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Discussion Starter #1
Using the couch potato method from what I have read if you are doing a lump sum it makes sense to buy the index stocks like XBB etc etc and if you are contributing to your RRSP via your paycheque you should go with efunds.

I have a large sum currently in under performing and high MER mutual funds. I was going to cash them out and move to the couch potato method. But then further investment is bi-weekly with yearly lump sums.

I was thinking of doing the following.

1) Initial lump sum from liquidating current funds as stocks
2) bi-weekly efund contributions
3) yearly lump sum in stocks

But what do I do with the dividends on the stocks? Should I just invest them into the e-funds immediately or hold them until year end and do a few transactions and move the money to stocks as part of the redistribution.

Another point I'm struggling with is investing in XBB vs using a GIC ladder.

Thoughts?
 

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I was in a similar situation a while back.

I called my broker (TDWH) and have them enable "synthetic drip" on my accounts. Basically, any dividend from the ETF's will be reinvested at no cost. Unfortunately they are only able purchase whole number of shares (ie no fractions), so you'll have a little remainder, but it's not a big deal.

To find out if your broker offers "synthetic drip", check here:

http://sites.google.com/site/cdndrips/canadiandiscountbrokers

Keep in mind the the TD e-series have a minimal holding period of 90 days. If you cash out before that, they'll take 2% from you.
 

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Jamesbe, I sold all my nonperforming mutual funds in January, and switched over to a mix of mainly stocks and ETFs. The Canadian part of my asset allocation is in stocks. US, EAFE and emerging markets are in ETFs.

I decided to use my dividends to rebalance, so have no drips. Odd bits of cash, including dividends are parked in TD e-series funds until I need to rebalance or am ready to buy a stock.

I still have about 15% of my portfolio in actively managed mutual funds. They were doing well in the 1980s and still are, and if it works I don't fix it.
 

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Great info, I'll think about the synthetic drip but taking a look at that link slacker posted trades are only $10 with RBC (who I use) after $100,000 in assets which I have. So rebalancing every 6 months at a cost of maybe $30-$50 is not a big deal either -- certainly less than the 2.5% MERS I'm paying now!

I am only 31 and this is for my RRSP so I do not plan on removing the money within 90 days so that is not an issue.

Does anyone following the couch potato method also use it for their TFSA? I have 20k room if I include my spouse and was thinking of lump summing my TFSAs to the max and buying the same stocks.
 

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Does anyone following the couch potato method also use it for their TFSA?
I think it depends on what you plan to do with your TFSA. If it's another long-term investment for retirement to supplement your RRSP, then couch potato makes sense. But if you don't have any specific goals or you just want to gamble, I'd do something more aggressive. With couch potato you know you'll never do better than the market. With a managed fund or individual stocks, you know that at least you have a chance of doing better. So if you don't mind putting that money at risk and you're willing to lose it, you could be more aggressive.

If, on the other hand, you're using your TFSA as an emergency fund, you probably don't want to follow the couch potato strategy either but instead put it in a high-yield savings account.
 

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Great info, I'll think about the synthetic drip but taking a look at that link slacker posted trades are only $10 with RBC (who I use) after $100,000 in assets which I have. So rebalancing every 6 months at a cost of maybe $30-$50 is not a big deal either -- certainly less than the 2.5% MERS I'm paying now!

I am only 31 and this is for my RRSP so I do not plan on removing the money within 90 days so that is not an issue.

Does anyone following the couch potato method also use it for their TFSA? I have 20k room if I include my spouse and was thinking of lump summing my TFSAs to the max and buying the same stocks.
A 2.5% MER is, in my books, nothing but armed robbery. It goes against my religion :D ;) to pay such high management fees.

I keep my mutual funds at TD (e-series funds) and PHN. So far I am happier with the latter, as their MERs are low and the returns have been better than TD's.
 
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