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Discussion Starter #1
http://www.moneysmartsblog.com/comparing-market-cap-etf-vs-dividend-etf-how-much-duplication/

I stumbled across this article and wanted to see what everyone's opinion on it is. Since I am planning on investing in some Canadian ETFs i thought it would be good to see if duplication is a big issue.

Also, I have a quick question on dividends: is it better to just buy a dividend ETF (XDV or CDZ) if i am planning on investing in more than say, 10 dividend companies? if less than 10 am i better off just buying each stock individually and avoiding the MER? (i have no idea if 10 is at all an accurate number)

Thanks.
 

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At TDW I can buy $50k of CDZ for $10.
Then I pay 0.60% per year MER. That is $300 per year.
After 5 years my costs will be at least $1510.

Or I can buy 10 Canadian aristocrats, $5k into each.
That will cost me $100 initially.
Suppose one drops of the Aristocrat list per year and I replace it with something.
So that is $100 initially plus $10 per year. After 5 years I have laid out $150.

The Canadian aristocrats are on the whole pretty diverse, stable, and well managed, so you can probably get by with only ten different companies, especially if you are also in other markets, maybe US, EAFE or EM etfs.

So if you have low trading fees and / or $50k, buy your own stocks. If less, buy CDZ or XDV. I vote for CDZ because it is less weighted to banks.
 

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Discussion Starter #3
Ok, thanks Soils4Peace.

Also, can someone clarify this scenario? Thanks.
If I buy one share of stock A, priced $100 with a 3% yield, i would get $3.
If i buy one share of XDV, let's say this was $100 as well, with an average yield of 3.5%, would I get $3.50 in dividends?

Doesn't this mean XDV is a cheaper way if i want exposure to banks and their dividends? instead of buying shares of TD at ~$75, i could just buy shares of XDV for a fraction of the cost, since banks make up like 1/3 of XDV.
 

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If you have much money and time, it is cheaper overall to buy the bank stocks. If you have little money and time, it is cheaper to buy XDV or a financial etf like ZEB. For that matter if you want exposure to Canadian banks, you could just buy XIU or a similar overall Canadian large cap index product because the big 5 make 25% of it and you get some diversification too for a lower MER.
 

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Discussion Starter #6 (Edited)
thanks for the link fatcat.

I put together a preliminary portfolio and want to garner some initial feedback.


CANADA

Equities:
(5%) iShares Cdn Large Cap 60 (XIU)
(5%) iShares CDN Capped Composite Index (XIC)

Dividends:
(5%) iShares CDN Dividend Index Fund (XDV)
(5%) Claymore CDN Dividend and Income Achievers ETF (CDZ)

REIT
(3.75%) S&P/TSX Capped REIT Index Fund (XRE)
(1.25%) BMO EQUAL WEIGHT REITS INDEX (ZRE)

OVERALL PORTFOLIO WEIGHT: 25%


US

Equities:
(10%) Vanguard Total Stock Market ETF (VTI)
(5%) Vanguard Mid-Cap Growth (VOT)

Dividends:
(5%) Vanguard High Dividend Yield ETF (VYM)

REIT
(5%) Vanguard REIT ETF (VNQ)

OVERALL PORTFOLIO WEIGHT: 25%


INTERNATIONAL

Equities
(10%) Vanguard Europe Pacific (VEA)
(5%) iShares MSCI Pacific ex-Japan Index Fund (EPP)

OVERALL PORTFOLIO WEIGHT: 15%


EMERGING MARKETS

Equities
(15%) Vanguard Emerging Markets ETF (VWO)

OVERALL PORTFOLIO WEIGHT: 15%


COUNTRY-SPECIFIC ETFs

To be determined. For now, looking at something like:

(2.5%) iShares MSCI South Korea Index (EWY)
(2.5%) iShares MSCI Turkey Index Fund (TUR)
(2.5%) Market Vectors Indonesia Index (IDX)
(2.5%) iShares MSCI Malaysia Index Fund (EWM)

OVERALL PORTFOLIO WEIGHT: 10%

LEFTOVER TO ALLOCATE: 10% (cash, bonds, GIC, again TBD)


Before the flaming begins, please note that I know a) this portfolio needs some work, and b) I have alot of ETFs listed. (15+)

I'm mainly looking to see if my allocations and fund choices make any sense. Personally i would like to lower my US allocation but was having a hard time finding good international and emerging market ETFs. (for example: scratch EPP and put more into VEA? is country specific ETFs going out of my league? would i be better off just throwing that extra into VWO? I am a beginner investor)

Also, any recommendations for the last 10% would be great.

I look forward to all constructive criticism. Thanks.

investor profile: young couple in mid 20s
time horizon: 20 + years
risk tolerance: high
investment vehicles: TFSA and remainder in RRSP
amount: 100k
 

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http://www.moneysmartsblog.com/comparing-market-cap-etf-vs-dividend-etf-how-much-duplication/

I stumbled across this article and wanted to see what everyone's opinion on it is. Since I am planning on investing in some Canadian ETFs i thought it would be good to see if duplication is a big issue.

Also, I have a quick question on dividends: is it better to just buy a dividend ETF (XDV or CDZ) if i am planning on investing in more than say, 10 dividend companies? if less than 10 am i better off just buying each stock individually and avoiding the MER? (i have no idea if 10 is at all an accurate number)

Thanks.
By the way - thanks for linking to that article. I remember spending a ton of time on it and it seemed like nobody read it. :)
 

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By the way - thanks for linking to that article. I remember spending a ton of time on it and it seemed like nobody read it. :)
FP,.. since I saw your comment here, thought I'd llike to say here too that your blog entry above was one of the first ones I read when I started my initiative here to put more dough in Canada.... great comparison there, very helpful,... thank you.
 
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