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Hi all,

Let's assume you have a fairly simple investment account structure such as an RRSP account, non-registered investment account, and TFSA.

Now, do you decide on one target asset allocation per account type (one type being retirement accounts, another type being non-retirement ones), or do you choose a single asset allocation target that would encompass all your accounts? If you choose one single asset allocation target, then how do you apply it to all your accounts?

I'll use the example of the Classic Couch Potato allocation:
Canadian equities 33%
US equities 33%
Canadian bonds 33%

If this is your single asset allocation for all your accounts, then do you aim to ensure that:
- RRSP account meets the allocation (33%, 33%, 33%)
- Investment + TFSA combined meets the allocation (33%, 33%, 33%)

Or do you choose different allocation targets, for example:
- RRSP = allocation 1
- Investment = allocation 2

Thanks for your help.
 

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Great question Chilly. What we do is look at all of our accounts as a giant portfolio. So if you have fixed income, make sure that it's in a tax deferred account. If you run out of RRSP room/tfsa room, and need to use a non-reg account, make sure that it's the tax efficient investments (cad equity) that's in the non-reg portion.

I've written more about this topic in my article about portfolio allocation.
 

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We maintain different allocations in our RRSP accounts - my wife has less risk tolerance than I do, so her RRSP is invested more conservatively.

Within each account we maintain a fixed asset allocation, and rebalance whenever something gets more than 5% out of whack. Any contributions always go toward the asset type that has the lowest balance when the contribution is made.

Our TFSA accounts are just in savings deposits for the time being, as part of our emergency fund. We'll incorporate them into the whole portfolio once the value of the accounts gets a bit bigger.
 

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After years of looking at asset allocation on a per account basis, I'm now shifting my strategy to look more closely at portfolio allocation. In concept I agree with most approaches in looking at everything holistically, but given slightly different time horizons and risk levels, we have segregated our accounts a bit.

Our RESP account is one allocation, our combined Non-Reg/TFSA accounts are another allocation and our RRSP accounts are another.

Where I'm struggling to find the appropriate strategy is asset allocation across RRSP accounts between my spouse and I. At the moment, each account is nearly identical. As such, every buy/sell ends up usually being done twice for each account.

Instead of having 8 investments in each account, I'm looking at whether it is feasible to spit this into 4 each. This would cut down on trading fees as well as investment tracking. Given the (what I've always assumed) intended goal of having nearly equal RRSP sizes at retirement, I'm wondering if I'll be able to adequately split these up and handle rebalancing along the way.

I'm sure several out there have looked at the pros/cons of this. I'm all ears!
 

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For a long time, all my husband and I had were the RSPs, so we diversified the holdings within them. Then as our non-reg account grew, we diversified within that account. Now, with the TFSA, there is another variable. As the TFSA grows, I am looking at holding mainly income within the TFSA and mainly equity in the non-reg account. This will take a couple of years to do, since the limit is only $5000/year, double for a couple.

The RSPs will stay the same because there is not a lot of time before rolling them over. My husband starts his RIF next year, and I start in 2014.
 

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Instead of having 8 investments in each account, I'm looking at whether it is feasible to spit this into 4 each. This would cut down on trading fees as well as investment tracking. Given the (what I've always assumed) intended goal of having nearly equal RRSP sizes at retirement, I'm wondering if I'll be able to adequately split these up and handle rebalancing along the way.
I don't see what other option is there is the aim is to have two roughly equal RRSPs. If the RRSPs have different assets in them, sooner or later, the total values will diverge dramatically over time. The only way to make sure two RRSPs are roughly equal is to have roughly the same allocation.

Another option would be to open up a spousal RRSP for the RRSP that has slower growth assets but this opens up a whole other can of worms.

Roughly, I have the RESP accounts set to a different allocation that all other accounts. Everything else is just one big pot though it is best to keep Canadian stocks in a taxable account.
 

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I think its MOST critical to view your entire portfolio as one entity, with the exception of the RESP (since this has a very defined timeline and purpose).

If you have different allocations for each account - you have to ask yourself why are you doing it (will one portfolio outperform the other, if so why don't you use this allocation for all your assets?).

I guess its only when you are saving for specific items (i.e. children's education, buying a home, buying a business) would you want to change your allocation, but this comes back to amount of time you can stay invested, which in turn should affect your risk tolerance.
 

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The next question for me here is how important it is to have our RRSP accounts the same size at retirement? Income splitting for tax as well as prevention of OAS clawback come to mind.

This being the case, and as pointed out by CC, with effectively a different allocation within each account (although when viewed as a whole reflect one allocation) the portfolios will likely diverge over time. I don't think I have much choice but to have the same or very similar allocation model in each account.

For example I could put the US equity in one, the International in the other - over time they should return similar -- but who knows? Another approach would be keeping everything as is now (all investments duplicated in each account) but only rebalancing on a combined view - such that I may only contribute this year to US equity in my account as opposed to my spouse. That would cut down the trading costs.
 

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I just recalled from the 2007 budget that income splitting on pension income is now allowed so unless something changes in the next 25 years (and it could!) whether both accounts are nearly the same or significantly different won't make a difference.

Keeping track of 8 securities as opposed to 16 should be much easier to manage (even though the other 8 are duplicate, the trading cost reduction and tracking in Quicken/Excel will be much better)
 
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