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.
Thanks Dan, I will enquire at Questrade. I do think I will stick to my original plan and sell 10-20% per year till I am all out. Just wanted options to get everything under one roof.
Hi Dan,
I’ve been following your advice for a number of years in my personal portfolio with great success. Recently, I have sold the assets within a corporation which I would like to also invest with the goal of living off the earnings. Can I use the same model portfolio within a corporate non-personal investment account, or are there unique factors I should consider?
Thanks!
@Steve: Managing a corporate investment account is rather more complicated than a personal non-reg account, but certainly you can use the same ETFs.
The new model ETF’s seems even easier now. I will most likely transition from the old model ETF’s you had advised in the previous years to the new one even though I know it’s not a necessity.
Dan, you’re truly the man!
Here’s my question, can I switch e-Series Bonds from my TD e series account to my e-series index fundS without cost? It seems like a good time to move money out of bonds and into the index to take advantage of the recent sell off.
Thanks
Hi Dan, my wife and I are trying to set up a non-reg investment account (we maxed out on our TFSA and RRSP). We would like to aim for a balanced portfolio across our registered and non-reg accounts. If we view our reg and non-reg accounts as a complete balanced portfolio, is it worth it for us to hold our target 40% of fixed income (GIC’s, bond ETF’s) within our registered accounts and hold the remaining 60% stock ETF’s in our non-reg account (and the balance in the reg acct) to be the most tax-efficient? Or is it better for us to just maintain the balanced distribution within each account?
Please do a write up on RBCs Investease (for the passive investor). The td-eseries are a pain in the neck to set up (and a lot of running around with the employees giving you blank stares when you go in to chat with them). While Questrade is still likely the best option (because buying ETFs are free) it does not come without rebalancing effort (although that is simple enough). The RBC Investease looks attractive for the ease of set up (and set it and forget it). Hard to believe it’s one of the big banks that’s offering a pretty good option:with low MERs and a reasonable Management Fee (0.5) it is comparable to WealthSimple (with total fees of about 0.7).
Dan I appreciate all the work you do to educate us. Can’t tell you how much you’ve helped me.
I’m shocked to see the individual ETF portfolio gone. My heart skipped a beat and then I cried and ate ice cream.
One thing I liked about that portfolio was that you could choose which account (RRSP, TFSA, taxable) to put each ETF in for tax efficiency. You can’t do that with the one fund, asset allocation ETFs. Domestic stocks, foreign stocks and bonds are all mixed together.
I guess you’d advise us to use the e-Series portfolio if we are concerned about taxes. And maybe you’re gonna say the 0.20% higher MER is worth it for the simplicity. And I get that you want to make things very simple, and I always appreciate that. But I really feel like you’re portfolio collection is missing that niche. I’m glad I saved the older portfolios. Would love to see them back and updated yearly though.
Either way, I still love ya! And I love how you’re spreading the word on the asset allocation ETFs. I recommend those to people I know who need to invest but don’t want to think about it. Would love more frequent podcasts :) You rock!
@Evan: Thanks for the comment. As I have tried to stress repeatedly, if you are using a portfolio of multiple ETFs successfully, there is no reason to switch simply because I no longer include these in my model portfolios. The model portfolios are not designed to be optimized for tax-efficiency. They are designed to be the best default choice for the vast majority of DIY investors.
@Brian: This is a common question with no simple answer. Holding the same asset mix across all accounts is probably not optimal from a tax perceptive, but neither is it a particularly poor decision. It will certainly make the portfolio much easier to manage. I know of many DIY investors who did fine until they started to try managing a portfolio of multiple accounts and multiple funds for tax efficiency. It eventually defeated them, because it can be quite complicated. Accepting an easier solution can be a good trade-off.
@Keith: If you are rebalancing your portfolio, you should be able to use a “switch order,” which moves money from one mutual fund to another without cost and without having to place two individual orders, i.e. one to sell and another to buy.
I enjoy the worry free tangerine all in one mutual fund , however I’ve been thinking in switching over to questrade. My only concern is the tax asset itself. Not the fact that it’s creating more work , but more about the fact that I don’t know how to proceed at the end of the year. Perhaps I missed a few articles about taxes and etf ?
Hi CCP, I am confused with rebalancing and it may be due to the markets dropping right now. In the past I have only paid attention to the bid-ask spread. In reading a post on your blog (forget where) I started to look at the NAV. Right now the bid-ask spreads are within cents of most of the ETFs I wish to buy but the NAV to market price is anywhere from 0.50 to 1.20. Is this too wide of a spread? I though there were supposed to be within cents of each other. Do I buy or wait to rebalance until they are closer? Thanks for any help in understanding this, I fear what I may have done in the past!
@Lisa: NAV prices are only reported once per day, whereas market prices chnage in real time when the markets are open. So there is no way to tell how close the current market price is to the current NAV. I’m guessing that you are comparing the current (live) market price to yesterday’s NAV on the fund’s webpage. This is very misleading.
That said, making trades on volatile days can be stressful, and certainly in these last two weeks there have been some huge swings during the day. If you;re just doing routine rebalancing, you may want to just wait for a day that it isn;t too volatile, and make sure you always use limit orders.
Thank you for the response CCP. Yes, I am looking at yesterday’s NAV and comparing it to live market. I’ll stop doing this especially during this volatile time. I am really a couch potato investor and just want to take my extra money saved and invest it and then not think about it until next year, but I will wait. I do always use limit orders – I learned that lesson from you from the start. What I don’t usually pay much attention to, unlike an individual stock, is the price of the ETF at the time of rebalancing. Is this a mistake in “normal” times? Should I be watching and waiting for better buy times? With my type of rebalancing I am not selling the high and buying the low, I am taking accumulated money (e.g., dividends) and savings and investing across multiple accounts. I’ve never been far off my targets, but I rebalance because I have the money.
@Lisa: Once you start “watching and waiting for better buy times” it’s a slippery slope to market timing and sitting on cash. You’re doing great by investing whenever you have the cash and by allocating your money to whichever asset class is furthest below its long-term target. Just keep that up and try not to overthink it.
I have been reading your articles for about 2 years now and think I’m ready to become a CCP. To date I’ve been buying individual stocks (TD, BNS, BCE, AQN, BAM, CNR, MFC, etc.) but as my portfolio grows I start to worry about being properly diversified. Also I’m becoming mentally fatigued with it all as I work 60 hours a week so don’t have a lot of time to keep track of it.
I’m just about to turn 36, have a very stable job (but no pension plan), a heathy emergency fund and don’t plan on retiring until after 60 so I’m leaning towards the ultra aggressive portfolio options but can’t decide between XGRO or VGRO is there any advice you have for how to pick one? Flipping a coin?
Also, these core stocks have done me well so I am a bit hesitant to sell them off and would rather just start putting all future contributions into the ETF. Is this a bad idea?
Hi, so you don’t have any more dividend income ETF?
So that ETF composed of multiple ETF, you also pay the fee on the sub ETF?
@Pat: No, there is no doubling up on fees. The posted MER for the asset allocation ETFs is the total amount you pay.
Hi Dan, Thanks so much for the insightful articles over the years.
For a non registered account (small business incorporated), is there an advantage to invest in either the e-series or the etf options for a couch potato solution? I have read of reporting simplicity. This is for long term (~20year to retirement), that will be all equity or almost all equity to begin with. Thanks.
@jdf: Yes, from a bookkeeping perspective, mutual funds generally easier in taxable accounts. If you use ETFs, it’s best to use a one-fund portfolio if possible if your goal is to keep things simple:
https://canadiancouchpotato.com/2017/01/26/ask-the-spud-can-i-make-taxable-investing-easier/
Hi Dan. I’ve been reading a lot of negative news about the global bond markets of late and With CDN/US bond yields now approaching near zero levels how will this affect future returns on the CP recommended all in one model portfolio ETF returns of xbal and vbal?
Hi Dan,
I have historically purchased XAW, VCN, and ZAG as my ETF mix. I am now interested in switching over to VGRO but I’m not sure how the best way to do this is. Should I sell off my other funds and buy VGRO? Should i keep everything as is, buy VGRO, and rebalance my other 3 periodically (i.e., when they get out of whack)?
Hi Dan; Thanks for all of your phenomenal efforts! It’s much appreciated by so many.
A question: If I were deploying a large sum of cash now, utilizing an all-in-one ETF such as VGRO or VBAL, is there any benefit (or lower risk) to spreading that cash over different providers (eg similar all-in-one ETF’s, but say 1/3 with Vanguard, 1/3 iShares, 1/3 BMO)? The sum of cash is in a corporate account and is a large proportion of net worth, but I am comfortable deploying this sum. Thanks!
Hi Dan, thank you for the model portfolio & all your insights. It was very helpful when I started investing in the td e-series funds portfolio that has an equal split of 25% each across the 4 index mutual funds.
Current scenario:
– I have about $50k of my employer’s stock in a taxable Computershare account (they have been matching 25%) and it’s a major Canadian organization in Canada. I know I shouldn’t have significant holdings in one company and should diversity. I have considered maybe selling it & move the proceeds in index funds down the line.
– I have a TFSA account with TD Direct Investing where I have $9,016.56 worth of TD’s e-series index funds and $2,097.12 stock of my previous employer (another major Canadian organization).
– I have about $140,000 CAD sitting in my chequing account.
Future scenario:
Wondering if you had any thoughts on how best to deploy the chequing account cash in the market in index funds:
– How much and how frequently – Dollar Cost Averaging vs Lump Sum.
I am leaning towards DCA purely from a psychological perspective of not having the angst of investing before market dips more & missing out of cheaper prices. DCA feels more comfortable that way of easing into the market. Though I have read a Vanguard study that over the long run Lump Sum investing usually beats DCA. If I do DCA, I was reading I could invest the entire amount on a regular basis (say biweekly or monthly) over a 12-24 months duration.
Wondering what do you think?
– Which account to invest in: TFSA vs taxable account for the 4 td e-series funds.
I am thinking that maybe I should max out the TFSA first with the 4 index funds & then start putting it in the taxable account. I know RRSP is there too but I naively don’t like the idea of having the money locked in till retirement (though I know I can take it out for buying a home or further studies. Not intending on doing both).
– Any other insights is appreciated too.
Thanks Dan
Hi Dan,
Guided by this model portfolio suggestion I was going to invest Balanced by 25% in each (4) category. But now am thinking of adding VYMI to the mix. I wonder if you have a comment about including dividend fund into the portfolio, inc. US fund into portfolio, impact on balancing, overweighted to International?… etc. Any insights appreciated. Thanks! ( am making one time purchases and not monthly contributions … investing a lump sum for long term retirement with 20 year horizon)
@Jay: There is no meaningful diversification benefit to using ETFs from multiple providers. The funds all hold very similar securities. And if a fund company becomes insolvent (which is extremely rare), investors don’t lose their assets, which are held by a third-party custodian for just that reason.
Is the market, at the moment, too volatile to adjust one’s portfolio back to one’s target allocation if one’s targets are off by less than 5%? Any opinions? ( I might have used the word, “one’s” a few too many times in this post, sorry about that :))
Hi Dan,
I am currently investing my entire portfolio in XGRO but I would like a monthly income ETF to add to my portfolio. I thought about a small REIT ETF (like IShares XRE) exposure into it, because of the dividend return and good performance it has showed over time. Do you recommend an allocation of 95% XGRO and 5% XRE for example? Or should I buy singles core ETFs like ZAG, XAW , VCN and XRE and balance them all manually? Do you think this is a good asset allocation idea
Thank you very much
Samuel
Hi Dan, it appears that the US and Canada may follow soon after will be cutting interest rates to zero and possibly even further cuts to negative territory in the coming days and weeks ahead to combat the sudden economy conditions. How do you think this will affect long term returns for ETF’s like VBAL and XBA since a sizeable portion are allocated to the bond markets. Thanks
@Frank: In volatile markets (and even more stable ones) rebalancing more often than necessary may just result in excessive transaction costs. The 5% threshold is a good place to start. No need to do it more often than that.
Hi Dan,
Whats the reason for the fall in prices of VAB and ZDB lately. When the buffer is also falling, it gets me a bit nervous.
Thanks
Jeff
@Jeff: Bonds and stocks can fall at the same time over shorter periods.
Markets have been extremely volatile in the last few weeks, with huge intraday swings and bid-asks spreads widening dramatically. The underlying bonds in an ETF cannot be priced intraday, so I think we’re seeing some short-term distortions in the prices of the ETFs. It’s probably best to avoid any trading on days like these.
Hi Dan,
I am looking to purchase more shares of VBAL as the price now is comparatively low. However the bid ask spreads are around 5 cents and up whenever I want to buy and I remember reading your advice to buy with about a 1 – 2 cent spread. I am thinking of still buying as even if I pay more to the market makers now wouldn’t I still benefit in the end if/when the price rebounds? I am holding VBal for the long term. Is there an error in my logic? Thanks for all you do.
@Tasha: During the very high periods of volatility we’ve seen in recent weeks, it’s not likely you’ll see spreads of 1 to 2 cents. If you are careful with limit orders (please them a penny or two above the ask or below the bid) it should be fine to but more shares. Agreed: if you are holding for the very long term, a difference of a few cents per share is not significant.
Hi Dan,
Like many here, really appreciate the information on your website. I am it the process of selling my mutual funds and building a couch potato portfolio. With the Vanguard portfolio, was there a reason why you suggested VEQT and not the VFV? I am debating between the two and would appreciate your thoughts.
Thanks,
Ricky
@Ricky: VEQT is a globally equity fund, with holdings in Canada the US and international markets. VFV holds only large-cap US stocks. It is a perfectly good fund on its own, but it is only part of a diversified portfolio.
Hi Dan,
I have a large loss in my VGRO. Can one tax loss sell this for VEQT in a taxable account? Or does on have to buy something from iShares instead?
Wild times.
@Andrew: VGRO and VEQT are not “identical property” so they can be used as a tax-loss selling pair. Just be aware that you are selling a fund of 80% equities and buying one that is 100% equities.
I have a small portfolio now well under $50k due to the downturn and it’s still bleeding. I’m 60 and not that much working time left. Should I sell all to stop the bleeding and buy back later?
@ Jeff no please dont sell, if you sell you wont make that back in the gains. after all the bleeding the skin will heal.
Love your blog! I want to eventually have your simple 2 fund portfolio of VAB 30% VEQT 70%.
I am currently holding 70% VEQT 15% ZAG and 15% ZPR
Is there a reason I should change? I am in the red deep on ZPR and really want to dump more in now as I can’t see it dropping (much) further.
Is there much difference in my current portfolio when compared to your model of VEQT/VAB?
How would you introduce ZPR into the model if one wanted to keep some prefs shares?
Thanks!
I’m thinking of purchasing xsp.to and qqc-f.to in a RRSP and TFSA account respectively. I have a LIRA that is *managed*. I decided it’s time to get involved by starting out with something smaller.
The tax considerations are complex of holding these two ETFs are complex. Can you comment on whether these would be subject to withholding tax. Thanks!
Hey Dan, i am a young investor looking to hold for like 35+ years. I plan on doing 100% equities portfolio for now. Your last portfolio you were doing XAW/VCN. Now you are recommending VQET and VBAL or ZAG. if i wanna go 100% equity should I just go all in VEQT only portfolio? or is it better buying XAW and VCN since it will be lower MER fee? but my portfolio wont be big amount only around 10k so far. Im very not sure if I should go VEQT only or XAW/VCN, I dont mind rebalacing the portfolio myself. But it looks like VEQT is hot now. Thanks a lot.
Hi Dan, Thanks for all your amazing advice. I am new to investing and actually just got money into VAB (30%) and VQET (70%) as I like that strategy as a beginner DIY investor. One question I have after reading millionaire teacher, reading a lot of your site/listening to your podcasts, and forgive me if I just missed it, but when diversifying a portfolio, why do you, Andrew Hallam, and even the asset allocation ETF’s not include REIT ETF’s. Are they not a great way to further diversify? Or are they a bad option? Or is it simply just too complicated adding one more level of diversification.
Thanks,
Steve
@Steve: REITs are already included in the broad-market indexes we recommend. More in this podcast:
https://canadiancouchpotato.com/2018/05/05/podcast-16-common-sense-with-ben-carlson/
@Will: VEQT will be much easier to manage going forward as you will be able to trade only one fund with no need to rebalance. The difference in MER is trivial on a $10K portfolio.
Hi Dan, I have little experience investing but find myself at the end of my career and need to generate 5% to fund my retirement. I have in excess of $1M saved currently in cash and due to the downturn looking to create a couch potatoe portfolio. Would a simple 2 fund portfolio do the trick during these difficult times. VAB 30% & VEQT 70%. Thanks for any guidance you can offer.
Hi Dan,
My wife and I have three separate portfolios all worth around $15,000. Do you recommend we invest in ETFs or the TD E-series funds? We will likely be using TD Direct Investing as our platform. Should we mix the accounts up between ETF and E-series? Any help is greatly appreciated!