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Discussion Starter #1
Hi!

So I have about 150k$ sitting in my savings account right now.

Based on my situation, what would be the best way to invest this money?

Some details on my financial situation:

I have ~40k free space for my RRSP.

My salary in 2020 will be around 230k, but on average it's around 140k.

I’m in Quebec, so my marginal combined tax rate is about 55%.

I’m 32 years old. I don't plan on using any of this money for another 30 years. So I'm really focused on the long-term.

I have 2 mortgages.
122k left on a 215k condo I’m renting (I’m the landlord). Interest rate of 1.95% variable.
306k left on a 500k house. Interest rate of 1.95% variable.

My current investments are:
~69k in a TSFA maximum growth account
~150k is RRSP maximum growth account
... and 150k sitting in my savings account waiting to be invested.

My TFSA is currently full but I still have about 40k of space in my RRSP. And I will invest the remaining 110k in a non-reg. account.

I would like a simple investment strategy where I can pretty much dump all my money and barely have to do anything.
I am disciplined enough to re-invest the distributions / dividends but otherwise I would prefer not to have to do anything.

Here are the details of my current mutual fund investments that I will be closing :

TFSA
TFSA

RRSP
RRSP

The MERs on these funds are about 2.5% so I will be taking my money out of them shortly and invest them myself using an online brokerage platform (Disnat).


If really new to all this and need your opinions / advices in the investment strategy I plan to use:


For my RRSP and TSFA I'm planning to go 80% XEQT and 20% XBB. But maybe I should just stick with XGRO (or VGRO?).
Both would give me 80% equity 20% bonds but the 2 ETFs strategy allow me to more easily adjust the repartition if I need to...
Do you think 80% equity is a bit much? Should I tone it down to 30% maybe?

For my non-reg., do you think it could be a good idea to go 100% XIC for tax implications?
I think XIC gets more Canadian dividends so it could be advantageous to hold in a non-reg.? I'm really not too familiar with dividends taxation etc...


I'm open to all suggestions and ideas on what would be the best way to invest / use this money!
Thanks!
 

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given the current markets are you an optimist or a pessimist ?

Also, I’d leave your rental alone - interest and expenses are a tax advantage/write off.

I like maxing out the rrsps given your 2020 income, glad you've been able to utilize your tfsa.

Optimist - markets are great and getting better, VGRO is a good choice. plus you’ve got 30 years till your thinking of retiring.

pessimist or concerns in the market, VBAL or MAW104.

if the sky could fall in .... crosses your mind, let us know as there are other options here....
 

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I second the suggestions above about all-in-one passive ETFs (such as VGRO, XGRO, ZGRO). You can't go wrong with these. If you stick to it, in 30 years you will be handsomely rewarded.

For my non-reg., do you think it could be a good idea to go 100% XIC for tax implications?
I think XIC gets more Canadian dividends so it could be advantageous to hold in a non-reg.? I'm really not too familiar with dividends taxation etc...
With regards to XIC, I would not let tax considerations drive your decision. Some may argue that there may be good reasons (other than taxation) to tilt toward Canadian equities, but in your tax bracket, the difference is minor and may actually favor something like VGRO or VEQT (for all equities).
 

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I agree. The crossover taxable income where cap gains tax rate is less than the DTC eligible dividend rate is at $97k in Ontario and not much different in Quebec.

Can be more or less for other provinces. In BC, eligible dividend tax rates are lower than cap gains tax rates up to about $150k taxable income.

 

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Discussion Starter #8
So you don't think 80% equity is too risky?

And between XGRO and VGRO, which would you pick?

Also, when you talk about delaying capital gains taxes, are you referring to my RRSP?
Otherwise could you elaborate?
 

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So you don't think 80% equity is too risky?
Not for a 32 year old. But if you think it is risky, you can choose a lower equity allocation such as VBAL or VCNS.

The main principle here is passive asset allocation.

And between XGRO and VGRO, which would you pick?
I don't see a major difference. Put one in your RRSP, another in your TFSA, and yet another in your non-reg.

Also, when you talk about delaying capital gains taxes, are you referring to my RRSP?
Otherwise could you elaborate?
The reference is to non-registered accounts. Your RRSP benefits from a tax deferral on your income, but when you make withdrawals, you will be paying income tax too. All taxes are deferred as long as the funds remain in the RRSP/RRIF. Most investors are in lower tax brackets in retirement, so there is a tax benefit equal to the difference in tax rates.

Speaking now about your non-registered account, which you will be taxed yearly, you would not pay any tax on capital appreciation until you sell (years from now in retirement). However, each year you will have to pay taxes on distributions. In the case of XIC, you would receive about $3500 in (mostly) eligible dividends. In your tax bracket (assuming income of 140K) you would pay about 890 dollars in taxes (in ON). If you go the VEQT route (diversified all equity), you will receive a distribution of 1510 dollars and pay taxes of 655 dollars. For VGRO taxes would be about 950, etc. So the difference in tax is negligible compared to principles of diversification or asset allocation.
 

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The point in non-registered accounts is to get more of your 'total return' performance in the form of capital gains (share price appreciation) taxable only when you sell the investments some day perhaps 20-30 years from now, versus getting too much of the total return in dividends/d istributions/other income that is taxed in the year received, i.e. every year starting now..

Many will argue that no one knows for sure whether a particular asset will appreciate in share price like it should while getting dividend/distribution income every year is a bird in the hand (versus two in the bush). In other words, no one knows for sure whether growth stocks with low yield will outperform a competitive stock with a high yield. It is true no one knows.

The key is simply not to get carried away (influenced) by holdings that pay high yield. A high income earner such as the OP simply does not need to pay even more taxes on investment income that is not needed today. There is plenty of time to generate income close to, or into, retirement.
 

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1) I would max the RRSP given your high income this year $230K so you should be near the top bracket. Great return opportunity there. VGRO or the BMO or ishares equiv whichever has the lower fees

2) In the TFSA you could go the same. Whatever has a small% CDN

3) ZLB or FQC are better CDN ETFs ( more diversified than the index XIC which is all banks and oil cos) for the inv acct. You will need to look at your % by region ie you may also have to add some INTL and US
 

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Discussion Starter #14
I'd go MAW105 in non-reg. MAW104 in reg. VBAL also excellent (Same composition as MAW104).
use vanguard fund comparison tool to see past performance, and details.
Damnit you're making me doubt now haha!
Aren't MAW105 and MAW104 only 60% equity though?

Isn't it a bit low for a 30 years investment?

Also, their MER is A LOT higher than VGRO or XGRO...
 

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Damnit you're making me doubt now haha!
Aren't MAW105 and MAW104 only 60% equity though?

Isn't it a bit low for a 30 years investment?

Also, their MER is A LOT higher than VGRO or XGRO...
MAW104/105 have a very long track record (1988) and generally give better returns compared to others in the same category, even with a higher MER.

You could always split by account, e.g. MAW104 in RRSP, VGRO in TFSA, XGRO in non-reg.
 

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Discussion Starter #17

I'm having trouble finding the equity percentage in MAW104. Is it 60%?
Any reason why you would pick MAW104 over MAW105 in the RRSP account?

Other than the equity percentage, how is MAW104 different than XGRO for exemple. Is it also a portfolio of ETFs but with higher MER because it's more "complex"?
 

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I'm having trouble finding the equity percentage in MAW104. Is it 60%?
Any reason why you would pick MAW104 over MAW105 in the RRSP account?
Yes, around 60% equity. Info here -> Mawer Balanced Fund | Fund Profile
MAW104 for RRSP/TFSA, MAW105 is for non-reg.

Other than the equity percentage, how is MAW104 different than XGRO for exemple. Is it also a portfolio of ETFs but with higher MER because it's more "complex"?
It's kind of the same thing, both contain "other fund bundles" but mutual funds vs ETFs. Not really more complex BUT Mawer funds are actively managed vs a passive management (other than rebalancing) for the ETF versions.

Some like active management, some don't. Mawer does have a good (and long) history of doing it right. Comparing the last 2 years for MAW104 vs VBAL etf (basically the same breakdown) Mawer is at 9.5% vs 3.6% for VBAL.
 

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Discussion Starter #19
That is crazy... I don't understand why they aren't more popular (or maybe they are?).
It looks like I should really do as you and dubmac suggested.

100% MAW104 in my RRSP/TFSA and 100% MAW105 is for non-reg.
Less than 1% for an actively managed fund sounds great especially considering their history...

And am I right thinking they're actually less risky than XGRO since their equity percentage is lower?

Any reason why I shouldn't do that and stick to my initial plan of going 100% XGRO?
 

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Mawer is very popular, so are some of the other ETFs but with less of a track record.

It's up to you on how you feel about the equity percentage, some don't like the high % exposure, some don't care ... question is, what will allow you sleep well at night if equities go down?

Just to note, I personally don't like putting all my eggs in one basket so to speak, like buying all XGRO or all MAW104. I'd consider mixing it up a little, like I mentioned before.
 
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