Canadian Money Forum banner

1 - 4 of 4 Posts

·
Banned
Joined
·
1 Posts
Discussion Starter #1
Hello everyone, this is my first post on this forum.

Canadian Capitalist, Canadian Couch Potato, and several others have shown me the wisdom of using an ETF based investment strategy. I've just closed my account with my financial advisory firm and now am sitting on a large pile of cash. The financial advisory firm was charging me a 1.6% annual fee, and they consistently have underperformed the S&P/TSX benchmark over the last few years.

I'm married with 2 kids, I'm 40, my wife is 38. We have 20 more years until retirement.

I was planning to do 60% equities, 40% fixed income using the "half-baked couch potato portfolio" (http://canadiancouchpotato.com/model-portfolios/). I would re-balance yearly when I contribute more RRSP and TFSA money.

My only dilemma at the moment is deciding how to get in. If I go all in now, and the market drops 20-30% it could take a few years to recover. I've been thinking about following the 70 week SMA (simple moving average) of each ETF, and entering into the position once it trends above for 2 weeks or + 3% as outlined by Donald Dony (http://www.canadianmoneysaver.ca/article_retrieve.aspx?article_id=2111).

I know there was another thread discussing the 200 SMA.

I was wondering what people thought about the ideas in Donald's article, and the best way to convert a large sum of cash (200K) into a balanced ETF portfolio.

Best Regards,
 

·
Registered
Joined
·
2,953 Posts
That is a great link that you provided to the Canadian Couch Potato website.

I wasn't aware that it existed but there is a lot of useful information there.

I would only say to keep your portfolio simple for easier and cheaper management and use the lowest fee, broadest-based ETF's.

Although the majority of my portfolio is in such ETF's, I do have 5 percent of my portfolio in the RBC Precious Metals Fund which has been one of the top performing funds over the long term. I would also include a 5 to 10 percent weighing in an emerging markets ETF.

Value and smallcap ETF's tend to outperform over time but with more volatility along the way.

Resist the urge to chase after hot sectors and trade only for rebalancing purposes and then only if your original asset allocation becomes seriously misaligned.

Learn to live with the ups and downs of the market and stay true to your original objectives.

As an alternative, also consider a portfolio of good paying individual dividend stocks with a history of increasing those dividends over time.
 

·
Banned
Joined
·
967 Posts
I went through something similar to you recently. I don't have an opinion on how to start, I took the "all-in" approach.

But the lesson I'd like to convey to you is to be careful if/when you buy a non-canadian ETF. Most brokerage charges about 2% beyond the international exchange rate, so if you're converting $100,000, you lose $2,000. There is a way to avoid this pit fall, consider using the Norbert's Gambit, you can exchange for $100,000 for the cost of a couple of trades.

I wish somehow had taught me this before, but you live and learn.
 

·
Registered
Joined
·
249 Posts
But the lesson I'd like to convey to you is to be careful if/when you buy a non-canadian ETF. Most brokerage charges about 2% beyond the international exchange rate, so if you're converting $100,000, you lose $2,000.
I got bitten by the exchange rate scam too. I consider that borderline theft as the ridiculous rate is not published. I've immediately moved my rrsp from that brokerage to another one, that keeps the proceeds of US equity sales in US dollars without the automatic predatory exchange.
So the first step is picking the right brokerage. For my non-registered account I use a deep-discount brokerage (with whom I get the FX rate for the initial exchange - 0.02 cents spread between the bid and ask).
 
1 - 4 of 4 Posts
Top