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[AllistonGT]

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What are your investment objectives and risk tolerance? Are you focused on preserving capital, seeking dividend payments, or aiming for capital appreciation?

I still have around 30 +/- years until retirement. (I would like to FIRE, but I also love Ducatis, hence 30 years until retirement).As a result, my investment portfolio is primarily composed of equity ETFs with less emphasis on debt (bonds).

Currently, I hold VFV, which replicates the SP500. I also have XEQT, which includes a mix of US, Canadian, and some global stocks. Additionally, I've included XEH, a hedged European equities ETF, to reduce my investment in US stocks while avoiding currency risk.

Retiring at the end of next year. I'd say medium risk tolerance. We have other investments as well so more than 1 place to draw from. We stoped contributing to our RRSP's about 5 years ago as I felt to much is a negative re tax planning.
Tired of paying my advisor fees after 30 years. I'll leave the RRSP's with him but would like to self direct more with other funds that currently are in cash.
Already have a Wealth Simple account set up.

 

[JC99]

We have a friend of a friend type who is a financial advisor that recommended S&P500 type ETFs like VFV for “set it and forget it” investments. My wife has that and I have TPU which is similar. They are both historically very steady over the long term, just make sure you have a DRIP set up for whichever account you hold them in then just let them ride. The main benefit for those is as a long term investment so it depends on when you see yourself needing the cash. We are both still up around 20% or more over a couple of years despite all the malarkey recently.

I'm a total noob at this though so these ETFs are just steady earners with lowish risk. If I threw my cash at every silver or gold corp that keeps being hyped I'd be broke.

 

[GreyGhost]

We have a friend of a friend type who is a financial advisor that recommended S&P500 type ETFs like VFV for “set it and forget it” investments. My wife has that and I have TPU which is similar. They are both historically very steady over the long term, just make sure you have a DRIP set up for whichever account you hold them in then just let them ride. The main benefit for those is as a long term investment so it depends on when you see yourself needing the cash. We are both still up around 20% or more over a couple of years despite all the malarkey recently.

I'm a total noob at this though so these ETFs are just steady earners with lowish risk. If I threw my cash at every silver or gold corp that keeps being hyped I'd be broke.

You need almost $70k in vfv for a drip/dpp to work. If you have less than that, when dividends are issued quarterly, they don't generate enough to buy another unit. If you want something you can drip with less money, you want annual dividends (bigger chunk of money at one time) and/or a higher dividend yield. Vfv is a good investment but dividend yield is <1%. Bank stocks normally drip at reasonable amounts of money.

 

[JC99]

You need almost $70k in vfv for a drip/dpp to work. If you have less than that, when dividends are issued quarterly, they don't generate enough to buy another unit. If you want something you can drip with less money, you want annual dividends (bigger chunk of money at one time) and/or a higher dividend yield. Vfv is a good investment but dividend yield is <1%. Bank stocks normally drip at reasonable amounts of money.

I don't have them for the dividends but as a practically worry free/no-need-to manage investment. Setting it up as DRIP just means there's one less thing to look at for me over the long term and I don't want to touch that cash for a long long time anyway.

The one investment I got specifically for dividends was an experiment with a small $ amount in an iron ore mine out east. Seems I managed to invest in the only iron ore mine with no iron in it, but at least the dividends are cool.

 

[JC99]

What's the downside of fractional shares? My brokerage has a commission free fractional share purchase option. My suspicious nature says there must be a downside somewhere but all I can see is that I can't set a bid price for these I have to buy at market value. What's to stop me buying 10.1 shares of something commission free rather than 10 with the $9.99 fee every time?

 

[PacoT]

We stoped contributing to our RRSP's about 5 years ago as I felt to much is a negative re tax planning.

I’m not a professional, and this isn’t professional advice. This kind of discussion probably fits best in the GTAM tax thread (or, of course, by consulting a qualified professional). Please feel free to correct or expand on what follows.

RRSPs provide a tax deduction that lowers taxable income in the year of contribution. Withdrawals in retirement are treated as taxable income.

If we ignore the time value of money and assume someone is in the same tax bracket during both working years and retirement, the overall tax effect would be neutral.

However, for most people, income tends to decrease in retirement—often placing them in a lower tax bracket than when they were working.

That means the tax deduction today usually generates more savings than the tax paid later.

Super simplified example (ignoring many other factors):

• RRSP contribution: $5
• Tax bracket while working: 35% → immediate tax savings = $1.75
• RRSP withdrawal: $5
• Tax bracket in retirement: 20% → tax payable = $1.00

Tired of paying my advisor fees after 30 years. I'll leave the RRSP's with him but would like to self direct more with other funds that currently are in cash.

A thing to consider is that ETFs also charge commissions. In general, ETF commissions are significantly lower compared to those of an advisor or a mutual fund. The MER (Management Expense Ratio) is the annual fee the ETF's fund manager charges. So also keep an eye on the MER of each ETF.

You need almost $70k in vfv for a drip/dpp to work. If you have less than that, when dividends are issued quarterly, they don't generate enough to buy another unit.

I believe some brokers allow you to purchase fractional shares, also when dividend reinvesting. At least I can do it with WS and IBKR.

What's the downside of fractional shares?

The orders take longer to fill (buy or sell) in the active market. My assumption is that brokers need to bundle your order with some others until they get one full unit.

 

[Lightcycle]

We stoped contributing to our RRSP's about 5 years ago as I felt to much is a negative re tax planning.

Elaborate?

I stopped contributing to RSPs a long time ago because I don't have any meaningful employment income to contribute from.

But mathematically, wouldn't compounding growth in any tax sheltered account (RSP, TFSA, etc) be better than getting axed every April? Is "tax planning" having a better picture of knowing what's yours and what's the government's before you have to melt down your RSP?

You seem to have a background in accounting/financial planning? So, very interested to hear your reasoning.

 

[Brian P]

I stopped contributing to an RRSP some years ago, when it started becoming apparent that the future RRIF income was probably not going to be tax advantageous compared to dividend income offset by the dividend tax credit from investments outside the RRSP and over and above TFSA.

 

[Brian P]

Gentle reminder that there are lots of different scenarios that will apply to different people. If you foresee a low-income retirement, then "any" savings is better than "no" savings, and having something stashed away in a place that's harder to get to (RRSP) reduces the temptation to spend it, and your income won't trigger higher tax brackets when it comes time to RRIF it. That isn't my situation, but it will apply to a lot of people.

My brother-in-law is a wizard at this. Took early retirement, and my sis and bro-in-law are still doing multiple ocean cruises every year more than 30 years on from retirement.

 

[Lightcycle]

I stopped contributing to an RRSP some years ago, when it started becoming apparent that the future RRIF income was probably not going to be tax advantageous compared to dividend income offset by the dividend tax credit from investments outside the RRSP and over and above TFSA.

True, but I'm currently maxed out on the dividend tax credit.

In my tax-sheltered accounts, not having to pay cap gains taxes every year has been very tax-advantageous when performing sector rotation or rebalancing my asset allocation.

Am I anomalous for having too much "churn" in a retirement account? In reality, it's not that often, maybe one or two big moves every 2-3 years, but still, the tax-savings are significant, IMO.

 

[Lightcycle]

Gentle reminder that there are lots of different scenarios that will apply to different people. If you foresee a low-income retirement, then "any" savings is better than "no" savings, and having something stashed away in a place that's harder to get to (RRSP) reduces the temptation to spend it, and your income won't trigger higher tax brackets when it comes time to RRIF it. That isn't my situation, but it will apply to a lot of people.

I get the feeling this doesn't apply to @AllistonGT either...

He's hiding some kind of secret financial strategy and I want to know it!

 

[GreyGhost]

Am I anomalous for having too much churn in a retirement account?

I think so. Not that your path is wrong, just different. I normally buy and hold for long periods. In my rrsp, I've only done one significant sale to rebalance. Aapl bought in 2008 was grossly overweight so I sold 2/3's of it late last year and put it in VT. If that had triggered cg tax, that would have sucked.

 

[Lightcycle]

If that had triggered cg tax, that would have sucked.

Yep, that's exactly the scenario I was talking about. I've rebalanced within my RSP quite a few times over the years, and not having to pay CG taxes each time has had a profound effect on compounding growth.

 

[JC99]

I’m not a professional, and this isn’t professional advice. This kind of discussion probably fits best in the GTAM tax thread (or, of course, by consulting a qualified professional). Please feel free to correct or expand on what follows.

RRSPs provide a tax deduction that lowers taxable income in the year of contribution. Withdrawals in retirement are treated as taxable income.

If we ignore the time value of money and assume someone is in the same tax bracket during both working years and retirement, the overall tax effect would be neutral.

However, for most people, income tends to decrease in retirement—often placing them in a lower tax bracket than when they were working.

That means the tax deduction today usually generates more savings than the tax paid later.

Super simplified example (ignoring many other factors):

• RRSP contribution: $5
• Tax bracket while working: 35% → immediate tax savings = $1.75
• RRSP withdrawal: $5
• Tax bracket in retirement: 20% → tax payable = $1.00

A thing to consider is that ETFs also charge commissions. In general, ETF commissions are significantly lower compared to those of an advisor or a mutual fund. The MER (Management Expense Ratio) is the annual fee the ETF's fund manager charges. So also keep an eye on the MER of each ETF.



I believe some brokers allow you to purchase fractional shares, also when dividend reinvesting. At least I can do it with WS and IBKR.


The orders take longer to fill (buy or sell) in the active market. My assumption is that brokers need to bundle your order with some others until they get one full unit.

Thanks for that. I did an experiment with fractional shares for Costco a while back (over 1k a share at the time) and they seemed to get filled quite quickly but perhaps that was because it was a very active stock?

I'm not a baller or Rockefeller so my trades are reasonably low $amounts. I usually wait a bit to trade a lump sum to save on the fees but if fractional shares allow me to trade a little more often, especially on high $ stocks, then I can take advantage of market movement without a significant penalty.

 

[Brian P]

True, but I'm currently maxed out on the dividend tax credit.

For people that are well positioned for retirement, I am convinced that the best strategy is a mixture of several strategies. The way I'm looking at it, the TFSA is the new-vehicles fund (I will not be buying a Lamborghini any time soon), and although the monthly income from RRIF and CPP is higher the longer you delay, I can use that income now more so than at age 90 (if i make it that far). Keeping some investment portfolio outside the RRSP, even after RRIFfing, buys cash flow flexibility.

 

[AllistonGT]

I stopped contributing to an RRSP some years ago, when it started becoming apparent that the future RRIF income was probably not going to be tax advantageous compared to dividend income offset by the dividend tax credit from investments outside the RRSP and over and above TFSA.

This. Plus if you die (when) any unused amount gets added to your income the year you pass.
RRSP's only defer taxes. Yea I know most people will have less income in retirement so taxes should be less. But if well funded, tax planning is a must.

 

[AllistonGT]

For people that are well positioned for retirement, I am convinced that the best strategy is a mixture of several strategies. The way I'm looking at it, the TFSA is the new-vehicles fund (I will not be buying a Lamborghini any time soon), and although the monthly income from RRIF and CPP is higher the longer you delay, I can use that income now more so than at age 90 (if i make it that far). Keeping some investment portfolio outside the RRSP, even after RRIFfing, buys cash flow flexibility.

How I feel as well. If possible should have different areas to draw from. Like cash (GIC's) to ride out a down market to avoid locking in a loss.

 

[AllistonGT]

I get the feeling this doesn't apply to @AllistonGT either...

He's hiding some kind of secret financial strategy and I want to know it!

Only financial strategy I ever had was work a lot, pay off debt as early as possible, and save. Live within your means.
I know, boring but being consistent for 40 years has worked for us.

 

[AllistonGT]

For people that are well positioned for retirement, I am convinced that the best strategy is a mixture of several strategies. The way I'm looking at it, the TFSA is the new-vehicles fund (I will not be buying a Lamborghini any time soon), and although the monthly income from RRIF and CPP is higher the longer you delay, I can use that income now more so than at age 90 (if i make it that far). Keeping some investment portfolio outside the RRSP, even after RRIFfing, buys cash flow flexibility.

I'll be delaying CPP probably till 67 - 68. Want to use up some of our RRSP's first.

 

[backmarkerducati]

As for ETFs I picked up SHLD six months ago and it has worked out well. It is a defence sector ETF with a mix of European and American defence stocks. I looked but I couldn't find one that was just European so I ended up with a mixed one.

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