needs and best interests of those who are new to DIY. As I’ve followed you over the years I personally transitioned to your individual ETF model from the TD e-series, but it took a few years to build the confidence and comfort to do so.
Now, our nest egg is growing to where I need to better understand foreign withholding taxes, options for managing, and whether they are worth the added complexity. As a result of this, and your simplified portfolios for 2020, it looks like I might someday need to graduate to one of Justin Bender’s ridiculous model portfolios, but so far I’m not quite convinced it is worth the added effort.
In the meantime, where can I access your old model portfolios, specifically the 2019 individual ETF model portfolio? Seems they are no longer available on your website, and I failed to save a copy for myself.
Thanks again for all that you do.
Hi Dan. Wanting to retire shortly and wondering if I can count on a 5 % rate of return with ETF investing. Is that doable for couch potato investing?
@Julie: A 5% return on a balance portfolio is a reasonable expectation over the very long term, but over shorter periods (even 10 years) it’s not realistic to expect anything other than volatility. Index ETFs ensure you will get the same return as the overall market, no more and no no less.
@Nicole: I don’t archive older versions of the model portfolios. For the record, the funds were ZAG, VCN and XAW.
Hi Dan! Thanks for all this great information. I started investing in TD e-series 10 years ago and finally started on ETFs at Questrade last year – I only sold 20% of TD holdings as a start and have not put any money in there since – I have much capital gains. To avoid selling more to transfer funds, do you know if I can transfer the TD holdings (presently held as mutual fund account) to brokerage “in kind”, even if they are not held at TD direct? Also, once they are in brokerage, do we pay when we sell the units? As is, there is no cost to buy/sell within mutual fund account. Thanks.
@Denie: You may need to ask TD and/or Questrade whether it is possible to transfer the mutual funds in kind. I don’t know, but my guess is that it’s not, unfortunately.
If you are able to transfer them to Questrade, you should be aware that Questrade is the only brokerage that charges commissions to buy or sell mutual funds.