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Discussion Starter #1 (Edited)
Hello Money Folks,

I have created 3 wings of investments within my RBC RESP account. I am spreading my monthly contributions as follows:

[plain cash] RBC Savings Deposit: $40
[mutual fund] RBC Target 2030 Fund: $80
[index fund] RBC Canadian Index Fund: $80

I know there are multiple strategies one could choose from in order to decide on how to balance a portfolio. Kindly suggest how I could balance my simple portfolio after one year from now. Or, do I balance every time I contribute?

Also, fund expenses for Target 2030 and the index fund are respectively 2.01% and 0.72%. Because of the high expenses of Target 2030, should I slowly move away from Target 2030 toward the index fund?
 

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Well the whole reason for those Target funds, is that they have a bit of everything, and they auto balance for you. If you are adding other stuff to go with the target anyway, I don't see why not just get rid of the target fund and replace with a couple of different index funds to achieve the ratio you want. Then you figure out how you will adjust that ratio every year as your kid(s) get closer to their university start date.

If you keep target it's the same idea, but then you have to figure out what the percentages will be over time within the fund, and adjust the stuff outside to match.

And keep in mind that you are paying the 2% not just on the stock portion of the target fund (which is bad) but also on the fixed portion which might not gain 2% to begin with (which is much worse)
 

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The Benchmarks for RBC 2030 are currently:

- 36% FTSE TMX Canadian Universe Bond Index;

- 23% S&P/TSX Capped Composite Total Return Index;

- 23.0% S&P 500 Total Return Index (C$);

- 14.4% MSCI EAFE Total Return Net Index (C$); and,

- 3.6% MSCI Emerging Markets Total Return Net Index (C$)


Because of the innate conservatism of bank mutual funds, they rarely exceed the performance of their benchmarks. With the exception of Emerging markets, you can match the performance of the first 4 benchmarks by simply buying RBC's Bond Index Fund: CDN Equity Index Fund; Currency Neutral US Index Fund; and Currency Neutral International Index Fund. All with MER's under 1%.

As CalgaryPotato says, if you are going to create your own asset allocation anyway by adding to the Target Fund, you may as well drop the Target Fund and go all the way.

PS. I have no idea why you would want to invest 20% of your contributions in Plain Cash in an RESP that is targeted for 13 years from now, unless it is just temporary to make it easier to re-balance your asset allocations periodically.
 
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