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Trying to create a portfolio with only a few ETF's for my RRSP. Although I like the couch potato portfolio; 25%bonds, 25%Cnd, 25%US and 25%Internat. I find the asset allocation does not suit me. I am more of a 60stock and 40bonds being at 40years old it makes sense, well at least to me!

Instead of buying 3 ETF's for each region of the world, wouldn't it make more sense just to own vanguards world stock(VT)? And for the bond I have XSB(ishares short bond). I am also thinking of buying a high yield bond fund, read somewhere that it has a very low correlation with other bond etf.

Do you think this portfolio is a strong base to work from? And what other etf would you add, but only ones with low correlation.

Thank you
 

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You could certainly do that. Note that Canada is only or 3 or 4% weight in the global equity ETF, so if you want to increase your exposure to Canadian equity you could toss in some XIU or XIC.

I wouldn't recommend making high yield more than 10% of your portfolio.
 

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You could just do Vanguard's Total Stock Market (VTI/NYSE) and FTSE All-World Ex-U.S. (VEU/NYSE) for your equity exposure.
 

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I recommend overweighting Canadian Equities. Currently, Canadian Equity is only less than 4% of VT. I personally have 40% of my equity portion allocated to Canadian. I'm 30. Seeing the wild fluctuations of foreign exchange rates in the last week, I can see why one may want to avoid that volatility.

I'm not sure how tax efficient it is to hold Canadian Equities in a USD ETF.
 

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The conventional recommendation is at least equal weighting between Canada/US/International stocks (if not overweight Canadian). As others have noted you won't get that with a single global ETF.
 

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didn't Harold Crump use to drop in here - when he wasn't marauding in libraries to heckle derek foster - Harold would drop in here & announce that all these global multinational funds never perform zip over periods of decades ...

my take is that every big canadian corporation is already a well-diversified multinational. Potash, agrium, barrick, snc-lavalin, bombardier, cameco, cn rail, encana, goldcorp, bmo, royal bnk, td, you name it, half or more of their business is outside canada. Plus they analyze their own sovereign risk, they insure their own enterprises, and they hedge their own currencies. All probably better than some deskbound-in-toronto geek fund manager.
 

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didn't Harold Crump use to drop in here - when he wasn't marauding in libraries to heckle derek foster - Harold would drop in here & announce that all these global multinational funds never perform zip over periods of decades ...

my take is that every big canadian corporation is already a well-diversified multinational. Potash, agrium, barrick, snc-lavalin, bombardier, cameco, cn rail, encana, goldcorp, bmo, royal bnk, td, you name it, half or more of their business is outside canada. Plus they analyze their own sovereign risk, they insure their own enterprises, and they hedge their own currencies. All probably better than some deskbound-in-toronto geek fund manager.
But the TSX is almost completely devoid of some sectors, like biotech/pharma. To get that exposure you need to invest in foreign equities. I don't think there is anything wrong, in principle, with just owning VT as your equity exposure. I'm not sure it's a given that you should be overweight Canadian equities.
 

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Why does everyone suggest having some exposure to US Equities? I don't see them doing very good long term, if you really want a passive portfolio.

A Chinese Index ETF + Canadian ETF should be sufficient for long term investing. Canada is very resource heavy and as the world needs Energy (ie. China), they'll buy from Canada and therefore boost Canada's economy. China is going to be out the US soon, i'd rather not be patriotic and just go where the money is going to go. With all the manufacturing jobs in China and their explosive growth, why not invest in China?
 

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Many US stocks do most of their business outside the US. That is, they are global firms, not US firms. US firms benefit from higher regulatory standards than you might see in China.

Not to mention, putting all your eggs in the China basket sounds like a recipe for getting wiped out. Just because China is growing rapidly does not make high equity returns a foregone conclusion. Be cautious, and don't naively bet the farm on one 'story'.
 

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Rinoscar...

1) I would add my voice to overweighting Canadian stocks with a Canadian ETF. Canada just seems to be in better shape than many developed markets. e.g. XIC, XIU or ZCN
2) Consider putting part of your equity position into a real estate or REIT ETF. e.g. CGR, XRE, VNQ
 

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Many US stocks do most of their business outside the US. That is, they are global firms, not US firms. US firms benefit from higher regulatory standards than you might see in China.

Not to mention, putting all your eggs in the China basket sounds like a recipe for getting wiped out. Just because China is growing rapidly does not make high equity returns a foregone conclusion. Be cautious, and don't naively bet the farm on one 'story'.
I'm aware that most companies do their business outside the US. However, with that said, the US is the biggest market for these companies. China is catching up while US is on its way down, why invest in something that is getting worse?

If China is so bad, a Pacific ETF filled with Taiwan, China, Hong Kong, Korea, Japan would be very good too or if you can find one with Singapore involved that'd be the best. These nations have money and thats where people will go. You don't go to a debtor nation.

I believe Roger's quote:

In the ’20s and ’30s, there was a huge move from the U.K. to the U.S., exacerbated by financial crisis, and the same thing is happening now. The world is moving from the West to the East and, again, it’s exacerbated by a financial crisis.
All the big investors have all been advocating China as well, Warren Buffett, Jim Rogers, Garth Turner... just to name a few. Aside from the Chinese housing bubble that I can maybe see happening, China doesn't seem like a high risk place to invest. Its growing economically faster than others.
 

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I'm aware that most companies do their business outside the US. However, with that said, the US is the biggest market for these companies. China is catching up while US is on its way down, why invest in something that is getting worse?
I don't believe this is true at all (re: US companies earning the majority of revenues from within the US).

MCD - < 40% revenues from North America - largest growth markets Asia and Latin America.
MMM - ~70% revenues from outside US - largest growth markets Asia and Latin America.
KO - ~75% revenues outside US - largest growth markets Asia and Latin America.

None of these are resource stocks. China and the rest of the world need a lot more than just resources.

While I personally do invests in China, I'm always hesitant due to the opaque nature of the government and the amount of control they exert over many companies.

Significant risks to China not only include the potential housing bubble, but all that manufacturing capacity produces products for markets outside of China. Eventually demand for their products internally will probably outpace demand for Chinese products abroad, but we certainly aren't there yet.
 

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I see iShares now has XCH (China index fund). anyone have any experience with this one? Seems like it could be an easy way to get some Chinese exposure
 

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Discussion Starter #14
I wouldn't recommend making high yield more than 10% of your portfolio.
I was thinking more like 5% of my overall portfolio.

You could just do Vanguard's Total Stock Market (VTI/NYSE) and FTSE All-World Ex-U.S. (VEU/NYSE) for your equity exposure.
Right now I hold those 2 ETF's and since I am a buy and hold investor, have the least possible etf's will reduce overall fees when time to balance.

I recommend overweighting Canadian Equities. Currently, Canadian Equity is only less than 4% of VT. I personally have 40% of my equity portion allocated to Canadian. I'm 30. Seeing the wild fluctuations of foreign exchange rates in the last week, I can see why one may want to avoid that volatility.

I'm not sure how tax efficient it is to hold Canadian Equities in a USD ETF.
Doesn't the VT mirror the world market, so if canada is at 4% of global market shouldn't the etf be at 4%? and if say the US would fall to one day 15%of the world market then the etf's weighting of the US market would fall to 15%?

The conventional recommendation is at least equal weighting between Canada/US/International stocks (if not overweight Canadian). As others have noted you won't get that with a single global ETF.
True, but I never did like having 50% of my portfolio invested in only 2 countries.

But the TSX is almost completely devoid of some sectors, like biotech/pharma. To get that exposure you need to invest in foreign equities. I don't think there is anything wrong, in principle, with just owning VT as your equity exposure. I'm not sure it's a given that you should be overweight Canadian equities.
I agree, there are alot of sector that you can't be exposed with CND markets.


SOIL4PEACE....If owing a CND etf or the VT aren't most of those REIT stocks included in them?
 

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I don't believe this is true at all (re: US companies earning the majority of revenues from within the US).

MCD - < 40% revenues from North America - largest growth markets Asia and Latin America.
MMM - ~70% revenues from outside US - largest growth markets Asia and Latin America.
KO - ~75% revenues outside US - largest growth markets Asia and Latin America.

None of these are resource stocks. China and the rest of the world need a lot more than just resources.
No i meant the overall US market vs the overall China market. US is bigger in size.

While I personally do invests in China, I'm always hesitant due to the opaque nature of the government and the amount of control they exert over many companies.

Significant risks to China not only include the potential housing bubble, but all that manufacturing capacity produces products for markets outside of China. Eventually demand for their products internally will probably outpace demand for Chinese products abroad, but we certainly aren't there yet.
Exactly, when we aren't there yet, lets earn it until we get close. :)
 

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Exactly, when we aren't there yet, lets earn it until we get close.
No no... my point is the China is now dependent on the world for their exports, their internal economy and demand for products is not self-sustaining. Therefore, if the US economy goes (and currently is bad), China will be bad.
 

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No no... my point is the China is now dependent on the world for their exports, their internal economy and demand for products is not self-sustaining. Therefore, if the US economy goes (and currently is bad), China will be bad.
Definitely however the China market is quickly catching up to the US market. The whole point of investing in China is for their growth, its going to be much greater than the US.
 

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SOIL4PEACE....If owing a CND etf or the VT aren't most of those REIT stocks included in them?
The low MER all market ETFs will tend to be dominated by large caps. Canada's largest REIT is a mid cap - REI.UN at about $4.6B market cap. ZCN and XIU are large cap only and contain no REITs. XIC contains 222 stocks including 0.34% REI.UN and possibly lower percentages of other REITs.

I guess there are two ways to go. You can minimize costs by going with all market funds with mainly large caps and the larger market sectors. Or you can manage risk by augmenting market sectors with lower correlation or with a preferred level of risk compared to the overall market. But REIT funds or other sector funds will have higher MERs.
 

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Discussion Starter #20
Definitely however the China market is quickly catching up to the US market. The whole point of investing in China is for their growth, its going to be much greater than the US.
Doesn't this remind anyone of the tech bubble??? Humm, correct me if I am wrong, but doesn't everyone invest in stocks for their growth? So why, would I place my cash in China and CND only??

DON'T FORGET WHAT THIS THREAD IS ABOUT..SIMPLE PORTFOLIO THAT IS WELL DIVERSIFIED. sorry for yelling, but it is getting alittle off topic!

The low MER all market ETFs will tend to be dominated by large caps. Canada's largest REIT is a mid cap - REI.UN at about $4.6B market cap. ZCN and XIU are large cap only and contain no REITs. XIC contains 222 stocks including 0.34% REI.UN and possibly lower percentages of other REITs.

I guess there are two ways to go. You can minimize costs by going with all market funds with mainly large caps and the larger market sectors. Or you can manage risk by augmenting market sectors with lower correlation or with a preferred level of risk compared to the overall market. But REIT funds or other sector funds will have higher MERs.
Would you go with a CND reit etf or one that covers many countries and I am assuming that since it is a sector etf, it should represent about minimum 5% to a max of 10%?
 
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