Money Bag: CAGE, Cash Wedges, and Net Worth Calculations
Welcome to the Money Bag, where I answer questions and address comments from readers on a wide range of money topics, myths, and perceptions about money. No question is off limits, so hit me up in the comments section or send me an email about any money topic that’s on your mind.
Today, I'm answering reader questions about a new asset allocation ETF from CIBC and Avantis, spreading your money around with VEQT, market timing during “these times“, where to park your cash wedge, and whether your net worth calculation should include future tax liabilities.
Thoughts on CAGE
First up is a question from multiple readers about the new Avantis CIBC All-Equity asset allocation ETF. Take it away!
I'm sure you've heard of the CIBC Avantis ETF CAGE by now. Since you're such an advocate for VEQT, I – and I'm sure those who follow you – would be interested on your take of CAGE.
As far as I can tell it's the only Canadian domiciled all-in-one that aims to do a bit better than the market (factor alone) by incorporating tilts to small cap and value stocks. And it's available to DIY investors (as opposed to something like DFA's F-Series funds).
Yes, I saw the launch and listened to their episode on the Rational Reminder podcast.
It's great news for DIY investors looking for an easy all-in-one factor tilted fund. Much better than trying to build your own multi-ETF portfolio.
That said, I’m skeptical of its theoretical outperformance (Avantis suggested as much as 2% per year, which would be big, if true) over a market-cap-weighted fund, and I don’t think I could personally stomach any periods of underperformance if the factors aren’t “working”.
But, in general, I'm a big fan of asset allocation ETFs as the most sensible way for most people to invest. Pick your flavour (fund sponsor) and your risk appropriate version (EQT, GRO, BAL, AGE, etc.), contribute regularly and stick to your plan, and that's a pretty good recipe for good financial outcomes.
Buying the Haystack
Next up is Fiona, who asked me about investing inside my TFSA:
With the money you put inside your TFSA, do you purchase VEQT only or do spread the money around?
I only hold VEQT in each of my account types (RRSP, LIRA, TFSA, corporate account). You can read about that in this post about how I invest my money.
VEQT spreads the money around already by holding more than 13,000 global stocks. More than just all your eggs in one basket, it's the biggest basket you can buy.
Market Timing in “These Times“
Up next is Thomas, who actually wrote this 14 months ago during the tariff tantrum but the question can easily be applied to today (and several times in any given year when there's market turbulence):
Hi Robb, I’m writing about the current situation with the market and wondering if we should sell off our current shares of VEQT and buy back in again when this all blows over (if it does).
No need to panic. Global stocks had been on an incredible run since October 2022. VEQT was up 20+% in 2023 and 2024. That's abnormally high. I use a 6.1% expected return in financial plans, so it would make perfect sense to see markets pull back a bit after years of strong growth.
It's hard to see these headlines every day and not feel like you need to do something. But markets have been through much worse (Covid, inflation, real recessions, global financial crisis, etc.) and keep moving up and to the right (eventually). There's no reason to think this time is any different.
Finally, selling now and buying back in when things blow over is a lot more difficult than you think. You have to be right twice. Once now (thinking you've avoided some upcoming losses), and then again when you think better days are ahead. Nobody knows when those bottoms and tops occur, which is why we stay the course.
Helpful Blog Posts
Here's a nice email from Nathan, who is grateful for the retirement focused articles:
Just a quick note to thank you for your incredibly helpful blog posts. My wife and I are in our mid-50s; she's retired and I will be retiring in a few years. I recently discovered your blog, and I've learned so much from it. Particularly helpful has been the information on delaying CPP and OAS to age 70, the importance of strategically drawing down RRSPs/RRIFs between retirement and age 70, and the use of a small cash wedge when drawing down investments in retirement. It's hard to find good content on the decumulation stage of life, and yours is top notch and easy to understand.
Thanks for the note and for your kind words – it truly means a lot.
I'm so glad you're getting value from the blog. In the era of podcasts, TikTok, and YouTube, I'm grateful for an audience that still gets value from the written word 😉
Where to Park Your Cash Wedge?
Sandra wrote in asking about where to park her cash wedge to maximize interest:
You've written about money being put into a cash wedge. I believe you had mentioned a HISA ETF. Presently I have a high-interest savings account where I receive 2.25%. I was looking at what was available for HISA ETFs and I am not seeing a substantial difference in the returns I would receive. Is there something I am missing or would keeping my cash wedge at my current bank be essentially the same?
The cash wedge I'm describing is not the money held in a non-registered savings account. It's strictly to help you facilitate withdrawals from your RRSP.
The idea is to put ~10% of your RRSP in a HISA ETF or money market fund to keep it safe, and so that you can withdraw from that fund regularly, rather than selling equities if/when markets happen to be down.
A HISA ETF is not going to beat the best high interest savings account rate, but it let's you hold cash inside of your existing RRSP without having to open a separate RRSP savings account. Think simplicity over maximizing returns.
Net Worth Calculations and Future Taxes
Finally, a question from Lawrence about whether to include future tax liabilities on your net worth statement:
I would appreciate your comments on how to handle major future tax liabilities on net worth statements. Clearly minor amounts from savings deposits, etc. are of little consequence and need not be acknowledged. I am thinking more of larger amounts, such as RRSPs , taxable accounts and the like. I argue with myself that amounts paid in the past year will obviously be reflected in the statements, as you update them each year, but what about the TOTAL tax liability for future years – say in a $1M RRSP and / or brokerage account?
The spirit of a net worth statement is to capture the broad strokes of your current assets minus liabilities.
While I understand that a portion of your RRSP is taxable, I don’t see how it’s reasonable or even practical to include an unknown future tax liability.
If you want to get that granular, why not include the present value of your future CPP and OAS income streams (after-tax, of course)? What about your human capital and projected employment income until retirement? It’s insane behaviour when you put it that way.
Your net worth is a snapshot in time of your current assets minus liabilities. In retirement, your net worth may decrease as you withdraw funds and your total balances deplete over time.
No need to overthink it.
The only caveat is in the event of a divorce and a division of assets. In that case, a $1M RRSP certainly does not have the same value as, say, a $1M principal residence due to the future tax liability of the RRSP. So, knowing that the tax liability exists is extremely helpful.
Do you have a money-related question for me? Hit me up in the comments below or send me an email.
