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Discussion Starter #1 (Edited)
I'm in the process of converting to an index portfolio, and I've been keeping a few notes on the target. Feel free to to browse and make any useful comments or suggestions that come to mind. It is primarily a more conservative version of Canadian Capitalist's Sleepy Portfolio.

My next step is to finalize what will be held in $US-denominated funds, as I may do one monster $USD conversion if I can get a rate from TDW low enough to be competitive with doing currency gambits or whatnot. Right now it is the US, International and Emerging equities, which would be 40%.

I'm also debating whether to immediately buy the entire short bond position needed to complete the bond target. It would be a large chunk (15%) at what may not be the best time to do so, and I may defer some of it in GICs or high interest for a couple of years.

I'd be interested if anyone has opinions on the equity breakdown that Dan Bortolotti's Uber-Tuber model does into core/value/small-cap.

And of course there's tax issues - I only have enough RRSP room to cover around 35% of the total (the TFSA is filled with existing bonds). Currently it would seem that stuffing REITs (if any), bonds and whatever US equities fit into the remaining RRSP space would be the best course.
 

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Why not do just one big currency gambit to get VTI, VTV etc., then rebalance with the TDB900 to 911 series or some CAD hedged ETFs later?

And I vote for some value and small tilt.
 

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One piece of advice would be to avoid over diversification which can lead to diworsification.

I like the smallcap, value tilt and 15% of a portfolio in emerging markets and maybe 5% in precious metals.

I don't think that the actual index investments chosen are as important as getting your asset allocation right so that you can sleep well during all kinds of market conditions.

Many investors end up being less tolerant of volatility than they first thought.

I find the current bond environment to be very challenging and don't really know what to recommend for the fixed income portion of your portfolio. Recently, high yield and real return bonds have been the best performers and so some of each of those should be considered.
 

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Discussion Starter #5
I'd put the bonds in the RRSP, then US equities.
That was the basic plan, although as someone pointed out, things like REITS that spit out high returns of capital might also have a priority on the RRSP. I'll have to look into this.

Why not do just one big currency gambit to get VTI, VTV etc., then rebalance with the TDB900 to 911 series or some CAD hedged ETFs later?

And I vote for some value and small tilt.
One of the reasons I went with TDW was to have access to the e-Series.
If I gambit (and since TDW doesn't seem to go below 0.3% spread I probably will) even if I do it in two or three chunks it is still a lot cheaper.

One piece of advice would be to avoid over diversification which can lead to diworsification.

I like the smallcap, value tilt and 15% of a portfolio in emerging markets and maybe 5% in precious metals.
Did you really mean 15% in emerging markets, or 15% in international markets generally. 15% emerging seems highly aggressive (certainly for me), and I don't think I've come across a potato-folio example that high. As for gold, many ages ago I had a token amount of a gold (later precious metals) mutual fund, and I believe my ownership single-handedly depressed that gold/mining sector for much of the 90's. Gold owes me, but at the current prices I don't think it is a good time to collect... :)

I don't think that the actual index investments chosen are as important as getting your asset allocation right so that you can sleep well during all kinds of market conditions.

Many investors end up being less tolerant of volatility than they first thought.

I find the current bond environment to be very challenging and don't really know what to recommend for the fixed income portion of your portfolio. Recently, high yield and real return bonds have been the best performers and so some of each of those should be considered.
You'll see that 5% real return bonds (XRB) is already on the purchase menu. I'd want to look closely at what was inside a high-yield bond fund, and those haven't really been on my radar. With 2% at Ally, I'm probably not too much worse off deferring part of the XSB purchase, although it is a shame you can't get Ally-type rates inside my TDW RRSP.
 

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With more risk comes the potential for more reward.

Emerging markets investments inherently involve more risk and VOLATILITY but, for the long term investor, potentially more reward.

I don't think that we will be able to sustain the level of recent performance on emerging markets investments but that doesn't mean that we should ignore the POTENTIAL.

It makes for a more exciting rollercoaster ride with higher highs and maybe lower lows along the way.:eek:
 

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I don't think that we will be able to sustain the level of recent performance on emerging markets investments but that doesn't mean that we should ignore the POTENTIAL...
But their higher growth expectation is already priced in. So buying now would expose one to the downside of a lower growth forecast. There is no free lunch.
 

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China is set to act on what it perceives is unacceptably high growth and inflation. Just the fear of this sent stock markets tumbling around the world on Friday!!

Anything that I buy is for a long term hold and not for a quick buck.

That said, I still don't know what to do with my bond investments at the present time. Do I hold onto them much as I did with my equity investments back in '08, knowing that, with time, indexes that go down always eventually come back??:confused::confused:

Anyway, back on topic, I believe that emerging markets investments have a place in any diversified portfolio. As to what allocation is appropriate, that is up to each individual investor to determine. What percentage that might be appropriate for you may not be as suitable for me.

I know that most investors should become more conservative with time but I have found that I have become more tolerant of volatility in my old age than I was when I first started investing.

You pays your money and you takes your chances.
 

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Hi Raven,
In doing some online research, I came across your post. I feel like my situation is very similar to yours.
Similar to your target allocation, I'm looking to purchase some of the low cost (MER) Vanguard ETFs.

Have you performed "the Gambit" yet in your TDW account? If so, let me know how easy/difficult is was.
Feel free to comment on my post. (TDW RRSP - Currency conversion vs. "the Gambit" )
thanks.
 

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Discussion Starter #10
For the bonds, I guess the question I'm asking myself is "if I buy a big slug of, say, XSB right now, what is the likely range of annual returns for the next couple of years". Ally is offering 2.4% on 2-year GICs (and 2.6% is available from AcceleRate if one is comfortable with the Manitoba credit unions). I don't know if the outlook for short bonds is bleak enough to make punting on part of that allocation for a couple of years worth considering or not. I'll likely buy the 5% of XRB real return bonds, and some portion of the 15% of XSB.
 

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What does history teach us from the last time that interest rates started to rise from very low levels??

I too have no idea of what to expect from bond funds or bond ETF's during the coming period of rising interest rates--only that their performance will not be great.

Also, how long will interest rates likely rise? If the losses in bond investments will be relatively short, then I would be prepared to ride it out but, if we are talking about many months or years of negative returns, then GIC's start to look like a more palatable option.

I guess this is a 'to each his own' decision depending on your own individual circumstances.

There are times when I find it more difficult to make my own investment decisions and this is one of those times when it comes to what to invest in with my fixed income allocation over the period of rising interest rates that has now begun.:confused:

What are the rest of you doing with your bond allocation?
 

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What are the rest of you doing with your bond allocation?
I cashed out all my bond funds to lock in the gains.
Still hold my direct bonds, and will hold to maturity.
Not planning any further bond allocation - direct or funds.
All new contributions are targeted to equity.
 
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