This week I had the pleasure of being a guest on the Rational Reminder podcast with PWL Capital’s Ben Felix and Cameron Passmore. We discussed how I built the blog, my switch from dividend investing to indexing, my thriving fee-only financial planning business, and simplicity versus optimization in your investment portfolio.

Check out the Rational Reminder Episode 11: Simple vs. complex with Robb Engen. While you’re at it, make sure you subscribe to the podcast on iTunes, Stitcher, Spotify, or wherever you get your podcasts. Great intelligent conversations around investing and financial behaviour.

Rational Reminder investing podcast

I want to expand a bit on the simplicity versus optimization discussion. I mentioned that I know I’m leaving money on the table by holding a Canadian listed ETF (VXC) in my investment portfolio instead of getting my U.S. and International stock exposure through U.S.-listed ETFs.

The tradeoff is cost versus convenience. By holding VXC, I’m giving up about 50 basis points in costs due to additional foreign withholding taxes on dividends. By using U.S.-listed ETFs instead, I could bring the total cost down to about 0.20 percent (versus 0.70 percent total cost with VXC).

That said, the U.S.-listed ETFs add a layer of complexity that may not be worthwhile for many investors. Multiple ETFs makes rebalancing more complicated, not to mention more trading costs to deal with. Then there’s the foreign currency conversion trick known as Norbert’s Gambit, which can be problematic to execute even for seasoned investors.

For those reasons I choose, for now, to keep things simple with my VCN and VXC two-ETF portfolio. That choice costs me about $750 a year in higher fees, which is certainly not trivial and will only get higher as my portfolio grows. But it’s a tradeoff I accept right now, perhaps until my portfolio reaches $250,000 or so. Who knows, by then a new product might come along that elegantly solves this problem for Canadian investors.

This Week’s Recap:

Earlier this week I compared Canadian cash back shopping sites, Ebates.ca vs. Great Canadian Rebates.

I finally was able to book our return flights home from Dublin next July. We fly on United Airlines from Dublin to Chicago to Calgary. The reason we chose United Airlines for both our flights to Edinburgh and our flights home from Dublin is because United does not levy any fuel surcharges.

We redeemed Aeroplan miles for both the departure and return flights. Altogether we spent 240,000 Aeroplan miles and just $590 total on taxes, fees, charges and carrier surcharges.

Weekend Reading:

Dale Roberts at Cut the Crap Investing shares his background a DIY investor and lists some ETF model portfolios on his site.

Dale also neatly recaps the week with a weekend reading post of his own (he’s giving me a run for my money!). He includes a great quote:

“Your portfolio is like a bar of soap; the more you touch it, the smaller it gets.”

Jason Heath explains how to reinstate your Old Age Security benefits after they’ve been clawed back.

Personal finance columnist Rob Carrick talks to author Fred Vettese about the best practices to stretch your retirement savings:

Carrick is also set to launch a retirement podcast called A Look Ahead: Rob Carrick’s Retirementality. It debuts with a three-part series starting October 1st.

Her elderly mother sold the family home for $300,000. Here’s how to help a parent invest in their 80s.

Ben Felix tells regulators, lobbyists, and investment firms to go ahead and keep charging deferred sales charges. He’s confident his firm, PWL Capital, will reap the benefits.

Mark Seed, the blogger behind My Own Advisor, says he’s feeling financial trapped as he inches closer to an early retirement goal and is realizing there is more to life.

The Million Dollar Journey blog lists the biggest weed stocks in Canada, along with an ETF to get exposure to the budding industry.

Nick Magguilli looks at abnormal markets and how to prevent forced selling with this gem: Why you don’t know the price until you sell.

Whether or not you need life insurance is a question that many people struggle to answer. In this latest Common Sense Investing video, Ben Felix looks at whether you need permanent life insurance:

Why for baby boomer couples, synchronize or stagger is the new retirement dilemma.

Thinking about retirement? Here are two key income sources to expect.

Consumer advocate Ellen Roseman looks into the Expedia experience: How the giant travel agency treats its customers.

Finally, why some of the best data on human behaviour is privately held by social media companies, and how universities can convince them to share that information.

Have a great weekend, everyone!

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9 Comments

  1. Brien Stewart on September 29, 2018 at 5:26 pm

    Rob, I’m retired and looking for an ‘Income Portfolio” and not worried about growth.
    Has anyone put one of these together?

    Regards
    Brien

    • Robb Engen on September 30, 2018 at 8:26 am

      Hi Brien, the make-up of that portfolio would depend on a number of factors. It sounds like you don’t need to touch the capital, but how much do you have to invest and how much income do you require from your portfolio each year? From there you can look at constructing a portfolio that can meet those income goals.

      There are several dividend ETFs from Vanguard and iShares, but I will caution that dividends are not the be-all and end-all of income generation in retirement.

      • Mike on September 30, 2018 at 7:29 pm

        I am currently living comfortable off of dividends. Why are you so against dividend income portfolios?

        • Robb Engen on October 1, 2018 at 9:56 am

          Hi Mike, to each their own. I’m not against dividends but there are other ways to generate income from your portfolio without limiting yourself strictly to dividend paying stocks.

          Certainly if you’re the type of investor who doesn’t need to touch your capital, and the dividends generated from your portfolio is enough to meet your retirement needs then there’s nothing wrong with a dividend focused portfolio.

  2. Bryan on September 29, 2018 at 5:43 pm

    Looking forward to hearing what you had to say on the Rational Reminder podcast! Are there other Canadian money podcasts you would recommend? Thanks!

    • Robb Engen on September 30, 2018 at 8:27 am

      Hi Bryan, well there’s the new Retirementality podcast from Rob Carrick coming out tomorrow. You can also check out Maple Money by Tom Drake, and of course the Canadian Couch Potato podcast.

  3. Matt on September 29, 2018 at 7:33 pm

    All airlines have a fuel surcharge of some sort. Not sure why that was a big differentiator on your part as fuel surcharges are not a profit center for any business.

    • Robb Engen on September 30, 2018 at 8:34 am

      Hi Matt, sorry I should have been more clear. When it comes to redeeming Aeroplan flight rewards, Air Canada charges huge fuel surcharges on those redemptions. The same itinerary on Air Canada would have cost $2,200 in fees and taxes, versus $590 on United.

      There are a couple of airlines in the Star Alliance that don’t charge fuel surcharges on flight redemptions, United being one of them. By altering our route to fly from Calgary to Chicago to Edinburgh (with a brief layover) we saved $1,600.

  4. Matt on September 30, 2018 at 7:08 pm

    Thanks Robb, that makes more sense.

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