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How to allocate all my $100k in savings for 2020?
Old 12-25-2019, 12:29 PM   #1
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How to allocate all my $100k in savings for 2020?

Hi all,
I hope to get some feedback on how to get to my retirement number:
I have around $100k combined, saved in a registered retirement savings account and tax free savings account (RRSP and TFSA in Canada). I kept the $100k in savings for the time being but the earnings as you have guessed, were low.
Now moving forward, I opened a direct brokerage account and I plan a DIY approach to investing. I was reading about buying and holding index funds and I looked up Vanguard Canada ETFís. I was thinking to pull the trigger but not sure about allocations or overall strategy.
The goal is to have a retirement portfolio of about $900-1M in 15-16 years, when I plan to retire.
I plan to contribute $30k/year for 15 years and I was counting on an interest rate of 6% (as per online compounding calculators).
Thank you for all the suggestions.
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Old 12-25-2019, 12:39 PM   #2
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Welcome OP.
How long did you keep the 100K in savings and why ?

I ask, because perhaps you are risk adverse, and now that the market has finally reached a high point after 10 years, many risk adverse people will jump in (Buy HIGH). Only to see the market drop some percentage, at which point they will sell to be safe (Sell LOW).
And repeat again in a few years..

So what is your risk tolerance ?
What did you do in 2008 ?

Within your RRSP I would certainly look at putting some (1/3) in XIU.TO
https://ycharts.com/companies/XIU.TO

Please stay away from the high MER costs so common in Canada as they will eat your profits relentlessly.
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Old 12-25-2019, 12:56 PM   #3
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Welcome OP.
How long did you keep the 100K in savings and why ?

I ask, because perhaps you are risk adverse, and now that the market has finally reached a high point after 10 years, many risk adverse people will jump in (Buy HIGH). Only to see the market drop some percentage, at which point they will sell to be safe (Sell LOW).
And repeat again in a few years..

So what is your risk tolerance ?
What did you do in 2008 ?

Within your RRSP I would certainly look at putting some (1/3) in XIU.TO
https://ycharts.com/companies/XIU.TO

Please stay away from the high MER costs so common in Canada as they will eat your profits relentlessly.
Many thanks for your reply.

I wasn't in the market in 2008 but I was reading about it. If another 2008 would come next year I would probably stay put if i have confirmation that my allocation is right. I have 15 years for the market to go back up.
Between these Vanguard Canada products which ones are to buy and hold in the RRSP/TFSA?
https://www.vanguardcanada.ca/indivi...entStyle=index
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Old 12-25-2019, 03:16 PM   #4
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To make it even more difficult for you, see this article:

The Top 4 Portfolios to Recession-Proof Your Investments

Quote:
Something must be in the financial water lately, as even the most bullish investors have started publicly expressing worry about the stock market finally reaching an unsustainable climax after more than a decade of record growth. With increased stock volatility, inverted yield curves, and global trade worries all making news, the economic tension is palpable to the point that the dreaded R-word is starting to get some significant buzz.

Are we headed for a recession?
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Old 12-26-2019, 12:28 AM   #5
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OP - One consideration before even deciding on funds is to pick where you will have the RRSP/TFSA reside.
Certainly you want the lowest cost that has ability to buy the funds you are interested in. So low/zero account fees, and low trading fees.

As for that nice list you provided, at first I was all exciting thinking Vanguard had opened a Canada office, but not yet

My needs are totally different from yours, so as part of my Canadian investments, I have VCN and XIU as the stocks component, as they both have low fees and are broad for Canada. I already have exposure to the US market.

In your shoes, I would consider having some exposure to foreign and US funds but not currency hedged ones as (my belief) the CDN dollar will rise compared to the US dollar and hedging removes that and is a small drag on earnings (as it cost money to hedge).
The reason is because the CDN stock market is a small percentage of the world stock market.
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Old 12-26-2019, 06:16 AM   #6
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You need to decide what asset allocation your comfortable with first, are you 80:20, 20:80 or somewhere in between? Then you populate with funds or ETFs to fill in your asset classes, low ER index funds are popular here.

https://www.bogleheads.org/wiki/Asset_allocation

Or you choose an all-in-one fund if you’re not interested in picking investments, rebalancing, etc.

https://www.vanguardcanada.ca/indivi...fs.htm?lang=en

Whatever you do, don’t let some random strangers online recommend your investments. What’s good for one may be horrible for another just based on risk tolerance, let alone other factors.
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Old 12-26-2019, 07:47 AM   #7
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Quote:
Originally Posted by Midpack View Post
You need to decide what asset allocation your comfortable with first, are you 80:20, 20:80 or somewhere in between? Then you populate with funds or ETFs to fill in your asset classes, low ER index funds are popular here.

https://www.bogleheads.org/wiki/Asset_allocation

Or you choose and all-in-one fund if youíre not interested in picking investments, rebalancing, etc.

https://www.vanguardcanada.ca/indivi...fs.htm?lang=en
+1 Good info here, take your time and do some reading to get comfortable with your investing decisions first.
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Old 12-26-2019, 12:20 PM   #8
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Quote:
Originally Posted by Midpack View Post
You need to decide what asset allocation your comfortable with first, are you 80:20, 20:80 or somewhere in between? Then you populate with funds or ETFs to fill in your asset classes, low ER index funds are popular here.

https://www.bogleheads.org/wiki/Asset_allocation

Or you choose an all-in-one fund if youíre not interested in picking investments, rebalancing, etc.

https://www.vanguardcanada.ca/indivi...fs.htm?lang=en

Whatever you do, donít let some random strangers online recommend your investments. Whatís good for one may be horrible for another just based on risk tolerance, let alone other factors.
Right now, I'm learning about picking investments and rebalancing. From my readings, I was thinking of an allocation of 80% stocks and 20% bonds. Then the VGRO, all in one Vanguard fund caught my attention. It says 80% equity and 20% fixed income. Is this the right 80/20 that I'm looking for?
If Vanguard does the stock picking and rebalancing for me, does this mean that, in a practical fashion, I can have only one fund in my RRSP/TFSA and put all my $100K in it?
Has anybody done it?
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Old 12-26-2019, 02:03 PM   #9
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Quote:
Originally Posted by Legodad View Post
Right now, I'm learning about picking investments and rebalancing. From my readings, I was thinking of an allocation of 80% stocks and 20% bonds. Then the VGRO, all in one Vanguard fund caught my attention. It says 80% equity and 20% fixed income. Is this the right 80/20 that I'm looking for?
If Vanguard does the stock picking and rebalancing for me, does this mean that, in a practical fashion, I can have only one fund in my RRSP/TFSA and put all my $100K in it?
Has anybody done it?
With all due respect, honestly, I think you’d be well served by a little self study. I sure wouldn’t invest $10,000, much less $100,000 or more, without fully understanding exactly what I was buying.

I assume you looked at VRGO online, it’s all explained there. https://www.vanguardcanada.ca/indivi...nced/?overview

Yes it’s 80:20 and Vanguard chooses the mutual funds that make up the allocation, there’s no “stock picking” per se, that’s all done at each mutual fund or ETF level. They do the rebalancing for you. You can hold any amount you want as long as it meets their minimum investment, whether it’s the entire $100,000 or some part of it. You just watch the returns and pay taxes on the dividends/STCG (or whatever Canada’s tax structure requires) annually.

How did you pick 80:20? I don’t need to know, but you certainly do.
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Old 12-26-2019, 02:20 PM   #10
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With all due respect, honestly, I think youíd be well served by a little self study. I sure wouldnít invest $10,000, much less $100,000 or more, without fully understanding exactly what I was buying.

I assume you looked at VRGO online, itís all explained there. https://www.vanguardcanada.ca/indivi...nced/?overview

Yes itís 80:20 and Vanguard chooses the mutual funds that make up the allocation, thereís no ďstock pickingĒ per se, thatís all done at each mutual fund or ETF level. They do the rebalancing for you. You can hold any amount you want as long as it meets their minimum investment, whether itís the entire $100,000 or some part of it. You just watch the returns and pay taxes on the dividends/STCG (or whatever Canadaís tax structure requires) annually.

How did you pick 80:20? I donít need to know, but you certainly do.
I'm doing the self study thing but I also want to bounce ideas of of the online community. If I'm completely off with my strategy, I don't mind being warned..
So far, I've been conservative with my investments (savings accounts). But no pain, no gain.
Since I have a 15 years window opportunity to grow the money, I thought that an 80:20 allocation will help with that.
All $100k are in tax deferred accounts so they can grow tax free.
Thanks for your post.
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Old 12-26-2019, 05:00 PM   #11
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I'm not fond of advising folks with so little background data.
15 yrs is a relatively* long time, I'd suspect once you start you'll probably continue investing till your accounts POD/TOD happens, Or not.

I suggest in addition to this sites assistance that this CANADIAN link helps! https://www.financialwisdomforum.

15 yrs could be considered LT/ST, if after 15yrs you're considering exiting all markets for fixed income/CDs (gov.insured, issuer risk-less, fixed interest, & non-callable).

Your own financial education is paramount, as I'm sure all agree upon.
I'm sure that site I linked above recommends some quality reading options.
Best wishes & Good Luck!
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Old 12-26-2019, 05:10 PM   #12
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Quote:
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I'm not fond of advising folks with so little background data.
15 yrs is a relatively long time, I'd suspect once you start you'll probabaly continue investing till POD/TOD happens.

I hope in addition to this sites assistance that this CANADIAN link helps! https://www.financialwisdomforum.org
Best wishes....
Funny, I was thinking 15 years is a short time. ... I do think OP's thinking that OP can retire in 15 yrs of investing is somewhat wishful, but if OP does not invest, OP will work until death.
Canada Pension Plan pays about 1/2 of what SS pays.

I expect a recession or even two in the next 15 years, but I could be totally wrong as I expected a big drop in the market since 2013.
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Old 12-26-2019, 05:10 PM   #13
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Quote:
Originally Posted by Legodad View Post
I'm doing the self study thing but I also want to bounce ideas of of the online community. If I'm completely off with my strategy, I don't mind being warned..
So far, I've been conservative with my investments (savings accounts). But no pain, no gain.
Since I have a 15 years window opportunity to grow the money, I thought that an 80:20 allocation will help with that.
All $100k are in tax deferred accounts so they can grow tax free.
Thanks for your post.
Since the 100K is in tax-deferred accounts, do you have unlimited ETF/Fund choices? IOW, is VGRO (as an example) even available in these tax-deferred accounts?
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Old 12-26-2019, 10:48 PM   #14
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Since the 100K is in tax-deferred accounts, do you have unlimited ETF/Fund choices? IOW, is VGRO (as an example) even available in these tax-deferred accounts?
yes, VGRO is available in the tax deferred accounts
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Old 12-28-2019, 01:21 PM   #15
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Funny, I was thinking 15 years is a short time. ... I do think OP's thinking that OP can retire in 15 yrs of investing is somewhat wishful, but if OP does not invest, OP will work until death.
Canada Pension Plan pays about 1/2 of what SS pays.

I expect a recession or even two in the next 15 years, but I could be totally wrong as I expected a big drop in the market since 2013.
I was expecting a recession and a long drop in the market as well. That's why I kept the funds in savings, with a low interest rate. The recession did not come.
and I'm tired to wait for it

Any other suggestions on where to invest the $100k for 15 years?
I can just invest half of that amount if that makes more sense and keep the rest in savings, like I did so far.
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Old 12-28-2019, 02:54 PM   #16
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Any other suggestions on where to invest the $100k for 15 years?
There are literally dozens of alternate ways of investing... antiques, race horses, yourself (start a business), to name only a few. I can, however, think of none that would take less research than for what you are considering. Your choices, for all practical purposes, are limitless.
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Old 01-04-2020, 10:43 AM   #17
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I was excited to see Vanguard enter Canada. I took a peek at their offerings with friends in mind. Their VBAL ETF (60/40) looked very interesting as they could show something like a track record (5.5% 'since inception'--a year or two?) And a 0.22% management fee. I won't touch a fund with no track record, BTW. No 'concept' funds for me.

If those numbers hold, you have a chance of meeting your goal. If my Vanguard funds (also about 60/40 overall) do that well over the next 15 years, I will be happy. I am speculating that the numbers will be better than that, but not betting on it.

It looks like you have a good start, but as everyone else has said, you have to educate yourself and make your own decision. My advice is worth what it costs: nothing.

If it were me, I would select one diversified fund where I would be happy with the asset allocation, commit the entire $100k and contribute the max every year, and never look at the balance for 15 years. I didn't do that myself, but I would be better off if I had. ''We grow too soon old and too late smart." (Old Dutch saying.)

Canada is an extractive economy and oil is in the toilet right now. It won't be forever, especially if you guys get your pipeline bottleneck fixed (eventually). So, I expect the Canadian peso to do better in the long run. All good for you.
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