How I Invest My Own Money
*Updated for Aug 31, 2024*
Regular blog readers know that I’m a big proponent of passive investing with low cost, globally diversified index funds and ETFs. Why? Low fees are the best predictor of future returns. Global diversification reduces the risk within your portfolio. Index funds and ETFs allow investors to hold thousands of securities for a very small fee.
Investors who eventually come to understand these three principles want to know how to build their own index portfolio. There are several ways to do this: pick your own ETFs through a discount broker, invest with a robo-advisor, or buy your bank’s index mutual funds.
Still, the amount of information can be overwhelming. There are more than 1,100 ETFs, thousands of mutual funds, a dozen or more discount brokerage platforms, and nearly as many robo advisors. The choices are enough to make your head spin.
Must read: Reboot Your Portfolio – 9 Steps to Successful Investing with ETFs
I narrowed these investment options down when I wrote about the best ETFs and model portfolios for Canadians. I’ve also explained how you can retire up to 30% wealthier by switching to index funds. Finally, I shared why you should hold the same asset mix across all of your accounts for maximum simplicity.
Now, I’ll explain exactly how I invest my own money so you can see that I practice what I preach.
My Investing Journey
I started investing when I was 19, putting $25 a month into a mutual fund. When I began my career in hospitality, I contributed to a group RRSP with an employer match. The catch was that the investments were held at HSBC and invested in expensive mutual funds.
When I left the industry I transferred my money (about $25,000) to TD’s discount brokerage platform. That’s when I started investing in Canadian dividend paying stocks. I followed the dividend approach after reading Norm Rothery’s “best dividend stocks” in Canada articles in MoneySense.
I later found dividend growth stock guru Tom Connolly (plus a devoted community of dividend investing bloggers) and started paying more attention to stocks with a long history of paying and growing their dividends.
Five years later I had built up a $100,000 portfolio with 24 Canadian dividend stocks. My performance as a DIY stock picker was quite good. I had outperformed both the TSX and my dividend stock benchmark (iShares’ CDZ) from 2009 – 2014. My annual rate of return since 2009 was 14.79%, compared to 13.41% for CDZ and 7.88% for XIU (Canadian index benchmark).
But something wasn’t quite right. I started obsessing over oil & gas stocks that had recently tanked. I had a difficult time coming up with new dividend stocks to buy. I read more and more opposing views to my dividend growth strategy and realized I was limiting myself to a small subset of stocks in a country that represents just 3-4% of the global stock market.
Related: How my behavioural biases prevented me from becoming an indexer
Furthermore, new products were coming down the pike – including the introduction of Vanguard’s All World ex Canada ETF (VXC). Now I could buy a tiny piece of thousands of companies from around the world with just one product.
So, in early 2015 I sold all of my dividend stocks and built my new two-ETF solution (VCN and VXC). I called it my four-minute portfolio because it literally took me four minutes a year to monitor and add new money. No more obsessing over which stocks to buy or worrying if a stock was going to go to zero.
Fast-forward to 2019 and another product revolution made my portfolio even simpler. Vanguard introduced its suite of asset allocation ETFs, including VEQT – my new one-ticket investing solution.
The next change to my investment portfolio was in January 2020 when I moved my RRSP and TFSA from TD Direct Investing over to Wealthsimple Trade to take advantage of zero-commission trading.
I opened a Corporate Investment Account at Questrade that summer to invest the retained earnings in my business.
I had to open a LIRA in 2020 after leaving my public sector job and receiving the commuted value of my pension. I opened the LIRA at TD Direct for simplicity. The trading fees made no difference since I invested the entire amount into VEQT and didn’t plan to make any changes (and you cannot contribute to a LIRA).
*I’ve since moved this LIRA to Wealthsimple Trade (Feb 2024) when the platform recently made the LIRA, LIF, and RRIF account types available.
Finally, at the beginning of 2022 I sold all of the units of VEQT in my TFSA and transferred the proceeds to an EQ Bank TFSA. It wasn’t about market timing or avoiding bad returns – we built a new house and I used the proceeds to top-up our down payment.
I started contributing to my WS Trade TFSA again this year (2024) and have been buying VEQT.
How I Invest My Own Money
I’ve written about personal finance and investing for nearly 15 years. Over that time I’ve done an incredible amount of research on banks, discount brokerages, robo-advisors, ETFs, index funds, and investment strategies. I’ve read extensively about behavioural finance and evidence-based investing. I’ve determined that investing in a simple, low cost, globally diversified, and automatically rebalanced portfolio will lead to the best long-term outcome.
I eat my own cooking, so to speak, and invest my own money this way. Here’s what it looks like:
| Account type | Platform | Product | Amount |
|---|---|---|---|
| RRSP | WS Trade | VEQT | $300,709 |
| TFSA | -- | -- | $0 |
| LIRA | WS Trade | VEQT | $216,848 |
| RESP | TD Direct | VEQT/VSB, XEQT/XSB | $111,860 |
| Corporate | Questrade | VEQT | $357,424 |
I recognize there is no “one-size-fits-all” investing solution. Investors need different products depending on their risk tolerance and stage of life. They use different account types depending on what they do for a living, their tax bracket, cash flow, and available contribution room. They may need to use multiple investing platforms to save in an employer-sponsored plan, to reduce fees, or to open a new account type.
Why Three Investing Platforms?
I’ve banked with TD for my entire life and so it made sense to open my first discount brokerage account there in 2009 at what was then called TD Waterhouse. That’s where I first established my RRSP, TFSA, and my kids’ RESP account.
I moved my RRSP and TFSA over to Wealthsimple Trade when the no-frills self-directed platform added these account types to its line-up. I was attracted to the zero-commission trades and was tired of paying $9.99 per trade at TD Direct. As I mentioned, I recently moved my LIRA from TD Direct to Wealthsimple Trade when that account type recently became available on the commission-free platform.
Wealthsimple Trade still does not offer RESPs or Corporate accounts.
I kept my kids’ RESP at TD Direct, and invested in commission-free TD e-Series funds until January 2024. This year I switched my RESP portfolio to mirror Justin Bender’s RESP approach for a family RESP, basically separating out each child’s share by putting my oldest daughter’s contributions, grants, and growth into VEQT and VSB, and my youngest daughter’s funds in XEQT and XSB.
I’m a big fan of Questrade and what they’ve done for self-directed investors over the past 20+ years. I wanted to try out the platform for myself and had the opportunity to do so when I decided to open a Corporate Investment Account.
ETFs are free to purchase on the Questrade platform and since I planned to add new money regularly it made sense to use Questrade.
Final Thoughts
I write a lot about investing and my philosophy is all about building a simple, low-cost, globally diversified investment strategy. I’ve explained how I invest my own money and apply this thinking to my unique situation. But my situation is not the same as yours.
You may not have the time, desire, or temperament to open a self-directed brokerage account and buy your own ETFs (even if it’s just one ETF). You may feel more comfortable with a digital or robo-advisor guiding the way.
Some of you may not feel comfortable at a robo-advisor and want to remain at your bank. There’s a solution for you, too, in the form of bank index mutual funds.
Some of you may be highly motivated to optimize your ETF portfolio even more by holding U.S. listed ETFs in your RRSP to save on costs and foreign withholding taxes.
The point is that there’s a solution for everyone in today’s investing landscape. I hope that by sharing these strategies, and how I invest my own money, you’ll be able to apply this thinking to your own investments to simplify your portfolio, reduce your costs, and ultimately lead to a better long-term outcome.
Thanks. This is helpful guidance.
This is so insightful. I think a lot of DIY investors go through the same journey: start with picking stocks, often having a dividend focus, and later settling with a simple, all-in-one fund solution.
Your early returns with stock picking were truly impressive. I’m surprised that didn’t motivate you to stick with it.
@AnotherLoonie – Thank you! I find the journey often starts with expensive mutual funds and then switches to stock picking. How well (or poorly) that goes will often decide what happens next.
My returns were good but the entire market was going up. I don’t place any value on my stock picking prowess – it was just luck. That luck ran out in 2014. I missed my benchmark (badly) and that’s when I realized I would have to spend the rest of my investing life constantly trying to pick winning stocks and avoid losing stocks (agonizing about both the entire way).
Just a quick note that WealthSimple now supports the LIRA and RESP account types. Not sure how recently they added it, but my husband is in the process of transferring his LIRA to them.
Hi Jennifer, I use Wealthsimple Trade – it’s their self-directed and mobile-only trading platform to buy your own stocks and ETFs. You’re referring to Wealthsimple Invest (the robo-advisor platform), which does indeed offer many different account types including RESPs and LIRAs.
Wealthsimple (the robo) is great, my wife has her RRSP and TFSA there.
You’re right – I was thinking of the Wealthsimple Invest platform! My bad!
Excellent overview of your investing journey Robb – thanks for posting.
My path was similar to yours but at 61 years old I’ve been retired for a few years and living off my dividend ETF’s. While I don’t like the market gyrations my dividends flow each month and I no longer need to think about rebalancing or selling any holdings to fund my retirement.
No self-directed LIRA at Wealthsimple, according to recent experience.
Only a robo-advisor one. Assume it is the same for RESP. Also Wealthsimple doesn’t, or it didn’t at the time , support RESP for QC residents. Not good.
Had a LIRA at Wealthsimple, robo. Have transferred it out to Questrade where I will self-direct it. Didn’t like all the churning & inexplicably, 15% emerging mkts in a supposedly balanced asset allocation, more than US mkt. Nightmare.
Hi Robb,
Thanks for the great article as usual, on a side note TD is offering now 0$ fees on selling and buying TD etfs uder TD assistant goal and they have an excellent new lineups for that including a One click portfolio ETFS , speaking of that if you can review it and tell us what you think about it it will be great.
Hi Gus, thanks – I saw that yesterday and perhaps it could be a solution for my TD e-Series funds. I need to change up my asset mix and one of their one-ticket ETFs (with free trades) would be a great fit and save me from rebalancing three different funds.
I’ll take a closer look and report back. My general view is that the asset allocation ETFs offered by Vanguard, iShares, BMO, and TD are all really good “one-ticket’ options for investors.
Robb, Does Vanguard have a USD equivalent of VEQT? I have funds in USD that I’d like to put into an asset allocation ETF but I don’t see one on the Vanguard list. I love your blog! Marjorie
Hi Marjorie, as far as I know the U.S. does not have an equivalent suite of asset allocation ETFs that include bonds. But the closest to VEQT (100% global equities) would be Vanguard’s VT (Total World Stock Index): https://investor.vanguard.com/etf/profile/VT
I think iShares AOR might be a suggestion although it’s more like a 60/40 balanced USD fund.
https://www.ishares.com/us/products/239756/ishares-growth-allocation-etf
Hi Robb: Your investment trail looks very much like my own. Even down to the same companies complete with Moneysaver advice. I am a few years ahead and have been retired for approx. 10 yrs it’s a good go. Thanks for the great articles
Gerry Surtees
Sudbury
Hi Gerry, thanks for your comment. As a life-long learner I know my investing journey has been shaped both by my research and by the product landscape available at the time.
The good news is that it’s becoming increasingly easier for a DIY investor to avoid the pitfalls of high mutual fund fees and get started on a path to low cost indexing.
Glad to hear retirement is treating you well.
Hi Robb, Thanks for sharing your investment journey. Is all your money invested in equities or do you have some money in Bonds, GIC etc? What is split 60/40, 70/30? And what are your recommendations for the other side of portfolio? Thanks!
Hi Don, my pleasure. What you see is all there is in terms of my investments (it is indeed 100% equities). No bonds, no GICs.
That said, I do keep a healthy amount of cash in my business account ($75k or so) and I do have some fairly predictable income streams that cover my everyday spending and short-term financial goals. This works for me, but I recognize it’s not for everyone. Most people need some bonds or fixed income in their portfolio.
As for recommendations, again I’m a big fan of simplicity and the diversification that an asset allocation ETF like VBAL or XBAL provides. Retirees can use these products with a total return approach in mind, selling ETF units as needed to top up their cash bucket.
Unfortunately in this low rate environment we can’t do much better than 1.5% interest on our cash savings. That’s the risk-free rate of return that we have to live with. I’d recommend seeking out that 1.5% with a digital bank or credit union (I use EQ Bank) rather than accepting the peanuts that the big banks are offering on savings deposits.
Hi Robb,
Wealth cash offers 5% on cash account if you are a generation member (>$500K)
I would be interested to hear what your returns have been with VEQT?
Thanks,
Jane
Hi Jane, I shared my investment returns earlier this year here: https://boomerandecho.com/investment-returns-for-2023/
Hello Robb – This is one good thing about the internet, where a person with good intentions can share valuable advice for all to see. Most people need to save for retirement and create their own pension plan. Your advice provides a needed service and knowledge, something that should be taught in school. Thanks for sharing
Hi JRR, many thanks for the kind words. It means a lot.
Thanks Robb for sharing your journey.
It took me a little over one year of dividend investing (April 2016 to July 2017), and doing fairly well, to realize that I was kidding myself about my prowess as a stock picker. Although I’d developed my own criteria for choosing the stocks, I concluded that I really had no idea what was going on in those companies. At the time, I worked for a company that was traded on the TSX, and come every quarter there was a mad dash to make things look great. I didn’t see anything illegal going on, but the quarterly results and upbeat tone hid significant internal problems, employee dissatisfaction, and struggles to maintain market share. I suspect not all companies are like this, but how, as an investor would I know – I wouldn’t! My investing luck didn’t run out, I made the switch from 30 stocks to ETFs while on an investing high. For me, it was the logical thing to do.
For anyone who is on the fence re stock-picking vs index investing, I highly recommend watching Las Krojer’s 5-part series of videos “Investing Demystified” on YouTube.
Hi Bob, my pleasure. Thanks for sharing your journey, too. It sounds like you were a quicker study than I was 🙂
Thank you for this comment Bob, I am literally sitting on that fence right now, and with more articles & comments like this I’m leaning towards just sticking to index investing.
I love the simplicity of your portfolio (and your weekly posts). I am now focused on VEQT as well, but I haven’t liquidated my dividend portfolio. I know I shouldn’t time the market, but I’m highly reluctant to sell any of my dividend stocks (usual suspects of big 5 banks, utilities and telecoms) because they are so battered at the moment, but it’s something I will look to do in 2021. Keep up the great work – I read many, many investing and personal finance blogs and yours is my favourite.
Hi Kevin, thanks for the kind words. I hear this a lot from investors – they don’t want to sell stocks that are down. There’s a cognitive bias at work here called loss aversion where the pain of losing is psychologically twice as powerful as the joy of gaining.
Try to frame it this way: If you were forced to sell those stock positions today would you repurchase them again? Probably not – with cash in hand you’d likely just buy VEQT.
If those stocks are held in registered accounts (RRSP/TFSA) then there are no tax consequences for selling them. Then you can immediately buy VEQT, which likely has a higher expected future return than those losing stocks you’re holding onto.
We sometimes want to believe that if a stock has fallen in price it’s just a matter of time before it recovers and grows again. But individual stocks can fall out of favour and either go to zero or stay out of favour for many years. It doesn’t care what price you originally paid for it and doesn’t owe it to you to return to its former glory.
I find my self in the same thought process of of the years investing – stock picking, etc.. and then thinking is there a simpler way – i.e. etf.s – but I do have a question – your stock picking did so well as you mentioned, then sold them all – capital gains taxes to be paid, buying 2 etf.s VXC and VCN in 2015 – to then sell them in the past 1-2 years and go all in on VEQT – with buying and selling are you cutting yourself short in future progressive gains and sort of doing the same changes in your investing philosophy, buying and selling instead of sticking to something that at the time worked for you? I believe VEQT is a greatf fund but it is also a new fund – instead of sticking with VXC and VCN and or adding VUN and possibly a few others, and then stick with it and simply keep investing more cash into each to keep a balance? I still find your latest How I Invest My Own Money – getting folk to think it is okay to buy and stick with a fund then to only seem undecided and sell and buy a new fund – your thoughts on my comments – and simply my own comments – nothing here to say what you suggest is wrong or right – I am questioning the reasoning of the investing style changes over time? thankyou
Hi John, thanks for your comment. You bring up a fair point. First, I must say that I made all of these moves inside my RRSP and TFSA – tax sheltered containers that spared me from any capital gains complications.
Next, let me address your comment about not sticking with what was working. The dividend strategy worked for a while, yes, but in 2014 it badly underperformed both the TSX and my benchmark index (represented by CDZ). It was that year when I realized I wasn’t cut out for this strategy over the long term. I’d have to consistently pick winners and avoid losers, all while agonizing over the portfolio every day. No thanks.
Now, let’s talk about product development and the evolution of ETFs and investing platforms. I switched from dividend stocks to indexing when Vanguard introduced its All World ex Canada ETF (VXC). Before that, to build a diversified ETF portfolio you needed 5-10 ETFs (remember the old Canadian Couch Potato portfolios?). I did not want to have to tinker with multiple ETFs.
The landscape evolved even further (for the benefit of investors) when Vanguard launched its suite of asset allocation ETFs. I could get nearly identical global stock exposure with just one balanced ETF (VEQT). Sign me up!
I changed from a dividend approach to an indexing approach for behavioural reasons. I couldn’t see myself as a long-term stock picker. But I don’t see the switch from VCN/VXC to VEQT as a change in investing styles – more like an improvement in the simplicity of my already sensible global indexing strategy.
Finally, it’s common to think of these asset allocation ETFs as “new funds” but they’re actually just wrappers that contain seven individual ETFs that have been around for many years. Furthermore, these ETFs track stock indexes that have been around even longer. The “track record” of VEQT is irrelevant because we can simply backtest what the returns *would* have been if the ETF had been around for 25 years.
PWL Capital’s Justin Bender has done exactly that, backtesting the returns of each of these portfolios over the last 25 years: https://cdn.canadianportfoliomanagerblog.com/wp-content/uploads/2020/10/Model-ETF-Portfolios-Vanguard-2020-09-30-Light.pdf
PS – I want to add that it’s also irrelevant that I sold a bunch of stocks in 2015, or I sold VCN/VXC in 2019 and bought VEQT. Why? Because I sold those stocks / funds and then immediately bought the new product. I stayed constantly invested, just in a different vehicle. I didn’t interrupt any magical compounding or anything like that. Just like in my response to Kevin: that’s true as long as you sell and then immediately invest in your new strategy.
I appreciate your feedback! and communications on ETF.s
Is there a simple version of this all in one ETF that excludes Canada? I’m not very positive on the Canadian market and find the allocation of 30% to Canada in this ETF too high, but like the other ETFs this holds.
Hi Gerry, I wrestled with this idea last year (read this post: https://boomerandecho.com/solving-the-home-bias-in-my-portfolio/) but ultimately decided that holding two ETFs (VEQT & VXC) defeated the purpose of having a simple all-in-one portfolio so I ended up with just VEQT.
That said, later in the year iShares released its own all equity ETF (XEQT). It has a slightly lower MER (0.20%) and its allocation to Canadian stocks is 23.3% compared to VEQT’s 29.9%.
Hi Robb,
Why did you choose VEQT instead of HGRO. The MER is slightly lower and the performance better.
Thank you,
Howard
Hi Howard, well I didn’t know what the future performance would be at the time 😉
HGRO’s outperformance can be explained by its tilt towards tech stocks (it holds NASDAQ 100). There’s no reason to expect that to continue over the long term.
HGRO also has some other issues that make it less appealing in a taxable account, and not appropriate in a registered account. One is the regulatory risk of the federal government disallowing the swap-based structure. Not ideal. Two, HGRO is less diversified than VEQT (or XEQT) because it tracks smaller indexes and holds fewer stocks.
Finally, the costs aren’t exactly what they appear to be:
VEQT charges a management fee of 0.22%. Its MER is 0.25%, and its TER is 0%. Total fee = 0.25%
Compare that to Horizons’ HGRO, which has a management fee of 0%, an MER of 0.16%, and a TER (trading fees) of 0.18%. Total fee = 0.34%.
Hi Robb,
Thank you for your response re HGRO.
I look forward to a meeting we have scheduled with you on November 25th. In the meantime, I hope you are able to answer the following question directory to me as it a is of a more personal concern.
Your concerns about HEQT are important because we hold HXT in all our accounts including our RRIFs and TFSAs. Is your concern about government disallowing the swapping structure that Horizon utilizes of immediate concern for us? If so, it might be wise for us to switch to VEQT now instead of waiting until the new year where there would be less income tax consequence.
Thank you in advance for your response.
Howard Weinstein
Hi Howard, to be clear the regulatory risk for swap-based products would only be of concern in a taxable (non-registered) account because such a change could mean selling all of those units and incurring all of the deferred capital gains in one year.
That’s not an issue in a registered account like a RRIF or TFSA. It’s the lack of diversification (tracking smaller indexes, tilting to NASDAQ) that make HGRO less appropriate in a registered account compared to the Vanguard, iShares, and BMO products that track broader indexes.
I guess what I’m saying is the only good reason I see to hold a swap-based ETF is when you don’t want to receive invest income in a taxable account. But if you go that route you should be aware of the regulatory risk and the lack of diversification compared to other similar (non swap-based) products.
Robb, that new house has already been a huge positive. If not for the plan to build you may not have sold your VEQT in early 2022 and suffered the same wrath the rest of us have. On Dec 28 I checked it and I was up considerably but the thought of selling never crossed my mind. Now all I’m hoping for is to get back to even. I was not meant to win big at investing, that much I am sure of. Fun fun fun!
Hi Barry, I’m not so sure about that given the rise in interest rates. It’s very likely I may have locked in a purchase agreement at the peak of house prices and may be faced with selling our existing home next spring at a much lower price than it was worth a few months ago. I’ve budgeted for that, to be clear, but it’s still not a pleasant scenario.
Keep hanging onto your VEQT and you’ll be pleasantly surprised with the gains over the long-term.
I’ve followed your advice and invested in VEQT, which has done quite well. What are your thoughts on BMO Investorline’s ZWG?. It is globally diversified, and invests in large cap. According to it’s blurb, it “seeks to provide exposure to the performance of a portfolio of dividend paying global companies to generate income and provide long-term capital appreciation while mitigating downside risk through the use of covered call options”. I’m a retiree with an adequate pension (I think of that as the fixed-income part of my portfolio). The words, dividend paying, global, long-term appreciation, and mitigating downside risk caught my eye. 12 month yield is 7.59% vs VEQT 1.67%. VEQT holdings are composed of 13,622 stocks, whereas ZWG holds only 106 stocks. Dividend income looks attractive. Although the covered call approach “mitigates downside”, I think it would also limit upside.
Following.
Hi Dennis, if you’ve read my work for any length of time you’ll know my answer to your question. You can’t compare a total market ETF like VEQT, which invests in some 13,000 stocks, with a concentrated, high-yield, covered call ETF like ZWG.
Not only does the covered call approach limit your upside, there’s no guarantee it limits your downside either (Google AIMCO’s $2B loss from a similar strategy. When energy prices tanked, their strategy blew up in their face. That’s why they say option trading is like picking up pennies in front of a steamroller.). In no world is there a risk-free 7.59% yield.
Take a total return approach with your investments, even in retirement, and you’ll have a much more diversified portfolio: https://www.moneysense.ca/save/retirement/a-better-way-to-generate-retirement-income/
This also comes down to your goals. If you want to leave a large estate and never touch your capital, then investing for income can make sense (even if it’s not the most optimal approach). If you want to maximize your retirement spending, then you’re going to need to dip into your capital and taking a total return approach is the best way to do that.
Thank you for your observations. Obviously a global fund with only 106 stocks is riskier than one with 13,622 stocks. The yield would suggest that is 7x riskier. I wonder if there is an optimum number of stocks for a global ETF to hold? (i.e. how much less risk would each additional stock contribute?). Writing a covered call increases the risk, too. Since the dividends will include foreign dividends, capital gains, and return of capital, determining the actual effect of taxation is difficult. I have been unable to find information as to the makeup of ZWG dividends. A total return approach is the best way to go.
Hello Robb,
What is your opinion of Harvest HDIV ? It appears yo have a good dividend, but
is it diversified enough? Also the MER seems high at about 1.07.
comments please.
Thanks marv
Hi Robb,
What are your thoughts to holding VGRO in one’s corporate account? I thought it would be easier than trying to ladder GICs for my fixed income.
I figured anything that allowed me to touch my investments less would be helpful. Even if I pay more for the bonds in a taxable account etc.
Hi Eddie, sorry I missed this. Holding VGRO in a corporate account is perfectly sensible in terms of keeping your investments simple and investing in a globally diversified portfolio. I’m not sure it replaces GICs though. If you need cash in the short term it’s best to get that from cash savings and GICs (6-12 months minimum of required spending) rather than trying to sell VGRO units every time you need money. An 80/20 portfolio is too volatile for that purpose.
Also be aware of the taxable distributions from VGRO – 4 times per year you’ll receive distributions from dividends and bond interest.
Hi Robb,
The dividends from VGRO meets my spending needs.
I hold a year of expenses in cash as well.
Yes, we oversaved.
Hi Robb, I appreciate and enjoy reading your thoughts, thanks for sharing them!
My question is regarding when you feel the best time would be to invest a lump sum amount into non taxable accounts (RRSP and TFSAs) after deciding to move all my retirement savings into a low cost index investment strategy? I’m primarily interested in investment growth at this stage in my life (between 40-50 yrs of age) and am a bit wary of the current investment market environment and its volatility over the last 6-12 months. I understand the long term approach of being in the market is better than being out of it but I’m trying my best to wrap my head around where the markets will be in the short term (6-12 months). If possible I’d like to DCA and get back into the market at a “lower” market value point that shows signs of market recovery (knowing nothing is certain in the markets). Thanks and all the best!
Hi Charlie, thanks for the kind words.
You’re asking me how I “feel” about when to invest a lump sum, which I think is an unfair question and might make it seem like I have any insight whatsoever into the short-term movements of the market (I don’t!).
The evidence suggests it’s best to invest a lump sum immediately because the opportunity cost of waiting (markets tend to be up more than down) leads to a less optimal outcome for dollar cost averaging versus investing immediately. Two studies that I’ve read put the outcome at 2/3 in favour of investing a lump sum immediately, while 1/3 of the time you were better off dollar cost averaging.
If I knew the result of a coin flip on average was always 2/3 heads and 1/3 tails, I’d guess heads every time. So you know where I stand when it comes to investing a lump sum – just do it now.
But if you cannot stomach the thought of investing a lump sum only to see markets go down in the short term, then DCA makes perfect sense, provided you come up with a reasonable schedule (i.e. $10k a month for 10 months or something along those lines). The goal there is to minimize regret.
Finally, there’s a third option to consider, which is if you’re feeling apprehensive at all about investing a lump sum then perhaps your risk tolerance is lower than you originally thought. In that case, instead of 100% stocks or 80% stocks, what about 60-70% stocks instead? Invest the lump sum more conservatively than you would have otherwise.
I hope that helps!
Thanks for your comments and feedback Rob. Continued success in your financial journey and thanks again for sharing your thoughts with your platform.
Charlie
Charlie, re your comment “am a bit wary of the current investment market environment and its volatility over the last 6-12 months.”
From my experience, we should always be wary, even when things are going great. Think about all the events that happened pretty much out of the blue, so we shouldn’t be surprised when something similar hits the headlines tomorrow.
I think the bottom line is that saying “invest within your risk tolerance”. Good luck!
Hi,
I love your blog. I am just wondering, investing is all about diversifying across asset classes right,! Have you thought of investing in a second investment property if cashflow stays neutral or positive, especially since there may be an opportunity to buy something like that over the next few months!
Hi Sud, as Canada’s worst handyman the thought of owning a rental property and being a landlord is not at all appealing to me.
I’ve got plenty of real estate exposure (and corresponding headaches) with my primary residence so I’m good with the diversification of holding 13,000+ companies across the world.
Hi Rob,
I hold VGRO in my corporate account and it is getting large.
Do you have a ballpark amount where someone should move away from a one ETF solution?
Would it be as expensive as having a full service advisor if I keep using VGRO? I hear that it is more expensive for the bonds, etc.
But boy it sure is easy to hold one ETF!
Hi Steph, it might be worth reading this article by Justin Bender answering this same question from me: https://www.canadianportfoliomanagerblog.com/when-should-i-dump-veqt-or-should-i/
There’s trade offs to consider (lower fees and more complex versus higher fees and simple), and the fact that this is held in a corporate account further complicates the question.
I think we should fight for simplicity in our lives, but that’s just me.
Thanks so much for this post! I found it super helpful. I did have a question about your TFSA. It says you have $116,276 in cash at EQ Bank in your TFSA. The 2023 overall max contribution limit is $88,000. Wouldn’t your total put you over, or am I misunderstanding something? Thanks in advance! 🙂
Hi Danica, thanks! That amount includes my contributions ($88k) plus investment growth over many years.
I’ve since withdrawn that entire amount (I did this in 2022) and now have available contribution room of $123,076 ($116,576 + the new $6,500 for 2023).
TFSAs are great, aren’t they?!?
Hi Robb, thanks for this article, it’s always interesting to sneak a peek into others’ finances. I am curious about your reasoning as to why you don’t have bonds (sorry if you’ve written about this before, I’m new to your blog)?
Hi Emily, thanks for your comment – glad you enjoyed the article.
Emily, most investors should hold some bonds in their portfolio to help smooth out the short-term ups and downs of the market.
I’m weird in that I’m an emotionless robot when it comes to investing so I’m not worried about getting nervous and panic selling my stocks when they go down.
A portfolio of 100% stocks should theoretically outperform a less risky portfolio over the long term, so that’s what I’m looking for from my all-equity investments.
I’m also 43 and still (again, theoretically) have 20 years or so before I need to withdraw from my investments.
Read my latest post and you’ll see more about the various asset allocation ETF portfolios and their expected returns over time: https://boomerandecho.com/how-to-choose-the-right-asset-allocation-etf/
Cool to see you trying out Questrade! Have you tried Passiv Elite yet? It is the *chefs kiss*
Nice to have multiple brokerages too in case one gets hacked.
Hi Mark, I’ve had my corporate account at Questrade since 2020. I haven’t had the need to use Passiv since I just invest in the all-in-one VEQT, which self-rebalances. I’ve heard good things, though!
If you invest regularly in your corporate account, or even just reinvest distributions, you should still check it out, even with a 100% allocation to VEQT.
Basically it alerts you via email whenever new monies are in the account and from there it takes about 10 seconds to login and reinvest distributions with their one click trades. Much easier than buying with the Questrade platform!
Bonus: i read that they let you link WS accounts now too. You can link your spouses accounts as well as your own and see all your holdings in one place, including your calculated money weighted return %.
Do give it a try!
I occasionally check to see if Wealthsimple Trade has added any new accounts. I did notice they added a LIRA account but wanted to confirm with them it wasn’t a mistake. Was there any announcement made about the new accounts or was this quietly launched? I will switch my wife’s LIRA, but she also has a Spousal RRSP. Any rumblings on that front? Is there some where to check on there website as to what they are working on or does it just show up on their site?
Hi Michael, I was surprised by this as well because I also check regularly to see if they’ve made any improvements. A client was setting up a LIRA and one of the reps asked her if she wanted the robo advisor or the self-directed platform.
It looks like they’ve quietly added LIRAs, RRIFs, and LIFs. Their Twitter account hinted they’d be adding RESPs and RDSPs soon. No word on spousal RRSPs, but hopefully they’re rounding out their line-up of account types and will have everything available soon.
Hi Robb, I’ve followed your journey for a number of years, and I just wanted to say thanks for being so transparent and informative. I wonder if you have any thoughts on VEQT vs VDY?
Hi Stephanie, thanks for the kind words.
It’s not really fair to compare VEQT and VDY.
VEQT is a globally diversified ETF that holds 13,500+ stocks. VDY holds just 52 Canadian stocks that pay high dividends.
In general, it’s better to invest more broadly rather than limiting yourself to a small set of stocks in a relatively small country.
Wow the thread keeps resurfacing
When we go into another 2008 (2015 or 2020) style situation, what is your method of managing your withdrawals when their valuations can be 30 to 50% lower than the highs and your counting on a $4000.00 a month withdrawal requirement?
Will you have a 4 year cash wedge saved up as well? This is my question to total return investors vs income investors? This can become a very difficult situation in a sustained downturn for people with smaller index portfolios pre retirement.
Hi Paul, there is good research on lifecycle investing that suggests maintaining an all-equity portfolio throughout retirement actually leads to better outcomes, even in the face of poor market returns.
I’m not sure if that’s sensible for investors who are actually living through those poor returns. A cash wedge is not optimal, but probably helpful psychologically to get through rough patches like that.
Four years of cash might be too conservative but your mileage may vary.
Thanks for the article. Great insight. I have been index investing for about 8 years and have followed the CCP approach with a 60/30/10 split between XAW/VCN/ZAG for a 90/10 equity bond split. I would like to simplify and move it to a single fund (either VEQT or VGRO – not sure yet). My question – is it as simple as selling off XAW/VCN/ZAG and purchasing the one fund? Thanks in advance!
Hi Jeff, it would be that simple in any registered account (RRSP/LIRA/TFSA). Sell your individual ETFs and then immediately buy your chosen all-in-one ETF. Those accounts are like Vegas – what happens in those accounts stays in those accounts with no tax consequences.
Note that you can replicate your 90/10 portfolio by holding 50% VEQT and 50% VGRO.
It’s trickier in a taxable (non-registered) account where selling those individual ETFs would trigger a taxable event (capital gains or losses). You’d have to look at your current market value compared to book value and decide whether it makes sense to trigger capital gains all at once, or maybe more gradually over a few years.
Thanks Robb. I really appreciate you taking the time to reply. These are in registered accounts so it looks like it should be quite simple. As a mid-30’s couple with one small child, do you recommend 100% equities or do you think some investment in bonds is worthwhile? My kids RESP is already in VEQT but I am thinking of moving our RRSP’s and TFSA’s to 100% equities for the next 10 or so years before slowly purchasing bonds as we age.
Hi Jeff, it’s impossible to say without knowing more about your goals and capacity for risk.
Certainly if you’re comfortable holding 100% global equities then VEQT or XEQT could be a sensible solution in your 30s and 40s (I’ll be 45 this year and still in 100% global equity, but I’m an emotionless robot when it comes to investing).
likely a simple question exposing my ignorance but is the VEQT MER of.24% on top of the individual MER’S of the underlying funds that appear to range from VCN of.05 toVEE of .25%?
Thanks
Hi Barry, it’s a common question so don’t feel bad. The answer is that the MER on VEQT is 0.24% total. There is no double counting of fees due to the underlying ETFs.
Why invest in a corporate account before your TFSAs are refilled? Would it not be better to take the hit now, paying taxes on dividends or wages, and fill your TFSAs for decades of tax-free compounding?
Would love to see your math / calculations behind that decision!
Hi Mark, I have $130,000 in unused TFSA room. Some quick math suggests I’d have to withdraw $330,000 in dividends this year to have enough to max out the TFSA, meet our spending goals, and pay the taxes associated with that large of a withdrawal (an extra $80k in personal taxes).
My wife has $100,000 in unused TFSA room so she’d need to withdraw a similarly high amount to max that out.
Our business does well, but not well enough to pay out the $600k or so needed to max out the TFSAs at once.
We also had some one-time expenses to deal with personally this year, so the TFSAs went on the back burner.
Don’t worry – we’ll catch up again soon, starting in 2025.
Hi Robb! Great article. I came across you after listening to you speak on a Money Feels podcast last year I believe. I’m curious what contributed to your decision to lean towards VEQT over XEQT, and why you split the difference in your RESP?
Hi Lara, thanks for your comment (and welcome!).
No particular reason other than XEQT didn’t exist yet when I made the decision to move to VEQT (it came along several months later, I believe). You truly can’t go wrong with either one.
I split the difference in my kids’ RESP only to separate the funds that belonged to each child. So my oldest gets the Vanguard funds and my youngest gets the iShares funds so I can clearly track contributions, grants and growth in a family RESP.
Hi Robb! Your name has come up a lot in my circle of friends. Being new to ETFs and seeing they’re both (XEQT an VEQT) are both near their 52 week high. Is it worth to wait a bit to dump all my RRSPs into it or do it asap even though it’s currently high? Your blog has been so helpful. Thank you! I will be booking a session with you soon!
Hi Bev, thanks for your comment! This video is worth watching to understand that it makes sense to invest immediately when you have cash available, instead of dollar cost averaging or waiting for a dip in the market: https://youtu.be/KwR3nxojS0g?si=1OMyQkvl3SA5nK9n
That’s because the alternative to investing is having your money just sit in cash, and since markets go up more often than they go down, you’re better off investing right away.
This is true even when markets are at or near all-time highs.