Tag: finance

ZGRO versus ZGRO.T: what’s the difference?

RobH2 Comments

ZGRO and ZGRO.T are both asset allocation funds (aka all-in-ones1) offered by BMO. They hold the same assets, and they both generate the same (dividends-reinvested) returns. But ZGRO.T says it has a yield of 5.65% whereas ZGRO has a yield of 1.73%2. How is this possible? Full disclosure: I don’t own either of these funds because I have historically invested in a very similar-to-ZGRO product, XGRO, instead3.

Let’s start with a really high level look at these funds4.

ZGRO vs ZGRO.T, Overview Tab (source bmogam.com)

The first thing I’ll point out is one of caution: ZGRO and ZGRO.T have very similar tickers and it’s all-too-easy to mix them up. The fund names are also very similar, although ZGRO.T adds the words “Fixed Percentage Distribution Units” to the mix. That’s a clue. The other things we can learn from this first glance is that ZGRO.T is pretty new (Inception Date), is about 1/20th the size of ZGRO in terms of investments (Net Assets), has an identical MER to ZGRO, but whoa, that distribution yield is off the charts. Put simply, if you had $1000 in ZGRO, and $1000 in ZGRO.T, and the last distribution paid was assumed to be constant5, you’d get $11.73 from ZGRO and $56.50 from ZGRO.T over the next twelve months. Huh?

This is even more puzzling if one takes a look at what each of the two ETFs hold: it’s identical:

ETF HeldZGRO %6ZGRO.T %
ZSP – S&P 50037.037.0
ZCN – TSX Capped20.420.4
ZAG – CAD Bond13.813.8
ZEA – MSCI EAFE13.413.4
ZEM – MSCI Emerg6.76.7
ZUAG – US Bond5.85.8
ZMID – US Mid Cap2.02.0
ZSML – US Small Cap1.01.0
Cash00

Comparing top holdings, ZGRO versus ZGRO.T. Can you see a difference? I can’t see a difference.

I spent quite a bit of time searching on the BMO website trying to get their take on the difference. In a lot of places, (e.g. the simplified prospectus7), the two funds are treated as the same. After nearly giving up, I did come across this document which has a teeny tiny footnote, which I reproduce here:

These units are Fixed Percentage Distribution Units that provide a fixed monthly distribution based on an annual distribution rate. Distributions may be comprised of net income, net realized capital gains and/or a return of capital. The monthly amount is determined by applying the annual distribution rate to the T Series Fund’s unit price at the end of the previous calendar year, arriving at an annual amount per unit for the coming year. This annual amount is then divided into 12 equal distributions, which are paid each month.

BMO Asset Allocation ETFs Whitepaper

So the big difference as I see is is that ZGRO.T attempts to give a stable yield in 12 month chunks. It does this by

  1. Giving you dividends from the underlying assets (so does ZGRO)
  2. Selling underlying assets (and generating a capital gain)
  3. Giving you back your own money (this is known as as return of capital)

Let’s take a look at the two from a tax perspective (note that this only matters if you were to hold these funds in a non-registered account):

ZGRO vs ZGRO.T 2024 Distribution Tax Tab (source bmogam.com)

And here the distinction between the two becomes clearer: ZGRO.T is making good use of Return of Capital (RoC) to distribute a dividend with limited near-term tax implications. But as always, there’s no free lunch — using RoC means that future capital gains will be higher since RoC reduces the ACB8 of the funds in question, and if your ACB drops to zero, you have to treat RoC as a capital gain.

So when might you consider using ZGRO.T instead of ZGRO?

ZGRO.T makes sense in a RRIF account. It’s essentially automating some of the steps I have to take every month to get paid (you can see the mechanism I use here). Every month, I have to sell some of my holdings in order to get the RRIF-minimum payment out.

In a non-registered account, ZGRO.T’s monthly distributions might be useful if you had the need for consistent monthly cash flow; in addition, if you expect to at some point be in a lower tax bracket, it might help you save future tax, since it’s deferring some gains by using Return of Capital. In my case, I don’t see a good reason to use it since I would have to sell existing assets in order to raise funds to buy it, which generates capital gains.

So, in summary, the two funds are the same from a total return perspective, with ZGRO.T more monthly cash and ZGRO providing more paper gains. In a RRIF account, ZGRO.T automates some of the manual selling needed to execute decumulation. In a non-registered account, the tax treatment of the two is different, and you’d have to work out the numbers to see if it’s a benefit or not.

  1. If you want to read about all-in-ones, https://moneyengineer.ca/2025/01/21/why-you-can-fire-your-advisor-asset-allocation-etfs/ is a good place to start. ↩︎
  2. This yield is calculated by dividing the most recent per share distribution by the share price and multiplying by 12. In essence, this number is the value of the most recent (monthly in the case of ZGRO.T, quarterly in the case of ZGRO) dividend payout extrapolated over the full year. It may or may not represent what kind of yield you get in the future. ↩︎
  3. Why? Inertia. There are minor differences in the makeup of XGRO versus ZGRO but either is a fine choice for the lazy investor. ↩︎
  4. All the tables here are right off BMO’s ETF selector, which is excellent, by the way. ↩︎
  5. ZGRO is currently paying 7.3 cents per share every quarter and this has been stable since 2020. ZGRO.T is currently paying 6 cents per unit held every month and this has been stable since March 2025. ↩︎
  6. As of September 18, 2025 ↩︎
  7. which weighs in at ~450 pages. I’d hate to see the non-simplified prospectus. ↩︎
  8. Adjusted Cost Base. The average per unit price you pay for a share, necessary to track in order to accurately calculate capital gains (or losses). I use adjustedcostbase.ca for this, found in Tools I Use ↩︎

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 ↩︎
  2. As a certified cheapskate, it’s hard for me to resist free money of any kind. ↩︎
  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. ↩︎
  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. ↩︎
  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. ↩︎
  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. ↩︎

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. ↩︎
  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. ↩︎
  3. Not a bad raise. ↩︎
  4. Looks like https://www.statcan.gc.ca/en/subjects-start/prices_and_price_indexes/consumer_price_indexes is a good place to start. ↩︎

What’s in my retirement portfolio (July 2025)

RobH4 Comments

This is a (hopefully 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 as of this morning

As of this morning, this is what the overall portfolio looks like:

Retirement holdings by ETF, July 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.

There weren’t big changes this month. My monthly decumulation from my RRIF accounts involves selling enough XGRO to meet RRIF-minimum payments, and the rest of my retirement paycheque is funded by my non-registered accounts. This month, given the run in the US stock market of late, that involved a sale of some shares of HXS1.

Plan for the next month

The asset-class split looks like this

The bond portion of the portfolio is a little smaller than I would like. The targets for my portfolio 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)

The change in the bond portion of the portfolio was amplified because I hadn’t updated the asset split of AOA in my multi-asset tracker in a while. AOA has drifted quite a bit since it only rebalances twice a year (next time in October). More on drifting in multi-asset ETFs here.

Overall

The retirement savings look quite healthy; even though I’ve been drawing a monthly salary for 7 months, I’m now ahead of where I was when I started my retirement journey. 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, a dizzying 0.77% higher than my first draw in January. This stability is thanks to the built-in shock-absorber of the VPW model (a 6-month cash cushion which smooths out the market gyrations considerably). I also think it’s an endorsement of my choice to take retirement payments monthly; my exposure to short-term market hiccups is greatly reduced since I’m not making big sales of ETFs to fund a year of spending all at once.

Monthly salary, as percentage of Jan 2025 salary
  1. Which particular ETF I sell from my non-registered portfolio is based on what asset class is the most overweight at that point in time. If it’s US Equity, then I sell US Equity. If it’s Canadian Equity, then I sell Canadian Equity. ↩︎

What’s in my retirement portfolio (June 2025)

RobH4 Comments

This is a (hopefully1 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 accounts2:

  • 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 as of this morning

As of this morning, this is what the overall portfolio looks like:

Retirement holdings by ETF, June 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 biggest changes over the last 30 days was due to a small rebalancing exercise I executed. I sold off some AOA in order to pick up more ICSH. The stock market has been roaring lately, and it caused my target allocations to become a bit cash-poor; ICSH is not, strictly speaking, “cash”, but for my purposes, it’s close enough. (You can read about my cash thoughts here). I could have instead sold XGRO to pick up more ZMMK, but US interest rates are a lot better than Canadian ones at the moment, so I figured I’d enjoy the extra few percentage points of return on my cash holdings.

Plan for the next month

The asset-class split looks like this

This looks to be pretty close to my target percentages which haven’t changed:

  • 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)

The pie is looking almost perfect at the moment. I don’t see any near-term need for fiddling with what’s there.

Overall

The retirement savings look quite healthy; even though I’ve been drawing a monthly salary for 6 months, I’m now ahead of where I was3 when I started my retirement journey. 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 aready.

Monthly retirement savings, as percentage of Jan 2025 value

My VPW-calculated salary has gone back to more or less where I started at the beginning of the year. And even with the crazy market swings we’ve seen, it’s stayed remarkably stable4. That’s thanks to the built-in shock-absorber of the VPW model (a 6-month cash cushion which smooths out the market gyrations considerably). I also think it’s an endorsement of my choice to take retirement payments monthly; my exposure to short-term market hiccups is greatly reduced since I’m not making big sales of ETFs to fund a year of spending all at once.

Monthly salary, as percentage of Jan 2025 salary

  1. I know it’s July 7, but the numbers are accurate for June, more or less. ↩︎
  2. I treat retirement savings as firewalled from my day to day chequing account. ↩︎
  3. Just barely, but I’ll take it ↩︎
  4. I changed the vertical axis of this chart to align with the other chart; it makes its stability much clearer. ↩︎