For DIY investors, asset allocation ETFs may be the greatest gift to come along in decades. It’s never been easier or cheaper to build a globally diversified portfolio that needs almost no maintenance. But compared with a balanced mutual fund, even one-ETF portfolios have a few potential drawbacks.
First, at most brokerages you still need to pay a commission of up to $9.99 any time you buy or sell ETF shares. If you’re making smallish monthly contributions, that’s a major obstacle. It simply isn’t cost-efficient to trade unless you’re investing at least a couple of thousand dollars each time.
Moreover, mutual funds give you the opportunity to automate your purchases. With the money taken from your chequing account every month, your savings become more consistent, and soon you may not even notice them. Unfortunately, when you use ETFs, you don’t get that benefit.
Finally, mutual funds make it easy to reinvest all distributions (dividends and interest payments), which means there’s no cash sitting idly in your accounts.
Of course, index mutual funds have their own drawbacks. The Tangerine Investment Funds, for example, offer all the benefits mentioned above, but carry a fee of 1.07%, which is no longer competitive. The TD e-Series funds offer these three benefits at about one-third the cost of Tangerine, but you need four funds to build a globally diversified portfolio, and you need to rebalance these yourself from time to time.
You can argue that robo-advisors combine many of the benefits of mutual funds and ETFs. It’s easy to set up automatic contributions from your bank account, and any time dividends or new contributions land in the account, the cash is quickly reinvested in new ETF shares. And most robos don’t charge commissions for trades. Problem is, these services aren’t free: robo-advisors typically charge about 0.50% annually (less on large accounts), which is $250 a year on a modest $50,000 portfolio, and that’s in addition to the management fees on the ETFs themselves.
What if you were able to combine the useful features of a mutual fund or robo-advisor with the lower fees of an asset allocation ETF? If you’re willing to put in a little effort at the beginning, it turns out you can create a DIY portfolio with the ideal mix of low cost and hands-off convenience. Here’s how.
1. Choose a brokerage with zero commissions
While most online brokerages charge between $4.95 and $9.99 per trade, there are a few options for trading asset allocation ETFs with zero commissions. These brokerages are ideal for investors who are regularly adding small amounts of money to their portfolio.
• Questrade offers all ETF purchases for free. (The normal commission of one cent per share—minimum $4.95, maximum $9.95—applies when selling ETFs.). While this presents an opportunity to build a portfolio of multiple funds, using an asset allocation ETF means you never need to rebalance, which has behavioural benefits even if you’re not paying commissions.
• National Bank Direct Brokerage now offers commission-free trades on all ETFs, the only big-bank brokerage to do so.
• Disnat (Desjardins Online Brokerage) also offers commission-free trades on all ETFs.
• BMO InvestorLine has a menu of commission-free ETFs, including 14 asset allocation ETFs. The list includes the major one-fund portfolios from Vanguard (VCNS, VBAL, VGRO) and iShares (XCNS, XBAL, XGRO) as well as BMO’s own family (ZCON, ZBAL, ZGRO).
• Scotia iTRADE lets you trade about 50 ETFs with no commissions. Unfortunately, the list is no longer on their website: you need to have an iTRADE account to access it. While most of these ETFs are not useful for traditional index portfolios, eligible funds include XBAL and XGRO.
• Qtrade offers a selection of commission-free ETFs, and the list includes both XBAL and XGRO.
A note for investors who are starting from zero: some brokerages charge a quarterly $25 inactivity fee on small accounts. The minimum balance to avoid these charges is $1,000 at Questrade, $10,000 at Scotia iTRADE, and $25,000 at Qtrade. Read the fine print before you open your account.
2. Automate your deposits
In general, you can’t set up an automatic purchase plan for ETFs the way you can with mutual funds. But every brokerage allows to you set up regular deposits of new cash to your accounts. Even if that cash doesn’t get invested immediately, there’s value in automating your savings rather than relying on ad hoc contributions that can easily get forgotten—or spent.
Automating cash deposits is particularly easy if your online brokerage is associated with the bank where you hold your chequing account. But even if you’re using Questrade or Qtrade to take advantage of commission-free trades, you can arrange an automatic transfer of, say, $500 per month to your TFSA from your third-party chequing account. If you can’t find the forms on your brokerage’s website, call them and ask for instructions.
You’ll still need to log in to your investment account to make a trade and invest that cash. But if you forget from time to time, it won’t make much difference: you can just make a larger trade next month. The important thing is that you won’t neglect to save.
3. Set up a dividend reinvestment plan (DRIP)
Robo-advisors automatically reinvest the cash when ETFs pay dividends or interest, which allows you take full advantage of compounding. For small portfolios, this is a pretty minor benefit, especially if you’re able to reinvest that cash with commission-free trades. But, hey, every little bit helps.
If you’re using an asset allocation ETF in a self-directed account, you can get the same advantage by enrolling in a dividend reinvestment program (DRIP). All discount brokerages offer these plans, and you can usually enroll easily online. Unfortunately, not every ETF is eligible at every brokerage, so it’s worth a call to the customer service desk if you’re not sure whether your asset allocation ETF is on the list.
When you’re enrolled in a DRIP, you’ll receive your dividend and interest payments in the form of new ETF units rather than cash—with the caveat that only whole units can be purchased. For example, if the ETF is currently trading at $25 per unit and your holding pays a $127 dividend, you’ll receive five new units plus $2 in cash. (No commissions are ever charged on DRIPs.)
DRIPs are a great way to way to keep your investments compounding in a TFSA, RRSP or other tax-sheltered account. But I generally don’t recommend them in non-registered accounts, as they can complicate your recordkeeping. If you’re making a few commission-free trades every year anyway, it’s easier to just mop up the idle cash in your taxable account at that time.
The (minimal) effort is worth it
If you’ve put the above three steps in place, then you’ve ticked the important boxes for a solid investment plan: you’ve got a broadly diversified portfolio that requires no rebalancing, your annual fees are super-low, you’ve got a regular savings plan, and your transaction costs are close to zero.
The investment plan I’ve suggested here isn’t entirely hands-off compared with, say, the Tangerine Investment Funds or a robo-advisor. With those options, once you’ve opened your account and set up your regular contributions, you could safely lapse into a coma for a few years and your portfolio would likely be in great shape when you woke up. But you do pay a significant amount for that benefit.
I’ve long argued that paying a little more for convenience is well worth it: that’s the reason I recommend asset allocation ETFs rather than assembling a portfolio from three or four funds, which would have a lower MER. What I’ve outlined above, in my view, strikes the right balance: it’s not the absolute cheapest option, and it’s not the absolute easiest, but it scores very high in both categories. If you can muster the energy to log into your accounts a few times a year and make a single ETF trade each time, then you’ll be well on your way to long-term success as a DIY investor.
I would love to invest in ETFs but Ireland has some crazy taxation when it comes to ETF’s so it is much better to invest in individual shares, That is why I stick to Dividend champions
What do you think of wealthsimple as a brokerage? They have no fees at all
I really appreciate the content you post on here! Have been reading for a few years and have been hesitant to commit but finally dove in last year! Your articles provide so much, thanks for making them available to everyone!
Just to note a correction / update:
The Questrade minimum balance seems to have changed to minimum $1000 across all accounts to avoid the inactivity fee (as of sometime last year)
https://www.questrade.com/pricing/self-directed-commissions-plans-fees/administrative
I see no one has provided more information about the PACC program so I will share what I know. I currently use it on two accounts and am in the process of switching banks so I had to resubmit the forms. Until recently, iShares used to provide the necessary form on their website. They have now deleted it but the program is continuing. I’ve spoken to iShares twice and they say you need to request the form from your brokerage now. Seems easy right? Except Qtrade doesn’t have the form and tells you to get it from iShares when you contact them. Questrade is more on top of it and actually provides an older version on their webpage which presumably you can use. I’m waiting to see what happens with the documents (I had the deleted form saved) I submitted to Qtrade last month which they agreed to mail on to iShares for me. Hopefully it works, otherwise I guess I need to switch everything to Questrade. It’s all a little strange to me frankly, why hide their great program which could be a real competitive advantage over Vanguard’s products. XBAL/XGRO purchases are already commission free at several discount brokerages.
@David: Many thanks for sharing your experience. This confirms my suspicion that the program is not well supported, either by BlackRock or the brokerages themselves. While the program may offer some small benefit to BlackRock, there is nothing in it for the brokerages except additional paperwork and lost commissions. So it’s really no wonder they’re not lining up to support it. Hope you’re able to make it work at Qtrade.
@Kajendra: Thanks for the update: I have corrected the blog post accordingly.
Hi Dan,
I recently sold my property and thus am now sitting on a large sum of cash (~hundreds of thousands).
I would like to invest all of that back into the market. However, I’m afraid to put all in at once. (i.e. timing the market at a bad moment)
What’s the best strategy to invest all of my proceeds that are currently sitting in cash?
@Liam: Using a dollar-cost averaging strategy will reduce the risk of unfortunate timing. There’s no magic formula for exactly how to do this, but I might suggest spreading out the purchases over some period less than two years. They key is coming up with a plan and sticking to it. Once you start second-guessing yourself before every installment, you’ll find that gradual investing is just as hard as investing the lump sum.
https://canadiancouchpotato.com/2018/01/22/ask-the-spud-should-i-use-dollar-cost-averaging/
In a taxable account for a Canadian investor, how does investing in an all-in-one EFT such as XBAL vs. investing in ZBD/XIC/XAW portfolio compare? Would one of them be better from a taxable perspective? Thanks in advance and keep up the good work! Hope you get back to making more podcast episodes!
@Khaled: My colleague Justin has done an analysis of this. For VBAL (and presumably XBAL would be very similar) he estimates the tax drag from the bond component to be about 0.10% compared with using ZDB. Unless the account is very large and you’re in the highest tax bracket, you may consider that a reasonable trade-off.
https://www.canadianportfoliomanagerblog.com/tax-efficiency-of-vanguards-asset-allocation-etfs/
Remember, too, that you could use VEQT or XEQT instead of XIC+XAW. In that case, there’s no difference in tax efficiency and you’r managing one fund instead of two.
Hi Dan,
I am wondering why you did not mention Wealthsimple Trade as one of the zero commission brokerages.
Is there a reason behind this?
Thank you,
Sam
@Sam: Wealthsimple Trade is not a full-service online brokerage: they don’t even have a web platform. No USD accounts, no DRIPs, no access to GICs, mutual funds or high-interest savings accounts. No transfers of investments from other institutions. If all you’re looking for is zero commissions there are far better offerings.
Hey Dan,
More related to comments in your latest MoneySense column than this post but I could not find where to comment there.
You’ve mentioned a few times that a 2-5 years GIC ladder during retirement withdrawal can be beneficial as it can:
A) Increase fixed income weighting of a portfolio when desired;
B) Protects against market downturns
The former I understand but I’m struggling to the benefit of the latter.
E.g. You determined withdrawal rate using 4% is $25,000 and you’ve setup a 5 years GIC ladder. A market downturn hits, are you still not required to sell $25,000 of your portfolio to replenish the ladder? How is this different from selling $25,000 of your portfolio directly to your spending account? Wouldn’t this just be 5 years of market returns vs GIC?
Thanks!
@Terence: You’re right that the GIC ladder does not really “protect you against market downturns.” I’m not sure I would have framed it that way. It’s really more of a behavioral benefit. In my experience, people take comfort in the fact that they have several years’ worth of planned withdrawals in safe investments, and this helps them ignore short-term volatility.
In the original article I wrote about drawing down a portfolio using ETFs and a GIC ladder, I assumed the investor would have separate ETFs for stocks and bonds, as asset allocation ETFs did not exist at the time. Replenishing the GIC ladder would also involve rebalancing, so usually after a market downturn you would be selling bonds and not stocks:
https://www.moneysense.ca/save/retirement/a-better-way-to-generate-retirement-income/
In the more recent article, the reader had asked about using only VGRO in a retirement portfolio. In this specific case, I was trying to discourage her from doing that because it’s almost certainly too aggressive. So I suggested VGRO plus GICs. This is simple, but a little less precise that the original idea of using an equity ETF plus a bond ETF plus a GIC ladder. The overall asset mix would drift over time.
https://www.moneysense.ca/columns/canadian-couch-potato/all-in-one-etf-rrsp-portfolio/
Really, if you wanted to simply use an asset allocation ETF in a RRIF and just sell enough shares each your to make your planned withdrawal, there would be nothing wrong with that. But the asset mix should probably be more conservative than VGRO!
Hope this helps.
Hi Dan,
VEQT has 30% weighting in Canadian stocks, and only 40% US.
Because the Canadian economy is 1/10th that of the US, and since we are so closely related… Isn’t this asset allocation to heavy on the Canadian side of things? Wouldn’t this be home turf bias?
Regards,
John H
As a new investor I’m interested in the Vanguard Growth ETF Portfolio (VGRO). This gives me an asset allocation of 80% stock, 20% bond. I like the simplicity of not having to re-balance. However, in the future I’d like to have more of my portfolio in bonds. To do this would I simply buy shares in a more balanced ETF Portfolio such as the VBAL (60/40) and start selling off my VGRO shares?
Hi Dan, thank you for all your advice.
It’s been a couple of months me and my partner are trying to figure out our investment strategy (for us, the reading of Andrew Allan book as been eye opening and introduced us to a all new world, since we are really newby in investment, but now very convince and eager to put that new knowledge in practice!) Our situation : We bought a house last November and have been able to withdraw 35K each through HBP. We want to put about 50K in our TFSA and make the reimbursement payment for the HBP with fresh money every year. I also just contributed with 27k to my RRSP (this will give 10k back in tax refound) and my partner have about the same amount or a little more in his RRSP with a good tax refund coming too. So for now, our money is mostly not invested and i’am really eager to finaly decide on my portfolio allocation.
The portion I am not sur of is the fixed-income part of the portfolio. I think I have a good risk tolerance, I read enough about it to know its a good thing when markets gets low when you start investing so you can by cheap, I plan to stick to my targeted allocation no matter what. But here is the thing, I also want to make it easy, since we will invest on our own via Questrade and a DRIP plan. So I have been looking for Vanguard All in one ETF. The MER bothers me a little but I think it might be worth the simplicity. So, if I consider myself a somewhat « risk tolerant » investor, is the 20% bond too risky if I am 35? I feel de 40% Bond is a lot of Bond, even do it will soon be much more representative of my age! If 20% is too risky, I was thinking to consider the VEQT at 70% with the balance in a Bond ETF. Do you think it is worth the added complexity to better represent my age and target asset allocation? I don’t mind to have to jungle between 2 ETF (but just one would be nice!) The choice of the Fixed income allocation bothers me, I am not sure what to choose because bond performance seem to be not so good these days. I want my bond allocation to balance my portfolio, but not just sit there doing almost nothing! So, corporate Bounds?, Short-term? Aggregate? Accumulating Units? Do you have a suggestion for a one fund Bond ETF? Or should I consider something else to balance my portfolio, with the Idea that I won’t need to withdraw money for the next 10 to 15 years, but use my fixed income allocation to rebalance my portfolio once in a while?
Should I bother about where I place my Fixed income allocation (RRSP vs TFSA) and Stock ETF allocation if I own them in 2 separate ETF?
Thank you very much, I can’t wait to fix my mind to finally start investing on my own and not with the very bad advises I got from my bank! (Sorry for my English, not my first language).
Hi Dan,
I’m relatively new to your site but am loving all of the information. I hold individual stocks in my TFSA and non-registered accounts but would like to improve my portfolio diversification with an ETF. The paralysis is real, though, and I find that one thing I’ve been stuck on is how to determine what the actual fees will end up being. I understand the cost to trade and the MER, but I would love to learn how to calculate all of the fees ahead of time so that I don’t have any surprises. (I’ve read in other places that there can be fees on top of the trading costs and MER.)
Thank you!
@Cynthia: The MER and trading commissions are the only significant costs of ETF investing. There may be extremely small transactions costs within the fund, and there may be withholding taxes on dividends from US and international stocks, but this may also be the case if you hold individual foreign stocks. If you’re on board with the strategy, the costs of ETFs should not be a reason to hesitate. They are the most cost-effective way to build a diversified portfolio.
@Frédérique: Thanks for the comment. Your situation is complicated and I cannot give you very specific advice. Overall, I think 80% equities is a very aggressive portfolio, so unless you are a very experienced investor I would consider a more balanced approach. My model portfolios offer suggestions for combining a bond ETF and an equity ETF if the all-in-one ETFs are not suitable.
If you end up using two ETFs, it probably make sense to hold the equities in the TFSA and the bonds in the RRSP if possible (limited contribution room can make this difficult). But this is not essential.
@Leah: In the future if you want to switch from 80% stocks to 60%, then yes, you could simply sell VGRO and buy VBAL. Another option would be to simply add second ETF of bonds and make your new contributions to that fund to gradually make the portfolio more conservative.
Overall, I suggest that new investors not worry too much about how they might rearrange their portfolio many years in the future. There will be plenty of time to make those decisions, and there will almost certainly be new products available by that time. Best to focus on getting started now.
@John H: There are sound reasons for overweighting Canada:
https://canadiancouchpotato.com/2012/05/22/ask-the-spud-does-home-bias-ever-make-sense/
Roughly equal amounts of Canada/US/international is a good rule of thumb. If you want to simply weight all countries according to their market cap, that’s fine, as long as you stick to the strategy during all periods.
Hi Dan
I went with ZGRO with my initial $6500 the other week in an RRSP account at Questrade. Lost about 5% in value over the last few days.
I actually find that funny for some reason. Lol. Probably because I have a longterm view on this.
Keeping with my plan and bought another $500 today. Paid about $0.69 in ECN fees so far.
Thanks for the great site and advice.
For now I’m leaving some money in my old companies group RRSP just until I know I can keep on track investing myself.
Can you recommend the best book or article that would walk me through the process of transferring that account to Questrade and selling it’s mutual funds so I can buy more ETF shares when the time comes? Buying ETFs was easy but, I sense that selling needs more careful decisions.
Also just as a curiosity, where would I go to get a complete list of all an ETFs holdings? Most sites only list the top 10.
Hi Dan,
I just bought 160,000 Vgro at $27 on Feb. 24 but today the price drops to $25.32 now. Did I make a bad decision and should I sell it? Thank you very much.
Similar situation to Lisa… I recently bought in, last monday, thought it seemed a good time to get in after the dip, but rough week!! Down 7%. Stressing over staying the hold plan, or jump back out this next Monday and eat the loss, and get in later. I know that there is no crystal ball, but just like to hear some opinions other than my own!!
@Lisa, @chris
Please, Please read this whole website. The whole philosophy of CCP is to not time the market and not pay attention to price swings. This will prevent you from doing things like selling after a down week, only to see it rise again after you have sold. Take the long term view, continue adding, and don’t check stock prices. Live your life, don’t let money control you, and you will find after 10 – 50 years you have lots of money. Yes, maybe it was a mistake to buy this week, but its easy to say that now. In the future, you will lose $10k in one day, maybe even $100k in one day, but most other days you will gain, and year after year it will grow.
Thanks Nate. Appreciate it.
@John: If you’re planning to switch from mutual funds to ETFs in an RRSP, it’s very simple. Once the funds have transferred to your new brokerage, simply sell them all at once and use the proceeds to build your new ETF portfolio. You may need to wait a day for the cash to be available in your account. There is not need to worry about “the right time” to sell, since you are likely not changing your market exposure. You;re simply switching from expensive funds to cheaper ones.
Thank you very much, Nate.
Hi Dan,
I currently hold 30% VCN, 60% XAW, and 10% ZAG in a 90/10 portfolio. I’m thinking of reducing 3 funds to 90% VEQT + 10% ZAG (?) For the sake of saving time from rebalancing once in a while. Would the new funds allocation be similar to what current funds and strategy? Thanks.
Great website. What are your thoughts on RBC Investease (as a simple, even lower cost- ~0.61-0.72%- than Tangerine, Big Bank solution)?
Thanks
@Yusuf: I have no first-hand experience with RBC InvestEase, so I can’t comment on their service. However, their portfolios seems to be very traditional index funds, which I like very much.
@Tom Le: Yes, VEQT is quite close to a blend of one-third VCN and two-thirds XAW. So if you were to switch to 90% VEQT and 10% bonds your asset mix would not change very much.
Hi Dan,
What are your thoughts about the newly released HULC Horizons ETF?
Do you see any advantage of using HULC vs HXS in a taxable account?
Thanks.
@Juan: The structure of the two ETFs seems to be identical, so neither would have any tax advantage over the other.
Thanks for your response Dan.
From the horizons website, the two ETFs dont look like they are identical though.
HULC physically holds the securities and has no swap fee. Do you know if the foreign witholding tax could be recovered in a taxable account given the corporate class structure of the HULC etf?
Thanks!
@Juan: My apologies, you’re correct that the literature on HULC says the stocks will be held directly. Since the fund is not expected to pay distributions, there would be no way for the end investor to claim the foreign tax credit to recover the withholding tax on dividends. Beyond that, it’s not clear to me what the tax implications would be for this fund.
Hi Dan,
Thank you for all your sharing. Would you mind sharing your opinions on recent stock market?
@Canadian Couch Potato
Hey I am in the process of setting up my Questrade account but I am confused on which ETFs are recommended. For my e-series investments I was able to download a pdf and see the 4 recommend index funds and different risk profile results.
I don’t see this for ETFs when doing it with Questrade and only see it for Vanguard and IShares. I am confused if these general ETFS to invest in or of they are specific products from specific companies.
Is there a limit to the size of a portfolio using the Hands-off Portfolio approach? Say, $100,000? $500,000? More? Is there a point/amount where a different approach should be used? Thanks much.
Hi Dan,
I’m looking to set up a couch potato portfolio for my $70,000 TFSA. I was looking to invest it in the Vanguard VBAL ETF. Do you think it would be wise to invest the entire amount in one purchase or spread it out? I’m currently with CIBC Investor’s Edge.
Dan, what is your take on Dimensional (or any other company’s) “Factor” funds? It seems to me like a combination of both active management and a riskier investing strategy. My advisor wants to put me in these funds, but I feel I’m better off with a Couch Potato strategy with simple index funds. Am I correct in my gut feeling here?
Thank you very much again, Dan.
Dan;
Sorry, I should have taken a better look at your blogs & podcasts before posting re Dimensional/Factor funds. Thanks for your hard work for us all.
@Jay: This post should also be helpful. It’s not specific to Dimensional, but to all factor investing:
https://canadiancouchpotato.com/2016/10/21/smart-beta-etfs-summing-it-all-up/
Hi,
Thanks CCP and Dan for the great infos. I’ve been reading a lot your blog and found wonders of information.
I would like to know your opinion. My current situation is tricky now. I was investing with a financial advisor for few years now and suggested to invest in different mutual funds for my TFSA (diversified globald bond) and RRSP (global diversified fund). Which I did. He’s approached was mainly to be conservative with low risk asset location, even if I am 30 years old, because he was suspecting a crash like today.
The more I read and get informed via your blog and website, I was looking forward to take my investments out of these mutual funds (which MER of 2,5 and 1,6%) and place it in smart ETF that tracks the world index equity market as suggested by you and Lars Kroijer a that offers me great diversify and extremly cheap fees (0.2% fee).
However, with the present crash due to COVID-19, I have lost a lot of money in those TFSA and RRSP. What should I do now ? Should I still make the switch and take out my money in those mutual funds and invest into the ETFs that trrack the index world?
Or should I wait that the bear market recovers and that my RRSP and TFSA .
Thanks for helping me.
PS I am not asking any recommandation of which ETFs to have, but mainly opinion concerning the decision to move my investment from mutual fund to ETF and see if i t is more a winning situation to keep my asset in those mutual fund and surf the wave even with the extra fees
@Mathieu: If you are able to transfer your mutual funds in kind to your new brokerage, then you should be able to sell them and buy your ETFs within a day or so. That means you will not be out of the market for long, so you don’t have to worry about selling low (as you will also buying low). But you don’t need to do anything immediately. It is probably worth waiting until the world settles down before you go through the process of opening new accounts, etc.
@Lisa, @chris
Please, Please read this whole website. The whole philosophy of CCP is to not time the market and not pay attention to price swings. This will prevent you from doing things like selling after a down week, only to see it rise again after you have sold. Take the long term view, continue adding, and don’t check stock prices. Live your life, don’t let money control you, and you will find after 10 – 50 years you have lots of money. Yes, maybe it was a mistake to buy this week, but its easy to say that now. In the future, you will lose $10k in one day, maybe even $100k in one day, but most other days you will gain, and year after year it will grow.
This is a message from Nate above.
I have been following the Canadian Couch Potato methodology for years. And never get flustered with ups and downs. And I would say I am not that worried with the impact to my savings right now as
1) Most of it is RSP and I am 44 and have time for it to recover
2) I think we have bigger things to worry about in terms of the impact this is having to our society, country, family, friends and colleague.
BUT I would like Dan’s advice on if there is a precedent for something like this. Although not worried part of me is inclined to liquidate my RSP ETFs and buy back once the price rises. Outside of Korea and China we now have mass global economic impacts, tourism industry on hold for likely months. Massive unemployment and government debts and probable upcoming bail outs. Things will revover in time but it would be utterly surprising to me given where we are at now if stock prices start climbing within the next 6 months.
Is there a comparison case to this market wise that you can put in context for us Dan, for example I found this article belowL
https://www.marketwatch.com/story/market-behavior-a-century-ago-suggests-the-worst-could-be-over-for-stocks-if-not-for-the-coronavirus-pandemic-2020-03-19
I would like to echo the first paragraph in Mark’s comment.
The only enhancement to that general advice would be possible only if we could see accurately into the future. It is useful to remember that the underlying wisdom of the Couch Potato method, (i.e. Non-Clairvoyent Passive Index Investing for Long Term Periods) is that we acknowledge precisely that reality — we cannot see into the future accurately enough to make meaningful “clever” i.e. tactical investment choices. A crisis such as we find ourselves in right now pushes all our emotional buttons and is likely to trigger us into irrational actions unless we all take a deep breath and remind ourselves that irrational feelings do not change realities, including the reality that we accepted as our guiding principle for getting into Couch Potato Investing. We Cannot Predict The Future. Period. Stay the course.
Just to be clear my RSP being down is really a minor thing in all of this. I have a job that is allowing me to work from home, I am still getting paid, my family is safe and fed and has shelter. If I have to work a few more years because of this situation that is a tiny sacrifice compared to so many other people around the world. I am truly blessed.
Thanks Oldie generally I agree with you and Dan and I likely will stay the course with my RSP.
But I see no where for the stock market to go but down for the upcoming months it only got buoyed recently by massive US Government intervention. The markets will continue to drop the issue as you state is there is no way to predict when we will hit the bottom. But I can state with confidence that we are not there yet.
The advantage of Dans approach is as you say it takes the emmotional side out so over the long term so you dont do irrational things with your portfolio on the regular and therefore perform better. I am personally not panicked or irrational or that worried as I am 44, but the pragmatic side of me does contemplate selling stocks (I had even considered it in late Jan when news broke) only to get back in once stocks have dropped to a threshold. Sure I wont get the exact timing right but probably would be much better than just letting it continue to fall for next 3-12 months. I see no short term situation that markets rally other than a medical team having an overnight breakthrough with a cocktail of anti-viral medications that alleviate complications of COVID. And sure that short term scenario is possible but its highly improbable.
All the best everyone stay safe!
@Mark
Great comments and sharing with us CCP’s, I empathize, people will endure and beat this.. somehow we made it this far. I agree with you to an extent, I think that the USA (Trump) declaring this will be over by Easter and everything reopening is an extreme long shot at best and unrealistic.
You mentioned the pragmatic side of you “adjective – a pragmatist is someone who is pragmatic, that is to say, someone who is practical and focused on reaching a goal. ..”
I take this definition as = Detach the emotion and let your portfolio take advantage of the lower prices for months to come (value), while still being able to contribute. Unless you need the funds now or are offside your asset allocation and need to rebalance, I would suggest the mantra of the CCP is to hold the course through all weather. What does Mawer say.. “don’t fix a ship in the hurricane”.
Foreshadowing: If inflation and higher taxes are the next few things for us to be concerned about from all this economic stimulus and lower rates, that means we beat the virus! We have bright people around the world who are working hard to find answers/medications to fight this. My own wife works in our local hospital laboratory, I worry about her more than anything.
Stay safe! #Thankyoumedicalemployees