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You're right, they are similar. I think this is because both exclude commodities and resources so both are essentially holding the TSX, underweight commodity stocks. In other words, they have similar sector exposures. Both are very light on tech.

I have considered buying ZLB instead of my individual 5 stocks and I think one could make that substitution. ZLB is better diversified, which is a plus.

In my non registered account, I prefer to hold these individual stocks. I prefer the tax accounting with the individual stocks, since I don't have to deal with the ETF distribution mess. I really prefer keeping Canadian ETFs inside registered accounts only.

But there's also a hefty 0.39% fee on ZLB. For my 100K invested, assuming I make just 5 rebalancing trades a year @ $10 each, my "MER" works out to just 0.05% which is a fraction of the cost of ZLB.
That's true, good point!

Anyone knows how that MER truely affects the returns? Say I buy an 100$ of an ETF with 1% MER and 10% CAGR. Let's say everything is applied only once per year. At the end of the year, will I get +10$ from CAGR and -1$ from MER or will I get +10$ from CAGR and -1.1$ from MER (because my investment now worth 110$). In the first case, it means MER can be substracted from CAGR. In the second case, it means MER must be compounded over the CAGR. I've read places saying your total return is CAGR - MER, but I'm wondering if it's just simplifying the truth...
 

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So, use ZLB in RRSP/LIRA/TFSA/ect and in the MARGIN/CASH acct use the 5-Pack ? Seems to make sense to me... simplicity has to be worth something...
Maybe. I'm using the 5-pack in the non-reg margin account, and XIU in registered.

J4B have you done a backtest on your 5-Pack vs ZLB ?
I haven't, but I think my 5-pack performance is closer to XIU than ZLB is. And I think ZLB has outperformed my pack.
 

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I have been using HXS & HXT for simplicity in my non-reg accounts for the tax simplicity/efficiency. I can see the advantage of 5-pack in a cash account if your not interested in a swap based structure.
 

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An update on my 5 pack (RY, ENB, CNR, BCE, FTS)

Year to date performance is -1.3% versus XIU -1.4% so they are exactly the same. Which is good, actually, because remember that XIU is getting a performance boost from SHOP.

I would consider matching XIU performance long term to be a success. I think I mentioned before that my trading costs on the 5 pack make it cheaper than holding XIU. So if I can hold essentially the same TSX 60 exposure, with lower costs, and with direct equity holdings, that would be pretty good. This also eliminates the securities lending of the ETF, which some people (including me) worry a bit about.

I also looked at stats on how badly the 5 pack fell during the crash, and this was interesting.

From January 1 to March 23 (the stock market low), the 5 pack was down -24% which was actually better than XIU -32% in the same period. And I measured the maximum drawdown of the 5 pack at -29% versus -36% for XIU.

That suggests that the 5 pack has roughly 80% of the volatility of XIU

So it appears that the 5 pack fell less severely than XIU in the recent crash. I would guess this is thanks to the weight in utilities, but also because these giant large caps tend to be a bit more stable than other TSX stocks. I would welcome other thoughts, because I don't have a great explanation of that but I like these results :)
 

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Last time I checked (see above) the 5 pack was performing the same as XIU. It's still tracking very closely but looking better now. YTD performance as of today is

5-pack: +1.3%
XIU -0.3%
ZLB -3.7%
 

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There's been a bit of a shift in markets recently with energy rebounding. I was curious if this changed my 5 pack's relative performance. YTD performance as of today is

5-pack: +1.8%
XIU: +1.7%
ZLB: +0.8%

It's nice to see that my 5-pack is tracking XIU quite well through this crazy year.
 

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Is there a reason you compare with XIU instead of XIC (or both)?
My 5-pack is entirely based off XIU, so I think it's most helpful to compare to XIU. But there's not much of a difference between XIU & XIC performance in any case.

You can see some details on this page about how the 5-pack is constructed by mirroring XIU holdings. This is a passive indexing technique which does not involve making active decisions on my part.

Thanks to @Eclectic12 and @like_to_retire for helping me refine the technique.

I should mention a bit of history here because it might clear up confusion. I really like XIU as a core holding, and it's always been central in my asset allocation plan. My RRSP holds XIU, not my 5-pack. However, when I was a resident in the US, holding Canadian ETFs was basically forbidden for tax reasons. Holding individual Canadian stocks was allowed. So I came up with this 5-pack approach to mimic XIU, so that I could continue investing without disrupting my asset allocation plan.
 

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However, when I was a resident in the US, holding Canadian ETFs was basically forbidden for tax reasons. Holding individual Canadian stocks was allowed. So I came up with this 5-pack approach to mimic XIU, so that I could continue investing without disrupting my asset allocation plan.
If you went back in time and started over without the Canadian ETF restriction, would you still go with the 5-pack?

XIU gives exposure to more sectors and the weightings are very different.

If you now don't have that ETF restriction, why not instead start to accumulate XIU, giving you exposure to the missing sectors? Your 5-pack can continue to grow and rebalance/swap as necessary.

Here are the sector weights of XIU (according to my broker's Fund Parser) as of today Nov12/20. The 5-pack is missing all the non-green sectors:

SectorWeight
Financials32.06%
Basic Materials13.55%
Industrials12.65%
Energy11.79%
Technology11.09%
Telecommunications Services6.12%
Consumer Non-Cyclicals4.37%
Consumer Cyclicals3.83%
Utilities2.84%
Real Estate0.76%
Healthcare0.71%
Cash0.17%
Unclassified0.06%
 

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If you went back in time and started over without the Canadian ETF restriction, would you still go with the 5-pack?
These are very good questions. I do have a large XIU position inside my RRSP and continue adding to that... e.g. bought more XIU last week.

But in my non-registered account, yes I think I would still go with the 5-pack even if I started today without US tax complications. I appreciate you asking this question because it's making me re-think my reasoning.

Here's why I would still go with the 5-pack in non registered:

- I find tracking of ETF ACB stuff to be a pain non registered. Yes I know there is a web site for it, and yes I know the brokerage tracks it pretty well these days, but I have learned over the years that you really should not entirely depend on external sources for this. It has to be tracked by me, ultimately. And this is somewhat irritating. I love XIU, but its distributions do include ROC and even phantom reinvested distributions (2018). I do find this stuff a nuisance to keep in sync with. Maybe this is irrational on my part, but I don't enjoy it.
Here's an example of that data. There are multiple ROCs in a year, so even the date of your trade (new addition) in relation to the ROC has to be taken into account. Then there's the potential reinvested distribution which can be very significant. Forget that one, and you will overpay taxes in the future.​
- going with 5 individual stocks is much easier to track. There are no wacky distributions, just dividends, and ACB is very straightforward... the ACB isn't constantly changing

- my overall fees for the 5-pack are actually lower than XIU's MER, considering all trade fees etc. e.g. two trades a year for adjustments works out to 0.02% fee compared to 0.18% for XIU

- based on the historical backtest (which I did very thoroughly) I think there is reason to believe that I could outperform XIU. It's not guaranteed or anything, but I think there is hope.

- 5-pack does have limited sectors, yes, but they are also equal weight. One of my complaints with the TSX 60 and Composite is the lopsided weights in financials and energy; now it's only financials. Note that the S&P 500 does not have this problem ... that index actually has much more even weights across sectors.


XIU gives exposure to more sectors and the weightings are very different.

If you now don't have that ETF restriction, why not instead start to accumulate XIU, giving you exposure to the missing sectors? Your 5-pack can continue to grow and rebalance/swap as necessary.
No question that XIU is better diversified. It even has a tech component! But I feel fine about my current arrangement because my RRSP does have XIU, and I keep adding to it over time.

Most of my new money is going into XIU (in RRSP) and not my 5-pack.
 

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... I should mention a bit of history here because it might clear up confusion. I really like XIU as a core holding, and it's always been central in my asset allocation plan. My RRSP holds XIU, not my 5-pack. However, when I was a resident in the US, holding Canadian ETFs was basically forbidden for tax reasons. Holding individual Canadian stocks was allowed. So I came up with this 5-pack approach to mimic XIU, so that I could continue investing without disrupting my asset allocation plan.
Sure ... though I recall several discussions of Argo's Five Pack happening before the leap was taken, with a shove from the IRS/US gov't.

... I find tracking of ETF ACB stuff to be a pain non registered ... I do find this stuff a nuisance to keep in sync with. Maybe this is irrational on my part, but I don't enjoy it ...
It's not irrational and I don't think many, if any, enjoy it.

The disconnect I see if when people learn it for the first time, they think it is incredibly difficult (it's simple math) and takes buckets of time to do (others with multiple ETFs post that they figure a conservative estimate is thirty minutes a year).


Cheers
 

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The disconnect I see if when people learn it for the first time, they think it is incredibly difficult (it's simple math) and takes buckets of time to do (others with multiple ETFs post that they figure a conservative estimate is thirty minutes a year).
Keeping track of each DRIP'd stock is a heck of a lot more work (at least 4 times in most cases) than the once a year check for an ETF re-invested capital distribution ACB adjustment or the once a year ROC ACB adjustment. In the time between Xmas and New Years, I check for re-invested capital distributions from BMO, Blackrock and Vanguard (many to most are zero) and make the adjustments for half a dozen ETFs. Come March, I take the ROC off the brokerage T3 Annual Income Summary and make those adjustments. Thirty minutes a year is probably generous!
 

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An update on my 5-pack. I looked at the performance since I started about 5 years ago. This is a large chunk (58%) of my Canadian equity holdings, and I also hold XIU as described above in post #312

Annualized returns, total return including dividends
My 5-pack performance has been 10.3%
In comparison, XIU performed at 10.7%

I will continue to hold the 5-pack in my non reg. The performance of these two are virtually identical and I have seen them taking turns beating each other. Virtually the same.

Though I don't care about dividends myself, the dividend yield is also quite high:
4.2% yield on the 5-pack
2.5% yield on XIU

That could be a pretty sweet deal for a dividend investor. You're getting the same performance as the TSX benchmark with 70% more dividends! That's actually a better deal than many of the dividend ETFs, where you get high yield but then underperform the index. Here at least you are matching the index performance.

Many dividend stock pickers have trouble keeping up with the TSX index performance, so maybe this 5-pack approach is a method to consider.
 

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Keeping track of each DRIP'd stock is a heck of a lot more work (at least 4 times in most cases) than the once a year check for an ETF re-invested capital distribution ACB adjustment or the once a year ROC ACB adjustment ...
Agreed that there's more transactions but is it really that more time consuming?

After all, it's getting some numbers from the monthly statement then plugging them into a tracking spreadsheet or web based ACB tracking system.


... In the time between Xmas and New Years, I check for re-invested capital distributions ... Come March, I take the ROC off the brokerage T3 Annual Income Summary and make those adjustments ...
That's two passes whereas for the DRIP'd stock, it's one and done for me. :)


...Thirty minutes a year is probably generous!
Agreed ... that is my experience when updating an ETF, several REITS and several DRIP'd stocks ACB.
Though I tended to wait until April or later when I had an ETF in a taxable account so that all could be done in a single pass.

Cheers
 

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This year I switched to the 5-pack in all accounts that have large holdings. I'm using RY, FTS, CNR, ENB & T - so far so good. No problems. I have 1 small account and I'm using ZLB as a proxy until its worth splitting up.

I have avoided investing in my cash account as I am a US citizen and reporting is such a PITA. BUT, if my understanding is right, the Canadian 5-Pack is US reporting friendly..... with respectable performance.

I contemplated a REIT but I hear that they can be a PITA for US Expats..... good thing the 5-pack doesn't need a REIT !!!
 

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I have avoided investing in my cash account as I am a US citizen and reporting is such a PITA. BUT, if my understanding is right, the Canadian 5-Pack is US reporting friendly..... with respectable performance.
This is actually a big reason I started doing this myself as well. Canadian ETFs are PFICs and have some unpleasant reporting requirements. So that's why I couldn't use XIU or XIC (in non registered).

As I understand it, the individual Canadian stocks don't have PFIC requirements. And you're right, REITs can be PFICs as well, so should be avoided.
 

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Later this year I will start building my cash/margin acct holdings up. I'll keep it a 5-pack until I hit ~$35,000 and then start a 10-pack - just to diversify. Goal is simple. for my 'stable portion' I might just run a GIC ladder &/or a small 3-6 yr bond port - I have never bought bonds before individually, but it cant be that hard. This plan will see me with no exposure outside Canada for that one account - Oh well. Also, it is my understanding that I can use my Canadian brokerage to buy US (NYSE) based funds. NO MF as I am not a US resident but I could buy SPY (NYSE USD) and leave it at that. Need to check the reporting requirements on that scenario.... but I think it should work.... I also need to check if my US divs from SPY would be withheld.....


So much to do with so little time.
 

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I'll keep it a 5-pack until I hit ~$35,000 and then start a 10-pack - just to diversify.
Smart, because the "5-Pack" is a disaster waiting to happen in my opinion. You need a minimum of 2 stocks per sector, and really should be 3 stocks to represent any sector, so that a single failure doesn't cause a huge problem.

Think of it. Each stock in a 5 pack represents 20%. Full stop. We don't need to go any further. The 5-Pack could be used for "walking around money", but shouldn't be seriously considered for anything else.

ltr
 
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