Category: ETFs

What’s in my RESP portfolio?

RobH1 Comment

As summer shifts into fall, I’m reminded that it’s back-to-school time. Or “Dad, I need money for tuition” time. I still have kids attending higher education, still making withdrawals from the family RESP we set up shortly after the birth of son #1, almost 25 years (!) ago now. RESP investing is a bit different from retirement investing given the (hopefully) shorter timelines of RESP investing1. Here’s how I approach it.

In the early days of the RESP, the contributions were invested in mutual funds; these were dark days, long before the rise of very cheap ETFs. Mutual funds were the ONLY way to make routine contributions (which I made, monthly, without fail — Pay Yourself First and all that). I had an 80/20 mix of equities and bonds in the first 18 years or so of its existence: 4 funds, one for US Equity, one for Canadian equity, one for international equity and one for bonds. I don’t remember the specifics of which ones and what percentages exactly. But the fund kept growing, thanks to market returns as well as CESG grant money, which I took full advantage of2!

As son #1 came close to entering post-secondary studies, I shifted the portfolio to a 60/40 mix using individual ETFs like HXS for US Equities, HXT for Canadian Equities, HXDM for International Equities, and CBO for Bonds. The GlobalX funds didn’t throw off dividends3 and so I just had to deal with the periodic (monthly) distributions of CBO, which ultimately were set to DRIP4.

I made the decision to move to 60/40 over 80/20 to preserve a bit more of the capital in the event of some kind of market meltdown5. Growth gets curtailed somewhat as a result, but there’s less volatility.

But I finally realized that all of this was completely unnecessary thanks to all-in-one ETFs. So now, the RESP has exactly ONE holding — XBAL, an all-in-one from iShares that takes care of the 60/40 split for me. And this is set to DRIP as well, so every quarter the RESP picks up a few more XBAL shares.

You can see how XBAL has preformed over the past 15 years or so. I’m comparing it to the 80/20 XGRO ETF from the same family, one that features prominently in my ETF All-Stars page6:

In a future post, I’ll explain how I fairly divide the RESP among my two sons — in essence, I pretended that the RESP was a mutual fund, with each son receiving the same number of units on the day the first withdrawal was made. Withdrawals are henceforth made in units, not dollars, and the unit price fluctuates with the value of the RESP.

How are you managing your RESP? Let me know at comments@moneyengineer.ca.

  1. Less time to build wealth, shorter runway for decumulation ā†©ļøŽ
  2. As a certified cheapskate, it’s hard for me to resist free money of any kind. ā†©ļøŽ
  3. They are “corporate class” ETFs that use a clever structure to avoid paying out dividends; all growth is buried in the increase of the ETF’s price. I still hold some of these in my non-registered accounts. ā†©ļøŽ
  4. Dividend Reinvestment Plan. Instead of getting cash in the RESP account, the DRIP buys additional shares of whatever generated the dividend in the first place. ā†©ļøŽ
  5. One may ask why I chose to stick with 80/20 in retirement, which is against some conventional wisdom. I figured that the RESP decumulation phase would be over a much shorter time period (say 5-10 years) and so I would be less able to wait for a market bounce-back. In retirement, I’m hopeful that decumulation will take much, much longer, and so with 80/20 I have a better chance of outliving my savings. ā†©ļøŽ
  6. Chart is courtesy http://www.dividendchannel.com, featured on Tools I Use. When I rolled the comparison all the way back to 2007 the 60/40 XBAL actually OUTPERFORMED the (supposedly) more risky XGRO. Can’t explain that one. ā†©ļøŽ

Comparing asset-allocation ETFs: what’s the right allocation?

RobH1 Comment

I’ve talked about my approach to investing before, which is slavishly devoted to maintaining a constant asset allocation across all my accounts. And as I’ve mentioned, my current targets are:

  • 20% is Canadian Equity, 36% is US Equity, and 24% is International Equity, for a total of 80% equity overall
  • 15% bonds
  • 5% cash

My allocation targets were picked to align with XGRO1, which, over time, will make up more and more of my retirement portfolio2.

As I’ve written elsewhere, these are pretty broad categories and could be sub-divided further. I’ve not bothered with this myself, but I thought it would be an interesting exercise to survey what the major all-equity and high-growth funds have under the hood. And so, I present this comparison:

A few notes on the above:

  • Canadian Equity: Some use an all-cap index (TGRO, VGRO) while some use a capped composite index (ZGRO, XGRO).
  • US Equity: VGRO and XGRO use an all-cap index, TGRO sticks to large cap, and ZGRO holds large, mid and small cap indices. TGRO is a bit of an outlier because it doesn’t hold small cap..
  • International Equity: TGRO takes an all countries approach, whereas the other three split between developed and emerging markets. Net effect is pretty much the same thing.
  • Bonds: Here you find the greatest variation; VGRO is the only ETF to hold bonds outside of North America whereas TGRO holds only Canadian bonds. XGRO and ZGRO are pretty similar, with XGRO having a bit more Canadian bond exposure over ZGRO.

The most notable difference between my allocations and the average allocation of the big 4 funds is that I have more international exposure than other funds, and that’s because I’ve chosen to hitch my wagon to the iShares/XGRO family.

The reason? I started investing in the iShares family some time ago because it was the family that my old provider (QTrade) allowed me to trade without fees. With my current provider (Questrade), all of the families are free to trade, and hence my continued devotion to iShares/XGRO no longer holds that attraction — I could buy any of the all-in-ones. (Indeed, I’ve actually been adding some TD all-in-ones because their management fees are a bit lower).

But this exercise has given me food for thought; perhaps I have a bit too much bias to the international equity portion of the portfolio. But honestly, I can’t believe it makes that much of a difference, and churning my portfolio simply to reduce my international exposure a point or two seems unnecessary3.

  1. Why XGRO and not an all-in-one from another company? Read on. ā†©ļøŽ
  2. I’m slowly converting my main holding (AOA, which trades in USD) to XGRO on a quarterly basis so that I’m never over exposed to foreign exchange variations. I convert a percentage of these holdings annually, corresponding to the percentage at which I’m draining my RRIF. ā†©ļøŽ
  3. Running some numbers through https://www.dividendchannel.com/drip-returns-calculator/ demonstrates that XGRO is the bottom of the performance pile over the past 5 years or so as compared to TGRO, ZGRO and VGRO. The difference isn’t massive, and the window is short because these funds haven’t been around all that long, but it’s another data point to consider…p.s. the tool above doesn’t (yet?) understand the 3 for 1 reverse split ZGRO undertook in August, so best to end any simulation involving the BMO funds at August 1,2025. ā†©ļøŽ

What’s in my retirement portfolio (Aug 2025)

RobH1 Comment

This is a monthly look at what’s in my retirement portfolio. The original post is here. Last month’s is here.

Portfolio Construction

The retirement portfolio is spread across a bunch of accounts:

  • 7 RRIF accounts (3 for me, 3 for my spouse, 1 at an alternative provider as a test)
  • 2 TFSA accounts
  • 4 non-registered accounts, (1 for me, 1 for my spouse, 2 joint)

The target for the overall portfolio is unchanged:

  • 80% equity, spread across Canadian, US and global markets for maximum diversification
  • 15% Bond funds, from a variety of Canadian, US and global markets
  • 5% cash, held in savings-like ETFs.

You can read about my asset-allocation approach to investing over here.

The view post-payday

I pay myself monthly in retirement, so that’s a good trigger to update this post. At market close, August 22, this is what it looks like:

Retirement holdings by ETF, August 2025

The portfolio is dominated by my ETF all-stars; anything not on that page is held in a non-registered account and won’t be fiddled with unless it’s part of my monthly decumulation. Otherwise I’ll rack up capital gains for no real benefit.

The most noticeable change is a growth in the importance of ICSH to my portfolio at the expense of ZMMK. I did the math to justify performing a Norbert’s Gambit of the CAD generated by selling ZMMK and picking up ICSH. The amount of HXS remaining in the portfolio is dwindling, and may be gone altogether by next month. I choose which assets to sell out of my non-registered accounts by simply determining which asset category needs to be trimmed based on my multi-asset spreadsheet.

I also have a new way to track my AOA splits; since it rebalances itself twice annually, it seems to me wiser to fix its bond contribution at 20% in my multi-asset tracker. The equity splits between US, International, and Canadian are still dynamically calculated at least monthly using a properly weighted formula.

Plan for the next month

The asset-class split looks like this

It’s looking pretty close to the targets I have, which are unchanged:

  • 5% cash or cash-like holdings like ICSH and ZMMK
  • 15% bonds (almost all are buried in XGRO and AOA)
  • 20% Canadian equity (mostly based on ETFs that mirror the S&P/TSX 60)
  • 36% US equity (dominated by ETFs that mirror the S&P 500, with a small sprinkling of Russell 2000)
  • 24% International equity (mostly, but not exclusively, developed markets)

I don’t really see a need to make changes based on what I see here. Cash flowing in to the account (bonus payments, regular TFSA contributions) will be re-invested in one of XEQT or XGRO1, typically2.

Overall

The retirement savings had a great month. Overall, I’m ahead of where I started even though I’ve been drawing a monthly salary since the beginning of the year. This is aligned with what my retirement planner told me to expect, but as you can see, the journey has had some interesting ups and downs already.

Monthly retirement savings, as percentage of Jan 2025 value

My VPW-calculated salary has hit a new high this year, 2.41% higher than my first draw in January3. This is also expected, since it tracks the value of the retirement portfolio, albeit in a much more controlled way. The VPW “cash cushion” smooths out the ups and downs of the monthly returns. I suppose I really should see an increase in my salary on par with inflation so that I maintain my spending power. I’ll have to think about how to track that4.

Monthly salary, as percentage of Jan 2025 salary
  1. I have purchased some TEQT lately since it has a lower MER. I covered TD’s family of all-in-ones here. ā†©ļøŽ
  2. Since my target is 15% bonds, and XGRO is 20% bonds, I have to offset some of the XGRO purchases with 100% equity purchases. ā†©ļøŽ
  3. Not a bad raise. ā†©ļøŽ
  4. Looks like https://www.statcan.gc.ca/en/subjects-start/prices_and_price_indexes/consumer_price_indexes is a good place to start. ā†©ļøŽ

The Cost of Asset Allocation ETFs

RobH3 Comments

Readers will know that I’m a fan of the asset-allocation ETF. In fact, the vast majority of my retirement savings are dedicated to them. (New to the concept of asset allocation ETFs? Here’s an intro.)

Owning asset-allocation ETFs means you can quite literally invest and forget. The target asset allocations are maintained automatically for you, eliminating the all-too-common desire to tinker/experiment/play and mess with your returns in the process.

As with all things investing, there’s no such thing as a free lunch. This automatic asset re-allocation is reflected in the MER1 of the asset-allocation ETFs. So what’s this automatic management actually costing the holder of the all-in-one?

To work out the answer to that question, you have to look at how the asset-allocation ETF in question is built. Some people refer to asset allocation ETFs as “funds of funds” and this is actually quite an apt description, since most asset-allocation ETFs are just constructed by buying up index ETFs issued by the same company.

For example, iShares and TD each have an all-equity asset allocation ETF, named XEQT and TEQT2, respectively. Here’s what’s actually under the hood of each of them:

(I tried to keep the colours consistent between the two: red is Canadian equity, blue is US Equity, and other colours are international equity).

The thing about the MER of an all-in-one is that it already includes the MERs of the funds from which it is built. The tip-off is phrases like this one in iShares’ literature:


…MER includes all management fees and GST/HST paid by the fund for the period, and includes the fundā€™s proportionate share of the MER, if any, of any underlying fund in which the fund has invested…

https://www.blackrock.com/ca/investors/en/literature/product-brief/core-etf-portfolios-product-brief.pdf3

What this means is you can work out what the MER would be if you decided to simply manage the underlying funds yourself, and in so doing, figure out the premium that the all-in-one is adding to the mix.

I did this exercise, and here’s what I found:

XEQTTEQT
MER of component parts40.103%0.089%
All-in-one MER50.20%0.17%
MER premium for all-in-one60.097%0.081%
Annual premium cost per $1000 invested7$0.97$0.81

I offer a few takeaways from this analysis:

  • The MER costs I’m talking about here are lower than a factor of 10 (at least) that what’s charged by typical investment advisors and bank-backed mutual funds
  • The cost premium of the all-in-one is small, but it’s higher than I expected; even small percentage differences are greatly amplified when you work out (say) the 10 year cost of using these products.

The alternative of managing the constituent parts can be a cheapskate alternative and can save real money over time8, but one must beware of

  • The added complexity inherent in managing a portfolio of multiple ETFs. The XEQT/TEQT example is the simplest one; if you add bonds to the mix (e.g. XBAL/TBAL) you will need to add a few more ETFs to replicate the all-in-one. I used to manage my portfolio without using all-in-ones. I enjoyed it (you may have noticed I have a deep interest in investing). In retirement I have chosen to be practical and have attempted to create an environment that won’t be cognitively overwhelming as I get older.9
  • The greater likelihood of straying from the plan due to inaction or emotion kicking in. I myself didn’t put a lot of credence to this argument, but people smarter than me have pointed out that this is probably the one biggest factor that derails investment plans.
  1. The MER (Management Expense Ratio) is the cost of operating the ETF, expressed as a percentage. You don’t directly pay MER fees, but they reduce the overall returns of your investments. Lower MERs = more money for you. ā†©ļøŽ
  2. No points for originality here ā†©ļøŽ
  3. In teeny tiny letters at the bottom of page 1 ā†©ļøŽ
  4. Weighted MER of each of the component ETFs. ā†©ļøŽ
  5. You can find these on the ETF pages for XEQT and TEQT ā†©ļøŽ
  6. Subtract 2 previous rows ā†©ļøŽ
  7. Just multiply. Watch those decimal points, though. ā†©ļøŽ
  8. I’m ignoring trading costs which aren’t zero but ought to be very small. Rebalancing assets is necessary of course but is perhaps a monthly, quarterly or annual exercise. ā†©ļøŽ
  9. And even a portfolio just based on all-in-ones may prove to be too much to handle at some point. I’ve started to pay a bit more attention to the services offered by robo-advisors. ā†©ļøŽ

Passiv guide to investing

RobHLeave a comment

Passiv is a tool I was introduced to via my online broker of choice, Questrade1. As I mentioned elsewhere, Passiv’s main mission is offer an alternative to all-in-one ETF funds by automating trades to make sure your individual holdings support your overall target.

Anyway, Passiv is a nice add-on for me because it’s a way better way for me to see accounts for which my spouse has given me trading authority (it’s a real weakness of the Questrade platform). On one screen, I can see all the accounts in the retirement portfolio.

Anyway, since I use Passiv, I get the occasional email from them. Recently, they posted a blog called The Beginner’s Guide to Passive Investing which I think is a pretty good summary of my own approach to investing; it’s a pretty good article to share with a new investor, too. There’s lots we agree on:

  • Saving is different from investing (my view here)
  • Passive investing is the way to go (I own no individual stocks in my retirement portfolio)
  • You don’t need an advisor. We disagree on why. For me, it’s because there’s all-in-one ETFs. For Passiv, it’s because there’s Passiv šŸ˜‰
  • Invest consistently, and without thinking. Pay yourself first.

They end the blog with a section called How Do I Start Investing?, which has a lot in common with an article I wrote called Ok, Iā€™m ready to fire my advisor. What do I need to do? Let’s take a look at what I agree with and what I disagree with in that part of the article.

Open a Brokerage Account

Passiv seems to think there’s only two brokers out there, namely Wealthsimple and Questrade2. Given that the Passiv platform supports direct connections to these two brokers, this is somewhat understandable. But make no mistake, there’s plenty of other options out there. And what’s right for your neighbour may not be right for you. What broker to use will depend on a bunch of factors, and I talked about some of them here.

Set up Your Accounts

Yup, that’s something you need to do. I broke it down in some detail over here, since I switched brokers earlier this year. Since the target audience is new investors, non-registered accounts don’t get a mention here, but for many long-term investors, a non-registered account ends up being part of the mix. And RRIFs, of course.

Choose Your Investments

Passiv doesn’t have any use for all-in-ones (aka asset allocation ETFs) since that’s kinda core to what they offer. So while their recommendations are sound if you want to buy into the five funds they recommend3, it’s more complicated than it needs to be. For me, it’s a two-step process

Set up Passiv

It’s of course a bit self-serving, but a tool like Passiv is quite useful to track your allocations if you choose not to use an all-in-one. Or you can use a spreadsheet like I do.

Fund Your Account

If you’re transferring from some other financial services provider expect a lot of form filling. I documented some of the issues with transfers in a general sense here and specific to the RRIF holder here.

Buy Your Investments

No argument here; if you don’t actually invest, your money is just sitting idle. If you buy an all-in-one ETF, that’s one trade per account.

Automate and Chill

Yes, Passiv can in fact do trades on your behalf. (That’s an upcharge, though). A Passiv-run portfolio is possible4. All-in-one ETFs are also automated, since part of what they do is periodically rebalance their holdings automatically. In retirement, automation seems difficult. There’s a lot of steps to get paid.

In conclusion

Passiv’s blog is an excellent primer on how to get started; feel free to share it with your kids, colleagues and relatives. Just be aware that it promotes the Passiv approach which, if followed to its logical conclusion, requires a subscription to Passiv Elite — worth it, if that’s the direction you prefer.

  1. Like most online brokers, Questrade is good at some things, not so good at others. You can read my review here. ā†©ļøŽ
  2. They are both fine providers; I have accounts at both. And QTrade too, but that should be done by the end of 2025. Anyway, buying and holding ETFs is offered by all Canadian brokers. No need to limit yourself to just these two. ā†©ļøŽ
  3. Three equity ETFs for the Canadian (VCN), US (VFV), and International markets (VDU) and two bond ETFs covering the Canadian (VAB) and US (AGG) markets. Before I retired, I had a similar approach, but chose different ETFs. In retirement, I chose to simplify. ā†©ļøŽ
  4. Be mindful that trades executed in non-registered accounts generally have tax implications. ā†©ļøŽ