I really could use some feedback and help...

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

I really could use some feedback and help...

Post by frankrom »

Hi Guys/Gals,

* sorry for the long post but I am trying to be detailed *


New to the forum... I saw a lot of good discussions and figured I'd sign up and see if I could get some assistance.

About me... 32 years old, high risk tolerance, looking to maximize growth. I recently pulled all my money from a Manulife investment adviser to start a DIY portfolio with RBC. Below summarizes my financial situation.

- RRSPs belonging to my wife: $127,000 (maxed)
- RRSPs spousal in my wife's name: $57,000 (maxed - I have a pension hence contribution room is low)
- TFSA wife: $60,000 (maxed)
- TFSA mine: $60,000 (maxed)
- LIRA wife: $35,000
- RESP: $14,000 (maxed)
- Non-registered funds $1,000,000 (debt swap strategy with my mortgage) I will likely be borrowing $570k or $670k for a private equity venture leaving a balance of $330,000 to $430,000 in investable assets for my portfolio
- My wife has a defined contribution plan (which we transfer the money out every once in a while to manage on our own - this is with Great West Life)
- I have a government pension. I plan to quit next year which will net me about $250,000 in additional investable assets from cashing out my pension

I have spoken with many AUM and fee based professionals and I don't think I am a good fit for them. I have considered hiring a AUM professional however most have a few set portfolios that they follow and they slot you in there... IE their balanced, or aggressive portfolio. If i wanted a more custom portfolio they don't really do that. Then I thought about hiring a fee based professional to design me a portfolio based on my needs and they won't recommend specific ETFs and tell you exactly where to hold them... more so they will design an asset mix for you.

Matter a fact I had a AUM adviser straight up tell me to my face in a meeting that I could probably do this all on my own if i wanted... I was surprised to hear him say that... not because I don't think I have the knowledge but surprised to hear a AUM manager tell someone that.

I am going to be an open book here and hope I can get some constructive feedback. Firstly I am not trying to BUILD THE MOST PERFECT portfolio... however I would like to structure it at least tax effective... hence hold the right ETFs on the right exchanges in the right accounts... Now moving on my thoughts are ... I am looking at building a 100% stock portfolio with strictly ETFs. I am mostly interested in US listed securities and developed EAFE.

I am getting bogged down with what accounts to hold specific ETFs and what ETFs to hold and lastly what currency to hold them in for tax purposes.

I am not overly concerned with currency risk at the moment due to the CAD being at 80 cents. Historical average is about this so if I turn all funds to USD I think i'd be exchanging it back in the long term around the same (give or take).

Some of the ETFs I had in mind are...

IVV - iShares Core S&P 500 ETF or XUS iShares canadian version
IEFA - iShares Core MSCI EAFE ETF or XEF.TO Canadian version
VOO - Vanguard S&P 500 or VFV Canadian version
OR in some accounts would it be better to use BMO ZSP.TO? VFV simply holds VOO and XUS simply holds IVV where as BMO ZSP.TO holds the S&P 500 stocks directly
I may consider a US technology and US financial sector specific ETF for a small part of my portfolio

Now the question is where do I hold which ETFs and do I hold an S&P ETF or a EAFE ETF on the the USD or CAD exchanges?

Due to the tax exemption on US dividends in retirement accounts I suspect I will be holding a US listed ETF in my RRSP and LIRA. When It comes to my non-registered funds shall I find a CAD version of IVV and IEFA to hold? I may consider using margin money and borrowing on margin money with USD listing securities cost much more so that is something to consider.


Does this make sense or would you agree with my synopsis below??

RRSP Accounts and LIRA:
Use USD to hold US listed S&P 500 ETFs to take advantage of dividend tax credit. In this case IVV

TFSA:
Use a Canadian listed international EAFE ETF... in this case XEF.TO canadian version of IEFA

RESP
Small amount of money here... likely throw this into an S&P 500 index? Use a a USD etf? or use a CAD ETF that holds the USD ETF? or lastly use BMO S&P ETF that holds the US stocks directly? Is there a benefit to holding an RESP in CAD or USD?

NON-Registered
I guess for my non-registered funds I have no choice but to forgo the dividend tax credit if I don't want to hold CAD securities... so take additional US market expose with S&P 500? Use a CAD ETF like BMO ZSP.TO to keep CAD funds in non-registered accounts this way I can benefit from margin accounts if i wish? Is there a benefit to holding any USD ETFs here in non-registered accounts?

I really hope some of you stayed with me for this post I could really use some people to bounce ideas off of. Industry experts won't get this detailed with me thus I have to rely on educating myself or associate with others who are doing the same.

These are just ideas... if I am not structuring something tax efficiently please let me know.

I'd even welcome a chance to discuss on the phone with anyone (if you are so willing)

Thank you
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: I really could use some feedback and help...

Post by kcowan »

I am pretty sure I can't help you. But just in case:
You say your RESP is maxed yet $50,000 is the maximum per child?
You must have an expensive house. What is it worth?
For the fun of it...Keith
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

Re: I really could use some feedback and help...

Post by frankrom »

Hi,

The resp is maxed for his age. He's only 2.8 years old, so only three contributions so far.

House is 1.4 million
OhGreatGuru
Veteran Contributor
Veteran Contributor
Posts: 1361
Joined: 27 Mar 2010 16:01

Re: I really could use some feedback and help...

Post by OhGreatGuru »

I think your investor profile is too far away from my own to give much advice. But I would suggest:
1. Your "high risk tolerance" is likely to equate to volatility in the bulk of your investments. Consider a more conservative profile for your TFSA's, so you have a stable source of funds for emergencies and major expenditures.
2. Your wife's RRSP, LIRA, and spousal RRSP should match her investor profile, not yours.

I think you're nuts to cash out of a government DB plan, but that's another reason why the advice you are seeking is above my pay grade.

Do I understand that most of the non-registered funds are borrowed? If so, I hope you have life insurance.
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

Re: I really could use some feedback and help...

Post by frankrom »

I refuse to let a pension dictate what I do with 20-30 years of life. I suggest to you that it is much more nuts to do something for 20-30 years that you no longer enjoy.

I don't lack opportunities and I will be able to make more with these other opportunities while enjoying myself much more.

This is a strategic move.
kumquat
Contributor
Contributor
Posts: 915
Joined: 09 Mar 2005 19:54
Location: North of Montana

Re: I really could use some feedback and help...

Post by kumquat »

frankrom wrote: 21 Jul 2017 18:09 I refuse to let a pension dictate what I do with 20-30 years of life.
While my only comment is that you have a pretty good NW for your age, I agree 150% with the above statement. For 39 of my 41 working years, I might have done my job for minimum wage, I liked it that much. When it was no longer fun and I didn't need the money, I retired. I still like that job/part-of-life. Why spend 20-30 years doing something you don't enjoy for people you don't like just to get a DB pension and die?
I don't intend to offend anyone, that part is just a bonus.

Science flies men to the moon. Religion flies men into buildings.
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

Re: I really could use some feedback and help...

Post by frankrom »

kumquat wrote: 21 Jul 2017 19:37
frankrom wrote: 21 Jul 2017 18:09 I refuse to let a pension dictate what I do with 20-30 years of life.
While my only comment is that you have a pretty good NW for your age, I agree 150% with the above statement. For 39 of my 41 working years, I might have done my job for minimum wage, I liked it that much. When it was no longer fun and I didn't need the money, I retired. I still like that job/part-of-life. Why spend 20-30 years doing something you don't enjoy for people you don't like just to get a DB pension and die?
Amen...

Thanks for the support and thank you for sharing.

This new opportunity for is with a private equity group. I'll be getting compensated, I'd be investing and I'd be using skills and experience which is more inline with what I enjoy.

This will very likely be way more lucrative than a DB plan anyways.
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: I really could use some feedback and help...

Post by kcowan »

frankrom wrote: 21 Jul 2017 10:29The resp is maxed for his age. He's only 2.8 years old, so only three contributions so far.

House is 1.4 million
You can contribute $50k in total and treat it like a TFSA. Just deduct the amount you will contribute every year for 17 years to get the maximum match.
For the fun of it...Keith
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

Re: I really could use some feedback and help...

Post by frankrom »

You are telling me someone can open an RESP and deposit $50k right away?

I am contributing the max $2500 a year to get the $500 government grant... each year.... until its maxed out.

You are saying you can deposit the whole $50k up front and then just claim the $2500 a year?
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Re: I really could use some feedback and help...

Post by adrian2 »

frankrom wrote: 21 Jul 2017 21:37 You are saying you can deposit the whole $50k up front and then just claim the $2500 a year?
Yes, you can deposit the whole $50k upfront, and no, in that case you can only claim $2500 once.

How to get the biggest bang for your buck from your RESP
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

Re: I really could use some feedback and help...

Post by frankrom »

adrian2 wrote: 22 Jul 2017 09:15
frankrom wrote: 21 Jul 2017 21:37 You are saying you can deposit the whole $50k up front and then just claim the $2500 a year?
Yes, you can deposit the whole $50k upfront, and no, in that case you can only claim $2500 once.

How to get the biggest bang for your buck from your RESP

Interesting ... but then you are forgoing 20% annual return on your contributions. I wonder what the future value of the tax deferred or tax savings would be vs forgoing a 20% return.

Thanks for the info guys but I haven't really got any feedback on the investment side of my original post.

Anyone able to chime in there?
longinvest
Veteran Contributor
Veteran Contributor
Posts: 3956
Joined: 10 Sep 2012 17:26
Location: QC

Re: I really could use some feedback and help...

Post by longinvest »

frankrom wrote: 21 Jul 2017 09:25 About me... 32 years old, high risk tolerance, looking to maximize growth.
...
I am looking at building a 100% stock portfolio with strictly ETFs. I am mostly interested in US listed securities and developed EAFE.
Hi Frank,

Could you help me understand how this works, for you?

You're not the first young person coming to an online forum claiming to have high risk tolerance and wanting to maximize growth. You know; who in his right mind wouldn't want more money?


Before you answer, I'll tell you about my vision of risk in my personal portfolio.

Let me make an analogy. Let's say that I lived in Toronto (I don't) and I wanted to visit my cousin in Ottawa on Sunday for lunch at 11:30AM. If I wanted to get there as fast as possible, I could go fast, much faster than the posted speed limit, and try to make the distance in 3 hours instead of 4. Why would I do that? Maybe because I woke up late and was not ready to leave before 8:30AM on Sunday morning. In other words, I would be driving at an average 135 km/h.

Would that work? I would say that the probabilities of it working are extremely high. So, isn't that good?

Let me think a little more.

What could wrong?

I don't have to tell you. You know. Here's a couple of examples. I might get a ticket and end up being late and having to pay a hefty fine, too. I increased my risk of killing myself in an accident and missing lunch.

Isn't there a more reliable way to get on time for lunch with my cousin? Of course, there is. It's not as glamorous, though; it won't let me tell tales at parties of how I avoided radar detection. I could set up my alarm clock at 6:00 AM, take the time to eat breakfast and shower, leave my house at 7:00 AM, drive at normal speed, and get to my destination on time or maybe even in advance (I could stop a few minutes at a Tim Horton's and lose a few minute, not to show up too early).

But, maybe that was my plan all along, but I really forgot to set up my alarm clock at 6:00AM. It's now 8:30AM and I'm just getting into my car. What should I do?

I don't know what you would do, but here's what I would do: I would call my cousin and tell him that I woke up late, that I won't be able to make it before 12:30PM or 1:00PM.

OK. Let's put the analogy aside. How does this prudence principle translate into financial terms?

I think that all this "risk tolerance" talk is just a way for financial advisors to push people into risky portfolios which increases their likelihood to make more money as a percentage of assets under management. (Back to the analogy: The financial advisor won't die if I kill myself in an accident due to having taken higher risks by speeding; he's like a viewer watching a car race on TV, the faster I go, the more fun he has).

Why do I save money and invest? I do it so that I can fund future spending, like retirement spending. What am I generally trying to achieve? I'm trying to more or less equalize my current and future spending (in inflation-adjusted terms) so that I don't have to live like a pauper today nor later when I quit working.

If I didn't save and invest today, I would have lots more money to spend. I would be rich, but I would have to continue working until I die (hoping never to get fired), or I would have to live like a pauper after I quit my job (or get fired).

If I saved too much today, I would get to live like a pauper, possibly missing on the younger and healthier years of my life, just to end up with too much money that I'm unable to spend later, when older and restricted by various ailments.

What almost nobody will tell you is that you could use a balanced portfolio, instead of an aggressive one, all life long. You might have to save a little more, but not as much as you might think. In the view of (very loosely) equalizing current and future spending, you just have to spend a little less all along. What you will gain is more reliability.

People talk about the ability to take stock risk as having "mental fortitude". I think that the speeding analogy is more accurate. The problem with stocks is not some mental weakness leading to an inability to ignore their volatility; it's more like a car crash. When stocks crash, it often happens when the economy is not doing well. Lots of people, in the U.S., just happened to lose their jobs and houses in 2007-2009. It's not that they were not able to mentally ignore stocks volatility, it's that they had to raid their retirement accounts and sell stocks just to survive. The same happened in the great depression, almost one century ago. People had to sell their stocks to survive.

Professor William Sharpe, a Nobel Laureate, describes risk as "doing badly in bad times".

In real life, this can translate into unanticipated course changes.

Here's an example. Maybe I was in my young 20s, put everything 100% in stocks because I thought there were no risk to me ("it's money for an eternity later, when I'll be 55 or 65"). Then, a few years later, I meet a really nice lady and we decide to have kids and buy a home. As it happens, just then, the house market crashes; there are awesome deals available. Unfortunately, banks are in trouble and don't want to lend money, except at extremely high interest rates. No trouble, I think; I'll just use my savings... But, the stock market has crashed along the house market. My savings have melted, too!

You do what you want. It's your money and your life.

Me, I've decided to be prudent. Probabilities are that others will be richer than me, but I don't care: probabilities are higher that I'll have enough, which is my objective.

Good luck!
Variable Percentage Withdrawal (finiki.org/wiki/VPW) | One-Fund Portfolio (VBAL in all accounts)
User avatar
Zipper
Contributor
Contributor
Posts: 658
Joined: 10 Aug 2005 16:36
Location: London ON

Re: I really could use some feedback and help...

Post by Zipper »

Nicely said! :thumbsup:
fireseeker
Veteran Contributor
Veteran Contributor
Posts: 1007
Joined: 03 Jun 2017 15:21

Re: I really could use some feedback and help...

Post by fireseeker »

Hi Frankrom,
Two thoughts:
1) You are proposing several extremely aggressive strategies -- leverage, private equity, withdrawing from a defined benefit plan. On the DB front, for instance, you could presumably stay in the plan to collect whatever pension you've earned when you turn 65 (you don't have to keeping working). You might earn more managing the vested amount yourself, or you might not. In either case, it will be locked in and out of your reach until at least 55. Longinvest offered wise counsel, but this risk/reward is for you and your wife to assess.
2) You say you're not looking to build the perfect portfolio, but are you sure about that? Sweating the potential tax benefits of US ETFs vs Cdn ETFS in various accounts is a minor concern against the risk you are proposing to take and against whatever AA you settle on.
That said, you may find this helpful for determining optimal ETFs for each account.
http://canadiancouchpotato.com/2016/07/ ... revisited/
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

Re: I really could use some feedback and help...

Post by frankrom »

Interesting to say to least.

Great analogy and story and I really mean that.

I guess it's hard to capture ones true situation via a few forum messages.

I didn't come from wealth nor was I given anything rather I I came from a modest immigrant family. I've always been a hard worker opting to build wealth rather than screwing around in my early years. This has paid dividends in terms of building a a critical mass. My point is I have always taken what I believe are calculated risks and I usually do not over analysis and second guess myself. I am a believer in any plan executed is a better than no action or the perfect plan never executed.

I am mortgage free ...

I would be leveraging 700k-1 million of my home at prime with a debt swap strategy thus generating tax deductions. I also make pre tax income which would allow me to save more of my income.

This would still leave 350k in registered investments and 250k in a cashed out DB plan.

Out of that 700k-1 million even if I lost it all I'd be in my 30s with a million dollars in mortgage. I make 130-160k a year and my wife does about 110k. We would still have about 500-600k in registered funds / DB money.

I should also mention I have a four Plex rental property as well.

We have no other debt.

This isn't exactly a horrible situation to be in.

The privately equity venture ... it's hard for you guys to have an opinion because you don't know the details. But it isn't a tech startup. They are consolidating an industry by buying businesses. There will always be intrinsic and tangible value. Could it go down? Sure anything is possible but in this case it is less likely.

Could my stock portfolio go down with the market? Yes. I think this is probably more likely given the super long bull run. But I am not trying to time a market.

My point is I find it unlikely both of these aren't going to play out.

Thus I see this as a calculated risk.

I look back at the equity market since 1926 and it has returned an average of 10%. That gives me 90 years worth of data.

I have many working and investing years in front of me. I am not trying to beat the market. I am simply trying to be the market over the long term that is all. That is because I won't need the money for a long period of time.

I am not trying to argue. I feel as if there are very smart people who have more life experience chiming in here and I am trying to encourage a healthy conversation while trying to ensure my thoughts are clear and my point of view is articulated well to you guys so you get the full picture.
gobsmack
Contributor
Contributor
Posts: 447
Joined: 04 Sep 2015 13:16

Re: I really could use some feedback and help...

Post by gobsmack »

frankrom wrote: 22 Jul 2017 12:49 I have many working and investing years in front of me. I am not trying to beat the market. I am simply trying to be the market over the long term that is all. That is because I won't need the money for a long period of time.
If this is the intended goal, I think you might be assuming way too much unnecessary risk. A couch potato ETF portfolio will get you there through a much safer route.

Maybe you should think about it this way: What is your goal? If you are investing for retirement, for example, how much do you want to accumulate to fund your retirement? Once you have an answer to this question, you will realize that there are several ways of achieving your goal and they all come with different risks. You can then figure out which path will work best for you. Usually, this means taking the path that increases the chance of success (i.e., lower risk).

I think longinvest may have offered this analogy before in another thread: If I only had a few dollars and I needed to make $5 million in 2 or 3 days, a lottery ticket might be the best investment available to me. Obviously, it comes with a lot of risk. But if I have 35 years to get there, I can come up with many safer ways of possibly achieving this goal. Maybe in the process, I can also come up with a contingency plan in case I fall short of my goal.

Lastly, I second the advice of others here in the thread. If I were one of the lucky few Canadians who have a government DB pension, I would probably not touch it even if I left the job (i.e., assuming I would eventually be able to collect a pension from the plan).
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

Re: I really could use some feedback and help...

Post by frankrom »

I don't get why there is so much reluctance to touch a DB plan?

I don't remember what my pension would be at retirement if I quit today. I think it was something like $10,000-13,000? At the age of 55 or so. Assuming I live until 85 (hopefully longer) I would collect about 390k from it. Then you also get taxed on that.

I quit today I get 250k and can invest it until I am 60. Rule of 72.... I could double that multiple times over this giving me so much more assets in the future????

And honestly -10k-13k or even if it was slightly more than that is peanuts in my retirement. It's almost non factor. Why not take it out.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: I really could use some feedback and help...

Post by AltaRed »

I stopped at
- Non-registered funds $1,000,000 (debt swap strategy with my mortgage) I will likely be borrowing $570k or $670k for a private equity venture leaving a balance of $330,000 to $430,000 in investable assets for my portfolio
IMO, anyone willing to take on that kind of risk, doesn't need help with a portfolio. The private venture secured by his house is the elephant in the room, nothwithstanding the rest of his current net worth and combined income of the couple. He could pick any ETFs he wants in his portfolio and the outcomes wouldn't move the needle.

At most, I'd do one or the other.... leverage circa $500k for non-reg ETF Couch Potato investments, or the private venture. Not both. To me, keeping the DB pension is neither here nor there given the OP's age and years left in his career. It won't be worth all that much anyway.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
peter
Contributor
Contributor
Posts: 662
Joined: 10 Oct 2005 21:37
Location: Alberta

Re: I really could use some feedback and help...

Post by peter »

frankrom wrote: 22 Jul 2017 14:59 I don't get why there is so much reluctance to touch a DB plan?

I don't remember what my pension would be at retirement if I quit today. I think it was something like $10,000-13,000? At the age of 55 or so. Assuming I live until 85 (hopefully longer) I would collect about 390k from it. Then you also get taxed on that.

I quit today I get 250k and can invest it until I am 60. Rule of 72.... I could double that multiple times over this giving me so much more assets in the future????

And honestly -10k-13k or even if it was slightly more than that is peanuts in my retirement. It's almost non factor. Why not take it out.
It may well end up being a small amount (peanuts), but the value isn't just 390k, it's 390k in current dollars with no risk. You lose both if you take the commuted value. Which may well have a large taxable component too. This is just a reply to the first quoted line here, not a reply to your overall question.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: I really could use some feedback and help...

Post by AltaRed »

I'd take the commuted value and put it to work. The value of a DB pension is not in the first 20 years of contributions. It is in the last 10 years of contributions when the multipliers, including percentage of final salary (or last 5 years or whatever) makes all the difference. Letting it sit for 30 more years won't change the forumla from the day the OP quits his job. It is not a linear relationship.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
peter
Contributor
Contributor
Posts: 662
Joined: 10 Oct 2005 21:37
Location: Alberta

Re: I really could use some feedback and help...

Post by peter »

AltaRed wrote: 22 Jul 2017 15:22 I'd take the commuted value and put it to work. The value of a DB pension is not in the first 20 years of contributions. It is in the last 10 years of contributions when the multipliers, including percentage of final salary (or last 5 years or whatever) makes all the difference. Letting it sit for 30 more years won't change the forumla from the day the OP quits his job. It is not a linear relationship.
Maybe. His salary is already close to the maximum pensionable salary but this has been debated before. I only meant to point out that the comparison was pretty inaccurate. I don't think it matters for the OP's plans though.
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

Re: I really could use some feedback and help...

Post by frankrom »

Jesus.

I officially think I am at a loss of words.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: I really could use some feedback and help...

Post by AltaRed »

frankrom wrote: 22 Jul 2017 15:45 I officially think I am at a loss of words.
Perhaps you care to elaborate?
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
frankrom
Contributor
Contributor
Posts: 49
Joined: 20 Jul 2017 22:47

Re: I really could use some feedback and help...

Post by frankrom »

Firstly ... I don't get how anyone here could say "anyone willing to take on that much risk doesn't need help with a portfolio"

I am not sure how anyone could say that. How does level of risk relate to someone needing help or feedback?

Secondly ... i don't get the comment that "I could pick any ETFs and it wouldn't move the needle?"

It seems as if there has been a lot of opinions thrown out since the original post specifically surrounding the DB plan ... but it doesn't seem as if these opinions really took into consideration my personal situation as I described... rather they just seem to be "I wouldn't take commuted value" or "I would".

It would have been beneficial to hear some factual discussion surrounding my situation and arriving at an opinion that way.

At this point maybe I'll make another attempt to find a AUM manager failing that I'll be back at the drawing board. I didn't really get much feedback from a portfolio structuring point of view.

This has been really hard on me... I've been trying to figure this out for months
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: I really could use some feedback and help...

Post by AltaRed »

frankrom wrote: 22 Jul 2017 17:20 Firstly ... I don't get how anyone here could say "anyone willing to take on that much risk doesn't need help with a portfolio"

I am not sure how anyone could say that. How does level of risk relate to someone needing help or feedback?

Secondly ... i don't get the comment that "I could pick any ETFs and it wouldn't move the needle?"
Firstly, putting $1 million at risk is the big elephant. Choosing between ETFs makes little difference. Studies again and again show that it isn't the specific choice of product that makes the difference in a portfolio, it is things like asset allocation, diversification and re-balancing that makes the most difference.
Some of the ETFs I had in mind are...

IVV - iShares Core S&P 500 ETF or XUS iShares canadian version
IEFA - iShares Core MSCI EAFE ETF or XEF.TO Canadian version
VOO - Vanguard S&P 500 or VFV Canadian version
OR in some accounts would it be better to use BMO ZSP.TO? VFV simply holds VOO and XUS simply holds IVV where as BMO ZSP.TO holds the S&P 500 stocks directly
I may consider a US technology and US financial sector specific ETF for a small part of my portfolio

Now the question is where do I hold which ETFs and do I hold an S&P ETF or a EAFE ETF on the the USD or CAD exchanges?

Due to the tax exemption on US dividends in retirement accounts I suspect I will be holding a US listed ETF in my RRSP and LIRA. When It comes to my non-registered funds shall I find a CAD version of IVV and IEFA to hold? I may consider using margin money and borrowing on margin money with USD listing securities cost much more so that is something to consider.
Within all of those choices, the variances are mere nuances against the backdrop of a $700k private venture and employment income levels. The variances will be in the decimal places of 7-8 digit net worth some day. It is like people who draw up a spreadsheet retirement plan and come up with differences of 1,111,111 and 1.111,212.55. It is noise.

More specific example, you could hold a US domiciled ETF in your RRSP (to avoid 15% withhodling on a circa 3% yield - 45 basis points), and Canadian domiciled ETFs in your non-reg and TFSA. The 45bp difference in that RRSP ETF is a decimal point in your net worth. IOW, it does not matter.

Added:
I didn't really get much feedback from a portfolio structuring point of view.
Here is your investment portfolio: VTI or IVV in your RRSP/LIRA (makes no difference), and XEF and XIC/XIU/VCN (take your pick of which- makes no difference) in the TFSA and non-reg. If you need more US... then put more VTI or XUS in your non-reg (makes no real difference either way).
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
Post Reply