It’s been a while since the last new article appeared on the Canadian Couch Potato blog, and over two years since the last podcast. So I’m pleased to share the reason for the long silence: I’ve been busy on a new book called Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs.
The official publication date is November 1, but the book is already available for pre-order on Amazon and Indigo, and will soon be on shelves at better bookstores across Canada.
I stopped recording the podcast in the summer of 2019 because I needed to take a break and think about how I could make my work more useful in a world of information overload. I didn’t want to just crank out content on a deadline: I wanted to create something that would have a lasting impact on readers and listeners. What was needed, I recognized, was a step-by-step guide to designing, building, and maintaining a portfolio of ETFs over the long-term.
The new book is something of a reboot in its own right. When I was a columnist and editor at MoneySense magazine, I wrote a modest book called the MoneySense Guide to the Perfect Portfolio, which laid out a plan for building a Couch Potato portfolio with ETFs and index mutual funds. That book sold out three editions, but it has been out of print since 2013. I still get emails from readers looking for copies, but there are none, and even if there were, the book is profoundly out of date now. The marketplace has changed dramatically: online brokerages are better and cheaper, excellent new ETFs have appeared, and roboadvisors have become a viable option for DIY investors who want a more hands-off approach.
As 2020 dawned, I had a clear idea of what my next project would be. Now I just needed to find the time to do it. Then along came the COVID pandemic, which meant a lot more time for all of us.
All of these roads led me to write Reboot Your Portfolio. The book is a complete guide to becoming a do-it-yourself investor using low-cost index ETFs. It draws heavily from the writing I’ve done over the years, since much of the advice hasn’t changed. But everything has been thoroughly updated, and large sections are brand new, reflecting the changes in the investing landscape. Moreover, my own approach has evolved during the last decade as I made the transition from financial journalist to portfolio manager: the more closely you work with human beings, the more you realize that simplicity always trumps complexity.
If you’re a hardcore DIY investor who’s been using ETFs for years, and you’re looking for advice about optimizing your portfolio to shave a few basis points in costs or taxes, you won’t find that in the book. The same goes if you’re only interested in model portfolios or specific ETF recommendations.
My goal with the book is to help you get away from the idea that successful investing is about choosing products and obsessing over tiny tweaks that will take you from an A to an A+. As I’ve worked with hundreds of investors over the years, I’ve come to understand that I can help more people just by getting them to an A. The small details don’t matter very much after that—and indeed, stressing over them can easily sidetrack you from what’s really important.
I hope you enjoy the book, and that it will help you get started on a path to investing success.
Boy, CCP, your answer to Vince, (quoted from your book — I should underline it in my Son-In-Laws copy!!), was a masterpiece in succinctness, encapsulating the innate wisdom and genius of Passive Index Investing.
Vince; It appears that you’ve sort of got the message, except that you think that later, when you reach the magic number of 1 Million Dollars invested, the message won’t apply to you, and Active Management will become more appropriate. I don’t see logically how that follows. Rational Passive Index Investing, as demonstrated by the whole thesis of the CCP website and educational intent, occupies the sweet spot of maximizing the probability of profit over a projected duration of time for a given unavoidable minimalized degree of risk. It is NOT settling for second best.
At larger amounts of Asset Worth, perhaps the opportunity exists for slicing the components into segments with lesser total management dollar costs, at the cost of more work on your part. But it still should be based on agnostic Passive Investing. Once you launch into Active Management, no matter how “Smart” or “Informed” you think it may be, you are essentially forecasting the future, and we all know where that leads.
Hi Dan. I found your comments to Vince regarding factor investing interesting. Yes, I’ve been around long enough to remember ‘Uber-Tuber’. And yes, I did slant a little toward small cap and value funds because of that – don’t worry, not much. I respect how you’ve evolved to a more simplified approach over the years. It’s been a while since you’ve mentioned the Fama-French Three Factor Model in a blog post. I agree with your recent arguments for a simplified approach to investing and understand why you recommend this. But I do still have ten ETFs in my portfolio – just because I want to. :)
@Vince: Thanks so much for supporting your local bookseller, which is excellent. And sorry you may have to brave the elements to do so!
Regarding what the industry wants you to think, here’s another passage: “Investors should understand that smart beta, even if it is grounded in empirical evidence, has much to do with marketing. No one is clamouring to launch old-school index ETFs these days: they would need to compete with enormous, well-established names such as Vanguard and iShares, who can charge minuscule fees because they manage hundreds of billions in assets. If you’re going to launch a new ETF, it makes more business sense to promise index-beating returns and charge higher fees—which is what the mutual fund industry has been doing for decades. Now that mutual funds are falling out of favour, the industry has found a more palatable way to peddle its wares.”
You’ve hinted at the real problem in your comment. You mention that the idea of a simple approach is appealing to you, but it sounds like you’re feeling like maybe you’re giving up something if you opt for traditional indexing. I’ve tried to argue that you are absolutely not giving up anything.
@Darren: There’s no question that my thinking has evolved on this topic. I should ask, have you found any benefits in a 10-ETF portfolio? Have you been able to keep it in balance over the years? Has it led to better performance? In the end, I won’t try to talk anyone out of it if they have been managing it successfully. But for those who haven’t yet built a complex portfolio, I definitely discourage it.
Hi! I am a newbie CCP investor. I am looking to set up a trading account with Scotia iTrade as I will probably make more smaller investments over time as I move my portfolio into my account. I have looked at both of your possible CCP portfolios and read your latest book. One of the concepts that you mention is looking at the bid-ask spread. I noticed that XEQT had a penny spread like you mention in the book but the Vanguard option, VEQT, has a 6 cent spread. That is a big difference. From your book, I should be choosing the IShares option because of the spread but not sure if I am missing something.
Thanks in advance for your response.
@Cindy: Thanks for a great question. A bid-ask spread of six cents on VEQT would a be a source of concern if it occurred regularly. But I know from using this ETF myself that this is unusual. Bid-ask spreads can tighten and widen during the course of a trading day, and you may have just looked at VEQT at an unusual time. It will normally be only a penny or two.
Hi Dan,
Great job on the book. It was a very clear and concise guide. Also, thank you for all of the content and value you offer to your readers and listeners.
I have decided to move my current investments to an Asset Allocation ETF. Based on my age and risk tolerance I am thinking a 70EQ / 30FI ratio makes sense; however, I prefer to not balance the accounts.
Does it make sense to invest 50% in a 60/40 fund, and 50% in a 80/20 fund or would that not achieve the result I am looking for?
Secondly, I will be making changes to my RESP account. Do you also recommend your model portfolios for these, taking into account potential for different timelines and risk appetite?
Thanks again, and hopefully my questions help other investors as well,
Jim
@Jim: Many thanks for your questions. Yes, you can definitely hold equal amounts of a 60/40 and an 80/20 ETF in order to get an asset mix of 70% equities. You will still need to rebalance occasionally (because these two ETFs will grow at different rates) but less often than if you used a bond ETF and an all-equity ETF.
And yes, asset allocation ETFs are an excellent choice in an RESP. You would need to adjust a couple of times along the way (for example 80% equities might be fine for a toddler, but not once the child is in high school).
Good luck!
Dan, Have I found any benefits to the 10-ETF portfolio? Yes – fun analyzing and graphing (but not reacting). As far as keeping it in balance goes, I keep it reasonably close through new investments and limited selling. The problem isn’t the effort, it’s the capital gains. I suspect that’s an issue with asset allocation funds as well. They must have significant distributions from internal balancing unless there are large inflows into the fund. Has it led to better performance? Well, not really. My overall fees are a bit lower. Even if I got tired of the complex portfolio, simplifying at this point in my life would cost a lot in capital gains. I should mention that there’s nothing crazy: CDN Bonds/GIC, US Bonds, CDN Equity, CDN Equity Small Cap, US Equity, US Equity Small Cap, Int Equity, Int Equity Small Cap, Emerging Markets, REIT. It doesn’t take long to get to 10.
Hi Dan,
I guess my confusion just lies in how Ben Felix’s recommended factor investing portfolio works, and my (lack of) understanding of it. I had the impression it had slightly better evidence for performing similarly to an all-in-one ETF, and was curious about your thoughts if it was comparable. It sounds like sticking to an all-in-one fund (which I am currently doing) is the right (ie simplest) approach for me as of now, but was wondering maybe down the line.
As far as the 1mil comment, an above commenter said I had planned to move to active management – I moreso meant I would try to be a client of where Dan works lol, along with Justin Bender and a couple others. Afaik they help with different things in the portfolio like financial planning and taxes.
I see the point about the difficulty of establishing new index ETFs. Anyway I will have to read your book before I comment again since you have so many informational excerpts that do answer my questions. ;-;
Hope you have a nice weekend!
Hi Dan. Love your new book. One question about Step 2. You mention that many investors overestimate the returns they can expect when setting goals. You say “if your goals are based on compounding at 8% to 10%, you’re likely to fall well short of your target”. But in Step 1, you mention that annualized return of stocks for the last 50 years to be 9.6% for Canada and 11.4% for the US.
Is 8-10% too much to expect with 100% equity fund like VEQT, over a 40 year period?
@Steve: Glad you enjoyed the book, thanks. It’s possible that stocks might return 8% to 10% over the next 40 years, but that would be much too optimistic for a financial plan. It’s usually best to be much more conservative. These days we’re using an expected return of about 6.5% for equities in our projections, for example. Better to plan for 6.5% and be surprised with 8% than the other way around.
@Dan: I know you have taken great pains to preface your broad stroke long term equity return predictions with the warnings that returns in the range seen in the past 40 years are not likely to be matched in future, and that even conservative long term estimates are subject to unforeseen downturns. But given that the meaningful return to the investor over any investment period is return minus inflation, is there any utility or improvement in predictability in hedging your equity return projections as values exceeding inflation?
@oldie: Sure, it definitely helpful to think in terms of real returns, i.e. adjusted for inflation. In fact, in the book I suggest that a very rough estimate of long-term equity returns is inflation plus 5%, which is in line with long-term historical returns. Of course, as we have seen, inflation can be volatile, too. The fact that we have seen inflation jump from around 1.5% to well over 4% in the last year doesn’t meant everyone should start projecting equity returns will be much higher now.
@Dan: Along the lines of the above thinking, is there a reliable repository of recorded data that gives Total Market Returns over the last 100 years for USA, Canada and Rest of World, as well as specific regional inflation (and calculated real returns) over the same periods?
@oldie: I’m not aware of any resource that is that “high-resolution.” Remember that older data can be pretty unreliable. One useful resource is Norbert Schlenker’s annually updated spreadsheet of returns, which includes historical Canadian inflation: https://www.libra-investments.com/Total-returns.xls
It doesn’t have year-by-year data, but the annual Credit Suisse Global Investment Returns Yearbook also offers some perspective. We have a tendency to look back at the most successful market in the history of the world (the US over the last century) and conclude, “This seems like a reasonable expectation for my investments over the next few decades.” Optimism is a good quality, but not the best basis for a financial plan!
I made a serendipitous discovery today. After tidying up my TFSA earlier this month (selling off all prior misguidedly purchased small fragments) and topping up my TFSA for 2022 and purchasing more of my remaining one fund — XGRO, I waited several days to account for the buying commission to be deducted and it didn’t happen. My professional association’s trading platform had recently ported over to Scotia iTrade, so I was not fully familiar with all the ins and outs of this new company’s procedures, so I phoned them to find out what the delay was. It turns out that Scotia iTrade has a not very well publicized list of 49 ETFs that it charges no buy or sell commission on, and XGRO happens to be on that list.
It seems to be a not very helpful feature (especially as they don’t seem to advertise it very much), as I always have excess liquid dollars waiting outside the TFSA account until the turn of every New Year when I can legally make my one XGRO purchase for the year (I have a DRIP arrangement for regular Dividends to automatically purchase more XGRO), so it’s not like I’ll be saving very much money. And it’s not useful to encourage Couch Potato investors to make all kinds of extraneous trades that they shouldn’t be doing, even if it’s “free”.
On reflection, maybe it could be a useful feature for those who are really cash strapped, but still have the discipline to want to contribute monthly, or even bi-weekly to their TFSA, as close to the max that they can afford; they can buy as much XGRO or XBAL as there is enough cash for, even if it’s 1 or 2 shares, without commission remorse. So there’s no excuse for dragging your feet on this, Guys and Gals!
Oddly, VGRO, VBAL etc are not on the list, and it’s sheer chance that I happened to choose XGRO years ago, rather than VGRO. Not that $9.99 a year would have made that much difference to my TFSA return. But I thought I’d pass it on, for what it’s worth.
@oldie
would you be able to tell me if any of the other iShares funds from the Model Portfolios are on the list of commission-free ETFs (XINC, XCNS, or XBAL)? Apparently the list used to be public-facing, but this seems to no longer be the case.
Thanks!
Sebastian
@Sebastien: XBAL and XGRO are available through Scotia iTRADE with no commissions. They are the only asset allocation ETFs on the list.
@Dan
Thanks for the info! Much appreciated.
Hi Dan. I just finished reading your book and I wanted to thank you for all of the fantastic information you provided. I made a huge mistake during the crash of 2020 and lost a lot of money because of it. I am dusting myself off and getting back in the saddle. I think that learning from a mistake like this will make me a better investor. I have just opened a Qtrade account and am in the process of closing and transferring my high priced mutual fund account over. I am going to use an asset allocation ETF. I had ideas of doing this prior to reading your book and was getting a bit worried that you were not going to discuss them in detail, but then I got to chapter 8 and you answered all my questions. I just wish I had all this information years ago! Thanks again for all the information you provide in your book and on CCP.
@Jeff: Many thanks, and glad you enjoyed the book!
Hi Dan, I’ve been reflecting on the recent BlackRock CEO quote (from annual report) that the next 1,000 unicorns will be green energy, sustainability investments. I was wondering if you had any suggestions or guidance re: green energy investing – any particular ETF’s if I want to concentrate a portion of my portfolio to this?
@Stephen: I defer to Tim Nash at Good Investing when it comes to this topic: https://www.goodinvesting.com/research
I Just ordered the paperback version since I am have been reading (and following) your advices since years. I wanted to take the time to thank you for your amazing work !
@Crazy Pierrot: Many thanks, and hope you enjoy the book!
Wondering if you have read this article in the Globe and Mail:
“ A portfolio for investors more anxious about stock market downside than missing out on gains right now “ by ROB CARRICK THE GLOBE AND MAIL , PUBLISHED JANUARY 14, 2022.
I had my money invested in mutual funds with brokerage firms for 30 years and at best my portfolio grew sideways. The large increases in my portfolio came from transferring principle to these funds not on returns. And finally having a retired economics professor who was also a CFP and a CGA explain the fees associated with mutual funds, which are unknown and never explained to investors, I took his advice and now invest in blue chip dividend stocks as a DIY investor. My average return, after paying the brokerage firm and learning about trailing fees and other fees was below the index. The professor was the one that pointed out this article but has modified his approach as to which stocks to buy. But long term, he has always outperformed the index. Are most of your ETFs index based? How does your portfolio compare to the article’s strategy long term?
@Pat: All of the ETFs in my model portfolios are index-based. The “Two-Minute Portfolio” is made up of 22 Canadian stocks, whereas my model portfolios include Canadian, US and international stocks, as well as bonds, so they are apples and oranges. A useful benchmark for the Two-Minute Portfolio is the S&P/TSX Composite Index, which is the one Rob uses in his article.
@Pat: Like you, I used to carefully read the Globe and Mail Business section end to end, trying to educate myself with all those knowledgable and professional people writing erudite and wise columns, and always coming up short with the knowledge that I’d always be too stupid to get what everyone else eventually seemed to confidently get and know. In other words I was forever doomed, through lack of training and intellect to fall behind the curve. Second-best advice (like the Rob Carrick article you quote), for those who could identify which category they were in seemed to be at least the most helpful and practical for us admittedly 2nd tier intellects; but next boom or bust around, would have us wondering perhaps that we had mis-categorized ourselves… Oh God, thinking all over again about how desperately I tried in vain back then to improve my investing knowledge has me sweating again in my sleep!
Then I stumbled upon the CCP strategy. (Actually I followed a chain of advice starting with “The Millionaire Teacher” book, but the point is, I ended up here). The basic CCP advice and the mathematical logic behind it is so simple it is forehead smacking in effect. The premise is really Simple — I got it right away in a week or so of constant re-readings, almost entirely from this Blog, but it is not Easy — it took me months of trepidation, rethinking and retesting my confidence before I transferred my whole portfolio to a rational CCP set up. But I haven’t looked back since. There’s been minor fine tuning, mostly due to the emergence over the years of new more efficient products, and the ferreting out, eventually, of my own residual magical thinking, but the basic principle is the same as it was back in 2012 when I finally got it. i.e. Your Investing should never be based upon predicting the future; the Index is your Light.
It’s all here in this Blog, in great detail for back referral, and conveniently condensed in Dan’s new book.
Honestly, I really don’t read the Globe and Mail at all now, just the Crossword Puzzle and obits. What a relief! If I accidentally catch an article while discarding the Business Section, I almost always get a good chuckle to myself.
Hi Dan – Loved your new book – I am in the process of moving to all ETF with my investments – I am a senior, and it takes a lot of time. One question – nowhere in your book, in all the lists of DIY places to invest, did you mention TD direct investing. May I ask why you omitted them?
Hi again Dan. I attempted my first etf purchase following you recomendation of bidding $.01 higher than the close. I checked back and I didnt get the ETF’s I was attempting to buy. The price closed at 25.28 and opened at 25.37. How can it open so much higher?? I’m a bit confused on what I did wrong. Thanks, Jeff
@Pat Norton: Thanks for picking up the book. While I named a few brokerages as examples, I didn’t make any recommendations, for the simple reason that I am agnostic about brokerages. Unless you are making frequent trades (in which case a commission-free brokerage is essential) then it doesn’t make much difference which one you use. If you’re comfortable at TD Direct, then it’s a perfectly good choice. Just be aware that all ETF trades are $9.99, so keep these to a minimum.
@Jeff: From your description, it sounds like you placed a limit order when markets were closed, which was the exact opposite of what I recommended (see page 160). As you learned, economic news still occurs when markets are closed, and opening prices can be significantly higher or lower than the pervious day’s close. Make sure you only place orders when markets are open, and even then, it’s best not to trade during the first few minutes of the open or close. Hope this helps.
Thanks Dan. Yes, I placed the order after close. I was trying to make notes as I went thru but apparently I missed a major point. I think I’ll read the book again to make sure I didnt miss anything else. Thanks for the fast response and everything you do.
Hi Oldie
You don’t have to “carefully” read the business section. The 2MP is not difficult to understand and equally forehead smacking as the CCP approach. And long term outperforms index based investing, which Carrick points out with data from 1986. Same buy and hold strategy and once a year review.
Carrick articles are not involuted.
@Dan: Your book is still on the way to me, but I would have a question in connection to Jeff’s inquiry about placing an ETF order. I understand it is best to place the order during the trading day, but is there any specific benefit or reason to place a limit order rather than just a market order during the trading day, especially given that on a typical day, spreads are usually just a penny?
Apologies if this is discussed in your book, but thought I would ask now as I have been playing around with a practice account to get a feel for the process, and after-hours orders as well as limit orders seem to be more problematic with ETFs than with a single stock (or perhaps that’s a specific platform issue).
Hi Dan. I am newbie in self-directed investing. I learned about this website through a private facebook group. Recently, I bought your book and hungrily read it and I found the answer to many of my questions. It was a fluid and smooth ride where you took me further down the rabbit hole in every step (referring to the famous quote “You take the red pill, you stay in wonderland, and I show you how deep the rabbit hole goes”). I am going to fire my financial advisor, sell that high fee mutual fund, and buy ETFs in brokerage account.
Just a suggestion to improve your book for future editions: you might want to add index at the end of book to help reader to locate important keywords and concepts.
This book is a reference and should be taught in schools and universities. Kudos to you and your team for sharing the valuable information and educating the public.
@Pat:
“And long term outperforms index based investing, which Carrick points out with data from 1986”
It is true that 22 Canadian stocks (I’m not clear how they were selected) is more “diversified” than, say, 1, 2, 3 or 4 Canadian stocks. But data from 1986 for these 22 stocks is not really “long term” in my view, and always subject to retrospective cherry-picking. There is no reasonable and plausible theoretical reason why this outperformance relative to the Canadian index is likely to persist in the true unknown long term, which presumably should be your investment horizon. If you believe in this persisting outperformance, then you believe in accurate future predicting, which in my mind is no different from clairvoyance or, to put it bluntly, on a par with ruminating upon viewing the entrails of a goat.
I’m talking theoretically, of course, and I think more elegant theorists than me might be able to show that your 22 “index surrogates” might match the Canadian Index so well as to make no meaningful practical difference compared to the index in the long term; but then, a single Canadian Index EFT would actually make a much more convenient and economical choice. And there might be very valid economic reasons why your sticking to Canadian Stocks might be a rationally logical optimum choice for your individual investment and future spending needs. But the notion that the Canadian Stock Market is “likely” to do better than the rest of the world during your investment period should not be a plausible rational reason. That’s just guessing.
The premise of Passive Index Investing (i.e. CCP investing) is that you cannot predict the future with enough precision to make meaningful investment decisions. Therefore your ONLY logical and rationally statistically supported choice is a diversified global mix of index funds distributed across a bond-equity ratio that is within your long-term risk tolerance.
I see that the choice of Model Portfolios that this Blog site offers all seek to meet the criteria of the latter paragraph within the differing needs of different investors, experience, convenience tolerance, and capital available. As far as I can see, none of them require any futuristic predictive assumptions. None of them purport to beat the index. This is a huge distinction.
I don’t intend to speak for this Blog itself; my thoughts are only my own formulation of how I understand the unassailable logic behind Passive Index Investing.
(I used to carefully and desperately read the Financial Section only because I believed that all these Financial Gurus, Carrick included, had some significant insight that I could gain if I concentrated hard enough. Now I realize that most of this so-called expertise was only retrospective smoke and mirrors, and can be safely ignored.)
Hi Oldie
The 2MP doesn’t require a crystal ball and you don’t have to be a necromancer. The two highest paying dividend stocks in each sector are picked. That’s it. No financial perspicacity or ruminative thinking is required either. Market Shparket. The same blind faith that you put in the indices could have been equally placed in the 2MP and given you a higher return for the past 35 years. Both passive techniques, one slightly better than the other.
I too invest in US and foreign equity using a comparable but not identical passive technique for the past 10 years. I do not purport to know the future and neither does the 2MP. But for the present its concept works for me.
I just read Dan’s book. I get it. Well written. I don’t disagree with it. For me, I just think there are other equally passive techniques that are as good or slightly better.
@Maz: Thanks for the comment, and glad you enjoyed the book!
@Sebastian: If you place a market order during a normal trading day, it will usually be filled with no issues. This is especially true of very large, frequently traded ETFs. However, I know from experience that you will sometimes get a surprise, especially if your brokerage’s quotes are not updating frequently enough. (Usually only professionals have access to real-time quotes.) Using limit orders is a best practice that every ETF provider recommends, and there is really no downside other than the extra few seconds it takes.
And to reiterate, placing orders after hours (even limit orders) is just a bad idea. Even if you’re at work when markets are open, take a few minutes to make the transaction on your phone.
Hi Dan
Purchased your book. I currently invest in 100% equities using a discount brokerage. I have multiple accounts between my wife and I. We’ve maxed on our TFSAs, we have personal RSPs at $200K but we have a spousal RSP and corporate (non registered ) account, both above 1M each. We’re in our mid 50s. I plan to work to 65. To transfer over to an ETF based portfolio sounds daunting for us. Is there a financial planner you recommend that could at least get us started on allocation and possibly retirement /estate planning?
@Julian: Thanks for the comment. Are you looking for a fee-for-service planner to work with you to set up a DIY portfolio? If so, these unfortunately do not exist, as most planners are not licensed to give investment advice. A planner will be able to help with retirement and estate planning, of course, but not ETF selection. Please email me if you’d like some recommendations.
Our team, for example, offers both services (investment management with ETFs, plus financial planning), but we manage the portfolios directly and charge an ongoing fee, not a one-off engagement.
Thank you Dan. Where would I find your email address?
I follow ‘my own advisor’ newsletter and they have reviews on ETFs so I have some good information but your book doesn’t really mention top picks in each category (Canadian, US, Foreign and Bond). The ones you have mentioned are in the newsletters.
I have just recently started to read books on retirement planning and estate planning but I’m a novice because of my age but I want to prepare. Templates for calculations on what I will need can be found almost anywhere these days, books and internet. The confusion comes in the pre transition before retirement and then the actual retirement. Which funds should go into which accounts and how to create proper cash flow and of course, tax strategy. I’m really not interested in ongoing services with a planner/advisor. I haven’t had luck with past advisors mainly because I had to purchase funds they were commissioned to sell and frankly my portfolio lagged. Like the ETF concept. I’m not looking for one strategy on retirement but several ideas which I could evaluate myself. Would appreciate it if I could email you.
Hi Dan
TD Waterhouse has e-Series Index funds. How do these compare to ETFs? I read that there are no commissions to buy or sell and dividends can be reinvested for free.
Also forgot to mention what do you think of Vanguard’s Target Retirement Funds?
@Julian: The e-Series funds are a good option as long as you are not paying commissions to trade them (which seems to be the case at TD Direct, at least for now). Lots of information about them on this site.
The Vanguard Target Retirement Funds are, I believe, only available as part of employer-sponsored plans, not to the general public.
Hi Dan – any advice for resources to learn about investing in a corporate margin account? I have a small business and some cash I’d like to invest in an index fund, but curious about whether there are strategies unique to investing within corporations. Thank you! I’ve learned so much from you, I really appreciate all of your content!!
@Lisa: Corporations can add an extra layer of complexity, for sure, but the overall investing strategies are mostly the same as they are for other taxable accounts. A balanced asset allocation ETF is a perfectly good choice for a corporate account, especially a relatively small one.
Hi Dan
Can you explain the Norbert Gambit method. I read an article that mentioned your name and that you describe this technique. But I don’t understand the strategy. I own VTI in my RRSP in USD. The strategy involves ‘swapping’ ETFs and in my example, with the Canadian equivalent VUN in CAD. If I was in my retirement phase, can you explain how I would be able to use this technique to avoid withholding tax if I wanted to cash VTI or it’s dividends? I tried looking it up on the internet and was confused even further.
Thank you
@Betty: Thanks for the comment. There are a couple of misunderstandings here, I think.
First, Norbert’s Gambit is a strategy for converting CAD to USD, or vice versa, using a security that is listed in both currencies. Usually this is done usng the Horizons US Dollar Currency ETF: this ETF trades in Canadian dollars as DLR and in US dollars as DLR.U, but both versions are actually the same security. You can buy DLR in Canadian dollars, move it over the USD side of your account and sell it in US dollars, thereby converting currency at very low cost. There are lots of blogs and videos describing the process: just make sure you find one specific to your brokerage, because they are all have slightly different processes.
You cannot do Norbert’s Gambit using VTI and VUN. Although these two ETFs have virtually the same holdings, they are two distinct funds. If you hold VTI and you move it to the CAD side of your account and sell it, your brokerage will just convert your USD to CAD with their usual mark-up, which defeats the purpose of doing Norbert’s Gambit.
Note also that if you hold VTI in your RRSP, then you are already avoiding withholding taxes on the dividends. It’s VUN that is subject to withholding taxes. So it sounds like you may be better off leaving things as they are. But please let me know if I have misunderstood your goal here.