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Discussion Starter #1
Hi everyone,

I'm a young professional and look after my own finances as an interesting personal challenge. I'm still learning lots about my finances and find this forum very knowledgeable and helpful. I've been looking for this question on blogs, forums, etc but can't seem to find the solution.

I've been following one of the simplified Couch Potato Portfolio. Canada index/ US index/ Canada Bond index/ International index.

I currently have the US, Bond, and International in my RRSP with the Canada index in my non-registered account due to lack of room in my RRSP and best tax efficiency. Since my account was small and I'm making lots of little payments every paycheck, I have all the indexes in low cost mutual funds. In the RRSP, once I accumulated enough money in a particular mutual fund, I would sell it and buy their equivalent ETF to minimize fees.

In the non-registered account, this is where I'm a bit confused. I've been buying Canadian Index mutual funds only and avoiding its ETF and any capital gains taxes. Should I proceed in the same method as the RRSP account and just pay the capital gains tax when I sell the mutual funds to buy the ETF? Or should I have been accumulating cash until I'm ready to buy the Canadian index ETF directly? Or just keep investing in the Canadian mutual fund forever and forget the ETF? I have my TFSA maxed at the moment with my emergency cash. Another idea would be to wait until Dec 2010 and move the cash out and move the Canadian Index Fund into the TFSA. However, my understanding is I would still pay the capital gains tax since it is an inkind trade correct? The capital gains taxes would only be a few hundred dollars, but would still like to minimize taxes obviously.

Thank you for any and all input.
 

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Hi everyone,
I'm not sure if I explained myself properly since I haven't heard a reply back and this forum seems usually pretty quick to respond.

I have my Bond, US and International index funds/ETFs in my RRSP. Since I ran out of contribution room, I put the Canadian index funds in my non-registered account and plan to buy the Canadian index ETF to minimize fees. Does anyone have any recommendations for a strategy to minimize capital gains taxes in my non-registered account? Or is this just a fact of life (Death and taxes)? :rolleyes:

Thanks for all the advice. Much appreciated.
 

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Part of portfolio investing is periodic rebalancing. Accumulating in a MF in a nonregistered account is a bit of a mistake if you plan to move to an ETF at a later time since you're on the hook for capital gains to that point. Better to use the rebalance point (say, quarterly) to make purchases in underweight ETFs. That said, rebalancing is best done in a registered account to avoid capital gains.
 

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One good option for the unregistered account would be XIU. It has a low management fee at 0.17% and only 60 Canadian stocks. There should be low turnover in the fund. You could buy and hold XIU somewhat underweight as andrewf recommended. That leaves your tax protected accounts with room for earnings that are taxable at a higher rate.
 
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