This is the most cost effective way to create a sensible investment portfolio. Investors will require a working knowledge of the individual assets, asset allocation and the risk levels of their investment portfolio. You will need to be comfortable doing your own buying and re-balancing of the stock and bond funds. The creation and managing of ETF Model Portfolios is quite simple, but it’s important that you have a working knowledge of stocks and bonds and the associated risk and return potential.
Getting your investment knowledge up to the required level is more than ‘worth it’. But if managing your own portfolio is not for you, go with one of the Canadian Robo Advisors. You can also explore the all-in-one portfolio ETFs from Vanguard, iShares, Horizons and BMO. These funds are completely diversified and rebalanced. The annual fees are in the range of 0.20%-0.28%. Here’s some help on how to select the ‘right one ticket fund’.
To create any of the ETF Model Portfolios you would open a discount brokerage account with your bank or source an independent discount brokerage. The management expense ratio can be less than .15% for a Balanced Portfolio. Investors may also pay trading costs and potentially annual account fees. Compare that to Canadian Mutual Funds at an average of well over 2%. No contest.
This MoneySense article, best online brokerages in Canada for 2021, details the leading discount brokerage offerings in Canada.
Discount brokerage partnership.
Cut The Crap Investing readers can sign up with Questrade (Canada’s top-ranked discount brokerage) through this partnership link. You can buy ETFs for free!
These are the four building blocks for a sensible, well diversified portfolio. Portfolios are typically re-balanced to the original percentages of stocks and bonds and regions on an annual basis, or when the allocations move out of balance.
You may also choose to add Canadian and US REITs plus US and foreign bonds for added diversification. I am a big fan of US Treasuries. Many feel that gold (and commodities) is a staple asset class. To see the magic of gold and US Treasuries check out The Permanent Portfolio.
Here’s a must read on protecting your portfolio from inflation.
I am also investing in bitcoin with a 5% weighting. We can think of bitcoin as digital gold.
*Please know all tax implications, withholding tax implications, currency risk and currency conversion charges and all fee considerations. Talk to your discount brokerage about the possibility of opening US dollar RSP (plus RIF, LIF, LIRA, TFSA and US dollar taxable accounts) you would then be able to separate your Canadian and US holdings. For more on US and International withholding taxes on dividends please have a read of this paper from Justin Bender of PWL Capital.
If you have any questions, please use the contact form.
Please note, these portfolios are not recommendations. Please ensure you understand your investments and the risks associated with stock and bond portfolios.
For greater diversification and risk management ideas please have a read of …
Here’s the updated returns for the core ETF portfolios.
Here’s my overview of the Balanced Portfolio With More Bonds.
The overview of the Balanced Portfolio With More Stocks.
Here’s my overview of The Balanced Growth Portfolio. The Sweet Spot.
Here’s my overview, Beat The Market With The Great Growth Portfolio.
Income and dividend portfolios.
Here’s my overview of The Greater Income Portfolio.
*Investors may also choose to also add BMO’s Canadian Banks and Canadian Utilities Covered Call ETFs.
These companies pay out generous (juicy) dividends while having increased their dividends over a 5-year period. The smart beta indices include dividend health screens.
*Investors may choose to add international dividend companies. iShares also offers a Global Quality Dividend Index ETF – XDG in Canadian dollars.
Canadian companies have increased their dividends for 5 years or more. US companies have increased their dividends for 25 years or more.
*Investors may choose to add International Dividend Payers.