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The Couch Potato Strategy is easy to follow when you have room to invest in tax-sheltered investments but if you don’t how can you diversify your investments outside RRSPs for growth with minimum tax consequences?

I’m in my late 20s, rather new to investing and have been following a High-Growth Couch Potato strategy (25% Canadian equity, 25% U.S. equity, 25% International equity and 25% Canadian bond) invested through TD efunds. Using the above breakdown, I generally invest a lump sum once a year within my RRSP account. However, I have just come into a small inheritance of $10,000 but I have already maxed out my RRSP contribution for the 2010 tax year. I would like to continue to follow the High-Growth Couch Potato portfolio in investing this newfound money but I’m concerned about the tax implications related to U.S. and International equities. I still have room in my TFSA and I’m investing for the long-term (10+ years). Also, I prefer to stick with TD eFunds because my portfolio is still rather small. I don’t know how to apply the Couch Potato strategy and still remain diversified with this investment. Does it mean just splitting the $10000 between Canadian Equities (TD-e Canadian Index) and Fixed Income/Bonds/GICs (TD-e Bond Index)? If so, I was thinking of putting $5000 in my TFSA ($2500 in TD e-Bond Index, $2500 in TD-e Canadian Index) and $5000 in TD-e Canadian Index in my non-registered account. Without the International and U.S. Equities, my approach doesn’t seem diversified to me so I was hoping that someone could help me out with figuring out how to diversify in non-registered accounts using TD eFunds, while minimizing tax implications.
 

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1. I wouldn't obsess over rigidly adhering to a nominal asset allocation across all your funds, given your age and investment horizons, and the amount of money involved.

2. If it really worries you open an ING account and put it in one of their Streetwise funds.

3. If you are thinking of moving a lot of the $10K into your RRSP next year, you might want it in something less volatile than 75% equity anyway.

4. If you are planning to add another $5k to your TFSA every year, does it matter what asset allocation you start out with?
 

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Thanks for replying to my question OhGreatGuru.
I guess I won't obsess over the asset allocation but I thought one of the benefits of the couch potato strategy is allocating funds and then forgetting about them until it's time to re-balance a year later.

Although ING Streetwise funds are a great idea, I stay away from them because of the higher MERs and I think it's easier and costs less in MERs to just try and replicate them with eFunds on your own, which I think I will do.

I'm still new to investing so can you explain what you meant by your 4th suggestion re: "4. If you are planning to add another $5k to your TFSA every year, does it matter what asset allocation you start out with?" The only reason I ask is because the way that I invest is once (or twice at most) a year; therefore, I just divide my total investment and allocate accordingly once (or twice).

Thanks
 
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