Just about everyone was happy to wave goodbye to 2020. By the spring it was shaping up to be the worst year for markets since 2008: when the market touched bottom on March 23, Canadian, U.S. and international equities were all showing huge losses. From peak to trough, Canadian equities had declined more than 37%, and foreign markets saw losses between 26% and 29%.
Even the safety net had gaping holes: Canadian bond ETFs saw peak-to-trough price drops of about 14%, which no one had ever seen before.
Then, almost as quickly as the markets fell, they roared back more swiftly than anyone expected. For example, the Vanguard Growth ETF Portfolio (VGRO) declined more than 25% in 40 ugly days during February and March, then had fully recovered just 196 days later. The whiplash was enough to make you want a neck brace to go with your face mask.
Last year was also the first in which my model portfolios consisted of asset allocation ETFs from Vanguard and iShares. Below I’ve presented a summary of the 2020 results for the individual equity and fixed income components in these products. Then we look at the overall return of the all-in-one asset allocation ETFs, as well as the returns of the two-ETF portfolios in my models.
For a deep-dive into the performance of the asset allocation ETFs in 2020, watch Justin’s video recap of one of the weirdest years investors have experienced in recent memory:
Equities
Canadian equity ETFs, which fell hardest in the spring of 2020, managed to finish the year on solid ground:
Vanguard FTSE Canada All Cap Index ETF (VCN) | 4.8% |
iShares Core S&P/TSX Capped Composite Index ETF (XIC) | 5.6% |
The 0.80% difference in returns between these two ETFs was a surprise: it arose because VCN started the year tracking the FTSE Canada All Cap Index, which had a quirky methodology that adjusted the weighting of some companies, rather than simply using their market cap. In June, the Vanguard ETF switched its benchmark to the FTSE Canada All Cap Domestic Index, which better represents the broad Canadian equity market. The returns of VCN and XIC should be more similar going forward.
U.S. equity ETFs continued their dominance in 2020. The ETFs tracking this market performed almost in lockstep:
Vanguard U.S. Total Market Index ETF (VUN) | 18.2% |
iShares Core S&P Total U.S. Stock Market ETF (ITOT) | 18.1% (in CAD) |
International equities—in both developed and emerging markets—also delivered tidy returns in 2020. As we’ve talked about in previous blogs and videos, comparing the individual components of the Vanguard and iShares ETFs in these asset classes is confusing, because the two index providers disagree about South Korea: the Vanguard FTSE Developed All Cap ex North America Index ETF (VIU) tracks an index of developed countries that includes Korea, while the iShares Core MSCI EAFE IMI Index ETF (XEF) excludes Korea, as MSCI classifies it as an emerging market.
As it happens, this was a big deal in 2020, as Korean stocks returned over 43% in Canadian dollar terms. This provided a boost to VIU relative to XEF. Of course, opposite was true for their counterparts in emerging markets, with the iShares index getting the edge:
So, how did all of these equity categories perform when combined in the Vanguard and iShares asset allocation ETFs? Here’s how the two all-equity funds performed in 2020:
Vanguard All-Equity ETF Portfolio (VEQT) | 11.3% |
iShares Core Equity ETF Portfolio (XEQT) | 11.7% |
Fixed income
It was the best of times, it was the worst of times for bonds in 2020. Concerns about liquidity in fixed income markets led to bond ETFs seeing huge price declines during the COVID crisis in March. But this problem cleared up quickly and bonds went on to post their best calendar year since 2014.
The yield to maturity of broad-market Canadian bond ETFs started the year at 2.3% and then plummeted to around 1.2% by year-end. Remember, a decline in yield increases bond prices, so the result was a surprising total return for the Vanguard and iShares flagship ETFs:
Vanguard Canadian Aggregate Bond Index ETF (VAB) | 8.6% |
iShares Core Canadian Universe Bond Index ETF (XBB)Â | 8.6% |
If you’re using my two-fund model portfolios with bond allocations of 70%, 50% or 30%, then one of the above two ETFs makes up all of your fixed income holdings. However, if you’re using one of the all-in-one ETF portfolios, then you’ll also have some other bond asset classes in the mix.
The iShares Core Canadian Short Term Corporate Bond Index ETF (XSH), which make up 15% of the fixed income in the iShares portfolios, delivered 6.2% in 2020.
The Vanguard U.S. Aggregate Bond Index ETF (VBU) returned 7.2%, while the U.S. bond ETFs held by the iShares portfolios (GOVT and USIG) combined to returned between 8% and 9% in Canadian dollars.
Finally, the Vanguard Global ex-U.S. Aggregate Bond Index ETF (VBG), which invests in foreign bonds outside of the U.S., managed just 3.9% during 2020.
Overall, then, the addition of these bond asset classes lowered the fixed income returns for the Vanguard and iShares all-in-one ETFs, compared with simply using VAB or XBB. If we take the weighted average of each ETF’s return, we can estimate a return of 7.2% for the Vanguard fixed income portfolios and approximately 8.2% for the iShares versions.
All together now
All right, it’s time to end the suspense and reveal the 2020 returns for each of the Vanguard and iShares asset allocation ETFs, as well as the two-ETF portfolios that combine a bond ETF and an all-equity fund. For a fairer comparison, the two-ETF portfolios are assumed to have been rebalanced monthly.
Asset allocation | Vanguard ETFs | Return | iShares ETFs | Return |
---|---|---|---|---|
80% bonds / 20% equities | VCIP | 8.35% | XINC | 9.35% |
70% bonds / 30% equities | VAB + VEQT | 9.73% | XBB + XEQT | 9.84% |
60% bonds / 40% equities | VCNS | 9.37% | XCNS | 10.33% |
50% bonds / 50% equities | VAB + VEQT | 10.35% | XBB + XEQT | 10.53% |
40% bonds / 60% equities | VBAL | 10.20% | XBAL | 10.58% |
30% bonds / 70% equities | VAB + VEQT | 10.82% | XBB + XEQT | 11.10% |
20% bonds / 80% equities | VGRO | 10.81% | XGRO | 11.42% |
Source: Vanguard, BlackRock, DFA Returns 2.0
As always, we need to be careful about drawing conclusions from short-term results.
First, the two-ETF portfolios saw relatively better performance than the one-fund options last year, simply because all-Canadian bond indexes outpaced more globally diversified fixed income portfolios last year. That won’t always be the case.
Moreover, the main reason iShares portfolios outperformed is their significantly larger allocation to US equities, the top performer in 2020. In any year when US markets lag Canada and international markets, the Vanguard portfolios are likely to have the edge. Over the long term, the differences are likely to be very small.
There’s another factor to consider as you ponder the events of last year. Many investors opt to build their own diversified portfolios using multiple ETFs rather than embracing the simplicity of the asset allocation funds. While this decision saved few a few basis points in MER last year, it would also have required you to do some major rebalancing—twice.
The first opportunity was in March, when you would have been selling bonds and buying stocks when it looked like the world might end. If you had the stomach to do that, you may have had to rebalance in the other direction, selling stocks to buy more bonds late in the year, following the amazing recovery.
Neither of those decisions was easy. However, if you were using an all-in-one ETF, this was all done for you, and you would have endured a tumultuous year with a return between 8.4% and 11.4%, with zero work, no matter what your asset allocation. It’s another reminder that successful investing isn’t about scratching and clawing for every basis point in fees and taxes. It’s about getting the big decisions right and avoiding crippling mistakes.
Hi Dan, I’ve been a follower of the Couch Potato for a while now and have gradually been switching to a “single ETF” portfolio since I retired 2 years ago. Therefore much of my portfolio consists of 60/40 XBAL within maxed-out RRSPs and TFSAs.
I recently sold my house so I now have a chunk of money to invest in a taxable account. I will be starting to have RRIF payments into these taxable accounts in the next few years.
Everything I read tells me I should be investing in Cdn stocks in my taxable accounts to take advantage of dividend and cap gains tax advantages, so I was considering XIU or XIC. But that will double my overall Cdn content % from 15% to 30%. What should be the priority here? Maintaining the balance and simplicity with XBAL or overweighting Canada to get the maximum tax advantages with XIC? Thanks.
@Kat: It almost always makes sense to set an appropriate asset allocation first: this needs to come before tax-efficiency. Once you’ve established your target asset mix, then you can (if you want to) use asset location strategies to keep, for example, most of your Canadian equities in the taxable account and more fixed income in the RRIF, etc. But this is much more complicated to manage and means you will need to use different ETFs for each asset class. You will need to decide whether it’s worth it, and it’s OK if you decide it isn’t.
Hi, is there an explanation available on how you calculate returns? A previous comments already mentioned you assume rebalancing monthly. Are you also assuming some sort of consistent contribution (monthly deposits for example)? Do you use Modified Dietz Rate of Return?
@Ty: The returns for the asset allocation ETFs are straightforward, since the portfolios consist of a single fund. For the two-ETF portfolios and the TD e-Series portfolios we assume monthly rebalancing. The main reason is to offer a more apples-to-apples comparison with the asset allocation ETFs. No contributions are assumed: these are time-weighted returns.
Hi Dan,
Will you updating your model portfolios for 2021, given the emergence of a variety of new products in the past year? You dropped the tangerine funds last year due to their higher MER, I am curious about your views on the e-series now that there are cheaper options.
I appreciate your insight.
@Shane: No changes to the model portfolios for 2021. Regarding the e-Series funds, what cheaper options are you referring to? There are no cheaper mutual funds.
Hey Dan. What do you make of the GME business lately (and Bitcoin?). I recently maxed out my TFSA in vanguard ETFs like you recommend, but can’t help feel a bit sidelined right now. Esp since I’m just getting started in index funds and a lot of people speculate the returns over the next few years will be less than average due to higher returns over the last few years…
I’m not gonna touch my TFSA index funds and I know individual stocks are basically gambling. Just curious what you have to say. I am wondering if I should put a bit of extra money into these things instead of standing by and watching it all. Or would that be foolish in your opinion when there are index funds?
Thanks! Sorry I hope it’s not a dumb question.
Hello,
I wanted to ask a question. I’m new to investing. I was wondering if I could just own 3-4 diversified etfs that coverts most sectors and put it in a drip . A set and forget type portfolio.
also do etfs increase in value? I’m planning growth + income (dividends) .
Thanks!
@Vince: It’s not a dumb questions: it’s very good one. FOMO is a very powerful force. There will always be people telling you how well they did buying Bitcoin or trading stocks. But over the long term, virtually no one amasses real wealth engaging in activities like this. There are far more disasters than success stories: the difference is you won’t hear about the disasters, because people only brag about their success. If you decide to invest using index ETFs you need to resign yourself to having the most boring stories of anyone in your circle of friends and families. But over your lifetime, you will likely enjoy more success than at least 90% of them.
Well, I am already committed to my maxed TFSA (at age 23) for index funds, definitely not touching that regardless of what happens. So you personally wouldn’t participate in what’s going on for individual stocks then for the benefit of the long term, or regardless you acknowledge that returns over the long term are the most consistent strategy?
I had a lot saved up early last year but put off investing since the market crashed. I really should’ve learned more about things then, was a huge missed opportunity for me. I’m hoping if there’s ever another crash that I’ll be able to capitalize properly now. With the current situation I’m wondering if I’m going to miss a second opportunity again. :S Wish I came to your website and saw how you recommended investing during the crash in the comments lol. Bleh. I mean my amount of savings and theoretical gains was really not that much since I’m just 23 and definitely not rich (about 30k in savings) but yeah, psychology I guess.
It’s weird reading about the hedge funds like Melvin Capital, apparently they had 30% ROI for a few years, but lost a huge chunk of it in the last week. Very common for those kind of fluctuations to happen according to Millionaire Teacher and I’m sure you’re aware too, more of a matter of when and not if, huh?
Thanks for the reassurance and replies to my comments!
@Vince: It’s sounds like you’re already ahead of most 23-year-olds, in that you are already saving an investing. If you keep up those good habits and just earn market returns (no more, no less) you can’t help but succeed as an investor over the next several decades.
Let me put tit this way. The number of people who have saved and invested with discipline over several decades, earned close to market returns, and then failed to meet their (reasonable) financial goals is zero. The number of people who blew up their portfolio and failed to meet their goals because they speculated on stocks is too large to count. The sooner you realize it’s a massive waste of time, energy and money, the better off you will be.
If your investing is exciting, you’re doing something wrong.
@Dwayne: The model portfolios allow you to accomplish these goals with one ETF. You don’t even need three or four.
After reading this blog is there another blog on how to move accounts from current brokerage to say Questrade? I would like to move several accounts which contain mutual funds, stocks and etfs to self directed Questrade and just use VBAL in all 7 accounts!
Hi Dan,
I am a long time reader and follower of your investing approach (and miss your more frequent postings!. I use multiple ETFs to diversify my portfolio as you used to recommend. However, I’ve never been good at rebalancing: when I contribute I do so to whatever ETF is doing poorly to realign my asset allocation, but I never sell and buy on a monthly basis to rebalance.
My question: what are the consequences of this approach? How much am I losing by “rebalancing” only by buying, without selling other ETFs when they are high? Am I likely to make up much of that loss by avoiding sell fees (I use Questrade)?
Thanks!
@PC: This seems like a good place to start: https://www.youtube.com/watch?v=Bf1zufNlQSk
@Stephen: It’s impossible to quantify what you might by losing (if anything) by not rebalancing more frequently. I’d say that if you are regularly adding money and you’re always buying what ever is most underweight, then you’re accomplishing much the same thing.
Sorry for the newbie question.
My portfolio is composed of ZAG, VCN and XAW, all held in my CAD RRSP.
Now, I have some $$ available in my USD RRSP.
Would it be a good idea to buy future ZAG and VCN from my CAD RRSP and buy XAW.U from my USD RRSP?
Or should I continue buying ZAG, VCN and XAW all from my CAD RRSP?
Thank you.
@Steve: If you will regularly be adding USD to your RRSP, then you may want to plan to use US-listed ETFs going forward. If this will be the only time you have USD in the account, then it is probably easier to just convert it to CAD.
Note that XAW.U is denominated in USD, but it it still a Canadian-domiciled ETF, so it does not qualify for the exemption of foreign withholding taxes, so it offers very little advantage. Better to use US-listed fund. There’s no direct counterpart to XAW, but Vanguard’s VT is very close (it holds stocks from around the world, but unlike XAW it includes Canada, too).
My wife’s RRSP are in a Fidelity Clearpath portfolio – FID740 series B (https://www.fidelity.ca/fidca/en/products/cp40)
We tried to compare our returns of the last years (I use CCP portfolios)
Do you know if the returns available on the website (ex: 12.8% in 2020) is before or after expenses?
@Phillipe: Published fund returns are always reported after fees, so you received the full 12.8% return.
Just to follow-up, this will be the only time I have USD in this account, I don’t plan on adding more.
I read on this site that transfering USD to CAD will be done at a no good exchange rate.
I would rather keep my USD.
You said that buying XAW.U will offer very little advantage, but is there any advantage at all over buying XAW in CAD?
At least, by buying XAW.U in my USD account, I’m not losing any advantage, right?
Or I could buy Vanguard’s VT with ZAG, and stop buying VCN and XAW, would that be ok too?
Thank you again!
Hi Dan, just wondering on your thoughts on TD ETF’s as you can buy/sell for free using a TD Goal Assist and how they compare
to other ETF providers.
Look forward to your comments.
Mel
@Mel: TD’s family of plain-vanilla index ETFs seems quite comparable to those from Vanguard, iShares and BMO. This would include TTP, TPU, TPE, and TDB. Most of their other ETFs are actively managed, and this includes the TD One-Click Portfolios.
@Steve: Managing USD in a portfolio can complicate things when it comes time to rebalancing, so if this is a one-off thing then I would consider just converting it with Norbert’s gambit and just sticking with CAD.
If you do decide to USD, then you would probably want to continue holding VCN as well as ZAG. VT is a reasonable substitute for XAW but remember that it holds very little in Canadian stocks.
Hi Dan,
Would you recommend swapping from the VCN/XAW/BAL funds recommend a few years ago to one of these strategies? If not, I was wondering if you still have the older asset allocation documents showing the mix for changing the portfolio allocation you can share. That way a few years down the road when it’s time to change, I know what mix to target. Thanks for doing this blog.
@Mike C: Unless making the switch would result in a big tax hit, I do think it makes sense for most investors to move to a one-ETF portfolio to keep things simpler.
If you do decide to use the three-ETF model, the formula is simple. First choose the appropriate bond/equity mix. Then split the equity portion 1/3 VCN and two-thirds XAW.
Hey Dan,
I was SUPER close to investing a little bit (1k) into AMC and GME and ended up not doing it. Instead I bought $3k worth of VEQT since it dipped minorly during the GME stuff. Since it went back up I technically made around $10. lol. I’m really glad I didn’t invest in that craze. I guess it’s important to remember that a fraction of people make big gains but the majority of people will not, as anyone who bought into GME at the height of the craze knows… although I could still eat those words, it doesn’t seem like it.
Anyway just wanted to thank you again for helping me make good decisions. I think the dip of last year and witnessing this FOMO event firsthand were really good experiences for me to be prepared in the future. I’ll keep at it. Looking forward to more of your content.
Oh one more question, what do you make of joining the military, for someone with financial goals? Stuff like legal officer, physio officer, I was curious about. I should do more learning to figure out what career paths would be good for me and my options, just curious if you have any knowledge or input there though.
Cheers
Hey Dan,
I’ve been a long time reader/listener (heck, even admirer) of yours for quite a while now. I can’t thank you enough for the incredible and genuine service you have provided to so many of us over the years.
I am approaching retirement and I am fortunate to have cash to put into a non-registered account since I have maxed out my RRSP/TFSA and helped my wife do the same with hers. I prefer simple, and I’m inherently lazy too :)
I’d like to put this new money into one ETF, specifically VEQT. I’m a big fan of Vanguard and I am very familiar with their array of ETF’s. My only hesitation is that it may not be the most tax efficient ETF for a non-registered account. I also think that if I seek out a pitch perfect ETF, it may be a fool’s errand and it might take forever and a day as well.
Assuming my other investments are well-diversified etc, would VEQT be a reasonable one-stop place to invest my non registered assets? If that question is too specific for you to answer, let me try another way: do you think investors can often over-think where to put non registered money—-constantly evaluating and perhaps even over-evaluating, tax consequences and every other potential metric when simplicity, ease, common sense, a ETF decent track record/reputation etc might be all we really need?
Many thanks for all you’re doing to assist so many of us.
@Vince: Glad if I could help you avoid getting involved in the GME nonsense. It’s a big step when you finally get to the point where this stuff doesn’t even tempt you anymore.
Sorry, I’m afraid I have no insight on military careers.
@Jeff: As long as you are comfortable holding a global equity portfolio in your taxable account, VEQT is a perfectly good choice.
Let’s think about other potential options:
You could hold all Canadian equities in the taxable account to take advantage of the dividend tax credit. But that fundamentally changes your investment strategy, so it’s putting the cart before the horse.
You could hold VEQT’s individual underlying holdings so you might be able to take advantage of tax-loss selling opportunities more easily, but this makes your life significantly more complicated.
You could use the swap-based ETFs from Horizons, but these added another level complexity, plus the risk that these funds will require complicated tax reporting, as they did a couple of years ago.
So, with all that in mind, I’d say VEQT is a pretty great choice.
Dan,
I genuinely appreciate your quick, thorough and professional reply. Best wishes for a wonderful 2021.
Hi Dan,
I’m 18 years old. Just maxed out my TFSA with XEQT. Car paid off in full, schooling covered (trades). Other than continuing to max out my TFSA (100% in XEQT) and just saving, should I consider an RRSP or additional investing account (taxed)?
Thank you!
Hi Dan
Is there a dollar value or tipping point in your mind when the single-ETF route (XBAL, for example) stops making so much sense?
And would you favour a single-ETF vs your old 3 portfolio if an account was static (meaning single deposit and left alone) versus an active account with monthly deposits?
Thank you again and again for this site.
@MP: I don’t think there is any dollar value that represents a tipping point. I see it more as personal issue: how much do you value the the convenience of a hands-off portfolio that rebalances itself? If you value that, then there’s nothing wrong with using an asset allocation ETF for a seven-figure portfolio. Always remember that by making the portfolio more complicated you run the risk of making mistakes that will cost you more than a few basis points in MER.
Regarding an account you won’t be contributing too (such as LIRA), I’d argue this is idea for a single asset allocation ETF. Choose the right asset mix, but one ETF, set up a DRIP and leave it alone for years. What could be better?
@KL: Kudos to you for getting started with investing so early. Whether to use an RRSP depends primarily on your tax bracket. If you’re in the lowest tax bracket, the tax deduction from an RRSP is less valuable, and it may be better to use that contribution room in few years when your income is higher. Remember, too, that money in an RRSP can’t be withdrawn without tax consequences, so it’s much less flexible than a TFSA. If you can max your TFSA annually and build up a decent emergency fund before your 20s, you’re doing great even without an RRSP.
Hi Dan and thank you for this column. I have $50,000 to invest, currently in the bank. I do not anticipate needing the money for at least 5 years, if ever, but would like growth for kids when I die . I am 70 years old with a good pension. I was thinking about buying stock in one or more Canadian banks, preferably that give dividends. Would this seem a good idea? My alternative would be one of the ETFs you recommend. Thanks.
Hi Dan,
I’m stuck and hoping you can help me think about this problem.
I’ve been following your website and the couch potato strategy since 2013, but only started investing in 2017 because I was saving for a house before that.
I’ve been lucky with my professional life and have been able to save aggressively and reached a 7 figures “portfolio”, but only 50% of that are the ETFs (VGRO and also VCN, XAW, ZAG from before), the other 50% is cash (not even in a savings account)
I deviated from the strategy a few years ago and started accumulating cash (copying Warren Buffet and other gurus) anticipating an economic crisis.
Now it feels that I’ve wasted years of returns on that cash and the longer I wait the more committed I have to be to the strategy of holding cash.
I’m still in my mid 30s but I wish to reach “financial independency” in my early 40s. If I can get an average 7% return for the next 7 or so years I would reach it.
How do I go about convincing myself to deploy that cash? Are there intermediate solutions to this problem?
Thanks!
@Peggy: I hope you will appreciate that I cannot advise you on what to purchase. I will only say that putting all of the funds into a few Canadian bank stocks is a very concentrated bet. An ETF that provides broad diversification through thousands of stocks carries significantly less risk.
Ok, I’m 56 years old. I have $1,000,000 in cash to invest. It’s the top of the market now (Feb 2021) .
I got rid of my broker a couple months ago. I’d like to get the best ‘index’ level return I can. What do you think of putting the whole
thing into XGRO or VGRO? The financial press keeps confusing the heck out of me, just when I think I get a ‘read’ on whats happening, and what looks like a good investment strategy, everything changes, often in a counterintuitive way. The more I read, the more I think index investing makes the most sense. I don’t want to spend endless hours reading the tea leaves – I need to out think my own impulse to be clever with this!
Hi Dan,
Asking a second question on a separate comment.
I’ve been reading more often than before about how bonds are expected to underperform in the next years compared to the past. In response to that some of my friends who have been doing couch potato longer than I increased their equity portion to as high as 95% and only 5% bonds. Some started to keep only enough bonds to cover their living expenses for 6 months and are going all in on equities.
Do you also see this issue with bonds going forward and do you think it makes sense to lower the % of bonds? Or does the reasoning behind the asset allocations stay the same?
For someone holding VGROs who wants to increase equity allocation would VEQT make sense? Thanks!
@Gerrard: All I can suggest here is that you come up with a strategy for gradually getting back into the market. Decide on what you want your final asset allocation to be and then invest some of the cash at regular intervals until you reach that target. For example, if your goal is 80% equities and you are 20% now, make a plan to get to 30% now, 40% in two months, 50% two months after that, and so on. The details don’t matter much: the key is that you stick to the dates you’ve chosen. If you start second-guessing every installment (“I’ll wait until X event occurs,” etc.) you will stay paralyzed in cash for even longer.
I’d also suggest that a 7% annual return for a balanced portfolio is unrealistic. In our financial plan these days we are using an expected return of about 6% for an all-equity portfolio.
Good luck!
Hi Dan,
I have recently started actively looking into passive investing :). I read a few books (including “The millionaire teacher” which lead me to this website), did a little bit of research and then just dove in. I am 35 years old and have a defined benefit pension plan from work. For my self managed RRSP, Do you think going with 15% bond exposure and investing the rest in stock indexes, would give me the same level of risk/security as that of a 60/40 balanced portfolio.
Thanks
@Sriz: Welcome to the site. In my view, it’s helpful to think of a DB pension as part of your bond allocation. It’s true that a secure pension may allow you to take more risk with your other investments, but there is no formula for this, e.g. 15% bonds plus the pension = 40% bonds without it. Even with the pension, you would still need to be comfortable with a portfolio of 85% stocks, which will be very volatile.
https://canadiancouchpotato.com/2014/04/14/ask-the-spud-is-my-pension-like-a-bond/
Hi Dan,
As always, I appreciate your blogs and model portfolios.
I’ve had your previous model portfolio of XAW, VCN, ZAG for a few years now, and they are performing well, however I do want to switch over to the one-fund asset allocation ETFs as it will eliminate the need to rebalance. I don’t want to double dip on these indices (as VGRO holds VCN and the Vanguard equivalents of XAW and ZAG), but I do prefer the one-fund approach.
How would you recommend I go about making this transition? Should I sell my ETFs and start over with the AA-ETFs?
@Lu: If you have committed to the switch, then all you’d need to do is sell your current holdings and buy the appropriate asset allocation ETF in each of your accounts. In an RRSP or TFSA, this would include nothing more than a couple of trading commissions. In a taxable account, however, there would be capital gains or losses to report.
Hi Dan, Thanks for your all the info, it is so so helpful. I have a question re: rates of return– I feel like I am doing my calculation incorrectly & hope you can point me in the right direction. In Jan 2020 I purchased a lump sum of VEQT in my TFSA account. According to your post, the rate of return in 2020 was in the 12% range. When i calculate my rate, I come up with only 6%. As I did not buy or sell any additional during the year, how can this be? It seems like a simple enough calculation but I must be missing something…..Thank you in advance!
Hi Dan,
I am transferring/exchanging a large sum of Canadian Dollars to Thai Baht next week.
Is there a currency exchange platform you could recommend for Canadian Dollars to Thai Baht in Canada before wire/transfer.
Hi Dan, for years I neglected contributing to my kids RESPs. Since 2019 I’ve been catching up and have 6-7 years left until they start college. I’m using TD e-series funds heavily weighted on equities for max growth. I notice two e-series funds show very high returns – TB908 and TB904 along with the one in the couch potato portfolio (TDB902). Have you published any articles you could refer me to that would advise a) How to re-allocate to lower risk the closer you get to the kids starting college? and b) How you chose TDB902 over the other seemingly high-performers? Those other returns are hard to ignore. : ) Thanks!
@Bob: TDB908 tracks the NASDAQ 100, which is a huge concentrated bet on US tech stocks. This has worked out very well recently, but have a look at the period from 2000 through 2002 to see the other side of the coin. TDB094 tracks the same index as TDB902, but hedges the exposure to the US dollar, so it will outperform any time the US dollar falls relative to the loonie (and vice versa).
I would advise against trying to take excessive risk to “make up for lost time.” Your time horizon in the RESP is now just six or seven years, so a balanced approach is important. See the suggestions from Justin in this article:
https://www.theglobeandmail.com/investing/globe-advisor/advisor-etfs/article-three-strategies-to-build-an-resp-nest-egg/
@Mikey: Sorry, no idea.