***updated this post to reflect the fact that XEQT has dropped XUS from its portfolio as of July 2, 2025***
This post is inspired by my original on the topic, “What’s the deal with XGRO“? XGRO is great, but since my target asset allocation is only 15% bonds, and XGRO’s bond target is 20%, there’s some tweaking I have to do in order to reduce the bond exposure. That tweak is increasingly being provided by XEQT, part of the same iShares family that produced XGRO.
(As mentioned elsewhere, I rely heavily on all-in-one ETFs in my retirement portolio. New to all-in-ones? Read a bit about them here.)
XEQT, like XGRO, is actually investing in thousands1 of different stocks. Unlike XGRO, it does not hold any bonds at all. I thought it would be interesting to see what, exactly, is underneath every $100 you invest in XEQT. See the results below:
The top stock holding outside North America belongs to Taiwan Semiconductor, at 46 cents for every $100 invested. Additionally, the geographic exposure looks like this:
Geographic exposure of XEQT as of July 25, 2025
One other little tidbit that might be interesting: the distribution yield of XEQT is 2.94% compared with 2.91% for XGRO. This I find a bit surprising, since I would have expected XGRO’s yield to be quite a bit better.
And, if you’re really paying attention, you’ll see that the dollar amounts of this column add up to roughly $80, in keeping with the 80/20 philosophy of XGRO. ↩︎
i lump these together because they hold exactly the same thing. Some loophole that iShares needs to exploit, I gather. ↩︎
On the date I pulled these numbers, cash cracked the top 10 for a holding of $1.34, which is not usual, so I just dropped it. Not sure why that is…perhaps by the end of the month it will resolve itself. ↩︎
There’s really no avoiding paying taxes, even in retirement. You probably have to do some budgeting to make sure you aren’t being caught unaware, though.
My retirement today is funded from a combination of my spouse’s part-time salary, my/my spouse’s RRIF, selling off assets from my non-registered account, and interest/dividend income from non-registered accounts.
The big difference, as I’m slowly becoming aware, is that aside from my spouse’s paycheque (which has the usual tax deductions / CPP contributions / EI contributions), there is nothing being set aside to pay my tax bill come April 2026. So it goes without saying that I had better make sure there’s a nugget somewhere that I set aside for the upcoming tax bill.
The Basic Canadian Income Tax Calculator, from TaxTips.ca
The basic tool, as implied, is pretty basic. It doesn’t include any sorts of deductions aside from the basic personal deduction and dividend tax credits. There’s an advanced calculator that has a bunch more inputs, but for the purposes of this article, the basic tool is good enough.
For the purposes of this tool, your income is in 4 buckets:
Other income: This is how 100% of RRIF payments are treated, as well as interest from non-registered assets (e.g. interest from a GIC, bank account, HISA, some ETFs)
Capital gains: This is only applicable to non-registered accounts. Note that many ETFs actually generate capital gains and a corresponding T3/T5 slip even if you don’t touch the fund at all2. Larger capital gains are typically generated when you sell an ETF that you’ve held for a while, which includes everything I hold in my non-registered accounts.
Canadian eligible dividends: This includes dividends paid by all public companies in Canada.
Canadian non-eligible dividends: I don’t have any of those, but if you own shares in a private corporation, you might.
Since my 2025 strategy is to simply collect RRIF minimum payments, I already know what that dollar amount is. I also execute non-registered asset sales monthly to fund my retirement, as I mentioned here. This generates capital gains every month; the exact amount this will sum up to in 2025 is unknowable in advance since it depends on factors like:
what specific asset I choose to sell
the price of the asset at the time I choose to sell
how many shares of the asset I sell at that price
I do track a metric I call “capital gain dollars per dollar of asset sold3” so I can compare the capital gain impact of generating (say) $1000 cash for every asset I own in my non-registered account. So I have a bit of control over the capital gain metric for a given year, but not a lot. My spouse also has non-registered assets in her name, but since she’s earning a salary, I’ll let that be for now.
Some examples might help illustrate the different tax impacts of different withdrawal strategies.
Let’s consider 4 examples, all of which give you 100k gross salary, before taxes:
The “RRIF and interest only” strategy: All income for the year is generated by either RRIF payments or interest payments from non-registered accounts.
The “non-registered asset sale only” strategy: All income for the year is generated by selling assets in non-registered accounts that create 70 cents of capital gain for every dollar of income thus generated4.
The “Dividends only” strategy: All income for the year is in the form of dividends. You’d need a pretty large portfolio to generate 100k of dividend income, just sayin’.
The “Blended Approach” strategy: Income comes from a mix of RRIF payments, non-registered asset sales, and dividends. You could play with the percentages yourself; this is an excellent way to see how different liquidation strategies generate (in some cases) very different tax bills.
The table below uses the basic tax calculator to generate the tax bill of the different payment strategies.
Withdrawal strategy
RRIF + Interest income
Income from asset sales
Actual Capital Gain
Dividends
Total Gross Income
Total Tax Bill (ON)
Avg Tax Rate
RRIF and Interest only
100k
0
0
0
100k
21.4k
21.4%
Non Registered asset sales only
0
100k
70k
0
100k
3.9k
5.6%
Dividends only
0
0
100k
100k
3.3k
3.3%
A blended approach
50k
25k
17.5k
25k
100k
10.6k
11.5%
Fair warning: don’t try to use this table to estimate your own situation. I chose 100k to keep the math easy, but since Canadian tax brackets have different tax rates, the overall gross salary chosen makes a huge difference in the tax bill — enter the numbers yourself!
My retirement planner advised me to target an average tax rate of no more than 15%, and besides the “RRIF and interest only” approach, all of the withdrawal strategies in the table accomplish that. The other takeaway is that on an income of $100k, all of the approaches generate a tax bill in excess of $3k — which happens to be the magic number CRA uses to determine whether or not you have to pay tax in installments.
As a result of doing this exercise, I’ve started a monthly automated contribution to a separate “tax” account5 so that I have money at the ready to pay my tax bill next year. All DIY retirees may want to do the same!
You will probably have to close a bunch of ads before ultimately getting to the page that matters. It’s a forgivable tax to for this useful site, IMHO. ↩︎
If you prefer to avoid annual capital gains, dividends and interest payments, then Global X has ETFs that are designed to do just that. I hold HXT (for Canadian Equity) and HXS (for US Equity) in my non-registered accounts for this reason. ↩︎
This is just the per share capital gain divided by the current share price. I use Adjusted Cost Base to keep track of my capital gains. ↩︎
This is a bit higher than the average of my portfolio, which is about 60 cents for long-held assets. You could choose a different number based on your own holdings. You only pay tax on half of your capital gains, and the calculator knows this. ↩︎
I used Wealthsimple for this since it’s stupidly easy to create a new investment account. And they pay a reasonable amount of interest. ↩︎
Previously, we talked in broad terms about the categories of what you can invest in, namely Equities, Bonds, and Cash. Having % allocation targets for each of these classes is a necessary starting point for making decisions. Here’s a post that talks about how to get there.
Maybe it’s helpful to take a look at some examples of what you can buy to hit each of these categories. I’m going to use iShares as the guinea pig since it offers a lot of products, but you could play the same game with any provider you like.
So if you visit iShares ETF page (this is what I’m looking at as I write this), you are presented with a list of (and I’m not joking here), 169 different ETFs. Ouch. How can anyone decide which of these is the best fit?
Helpfully, the page includes an “Asset Class” Filter:
iShares “Asset Class” classifcation for their 169 ETF products (May 2025)
…and now you can quickly recognize “Equity” (with 105 different ETFs to choose from). “Fixed Income” is the other term of interest — this will include bonds and probably something that looks more like cash. So this is now looking a little more sane. Wait, what’s this? They each have “sub classes”?
iShares ETFs Equity and Fixed Income Sub Classes as of May 2025
This narrows things down somewhat. Let’s break these down further.
Equity Sub-Classes
The term “Cap”1 comes up here. This is short for “capitalization” or, in plain English, “How big is the company we’re investing in?”. I don’t like to place bets on which companies are the most appropriate, so I would gravitate to the “All Cap” sub asset class here. “Large Cap” is probably the next best bet, since large companies tend to dominate the returns in the markets they serve. So let’s select both2.
We’re still left with 75 ETFs with that filter. Still a lot to take in. I suggest sorting by “Net Assets” with the largest on top by clicking in the appropriate column. I figure if other people are investing in these funds, why shouldn’t I?
So here’s my take on the ETFs I see on my screen:
ETF Symbol
Class
Consider?
Comments
XIU, XIC
CAD Equity
Y
Both variations of TSX. I would lean towards XIC because it is cheaper to own.
XSP, XUS, XUU
US Equity
Y
XSP is “hedged” meaning it tries to take away the FX variations, and I normally don’t worry about that. XUU would be my top pick here.
XEF, XFH, XSEM, XEC
Int’l Equity
Y
XSEM/XEC are solely emerging markets, and I would never just hold it absent something like XEF/XFH as well. If I had to pick one, it would be XEF since it’s unhedged. If I could add a second, it would be XEC because it’s cheaper to own.
XQQ
US Equity
N
This is too narrowly focused on 100 Nasdaq stocks; the point of buying a asset category is to buy as many companies as possible
XAW
US Equity + Int’l Equity
Y
An easy way to get non-Canadian Equity exposure with one ETF
XGD, XEI, XDV, XFN, XEG, CPD, CDZ, CIF, XIT, XHC
CAD Equity
N
These are all too narrowly focused and/or trying to make bets on specific parts of the market. Asset allocation is about buying the whole market.
Everything else
No idea
N
There are probably funds that I would consider further down the list but there’s only so many hours in the day, ya know?
Assessing the largest iShares All-Cap/Large Cap ETFs
Fixed Income Sub-Classes
One thing I’ve learned is that Fixed Income is harder to parse than Equity. My quick impression of the names I see on my screen:
Credit: No idea what this might mean
Flexible: ibid
Government: ok, that’s easy, this is only looking at bonds issued by governments. This tends to be the most popular segment of the bond market because (a) there’s a lot of them3 and (b) they are seen as safe investments.
High Yield: This is code for “junk bonds”. More risky, but higher rates of interest.
Inflation: My guess is that this is what is intended to mean “cash”
Multi-Sectors: My guess is that this trying to build a broad universe of bonds.
So, for simplicity, I think I’ll ignore the sub-segments but give you my take on the largest offering here again.
ETF Symbol
Sub Asset Class
Consider?
Comments
XBB
Multi-Sector
Y
“Core Canadian Universe” sounds like it’s got a lot of holdings across the spectrum, and it’s cheap to own. Perfect. This is clearly “Bonds” in my nomenclature.
XSB
Multi-Sector
Y
“Short Term Bond Index” makes me wonder if this is leaning towards a cash-like investment. The fact sheet puts the loan duration at “1 to 5 years” which isn’t cash-like enough for me. This is “Bonds”, albeit rather conservative ones.
XCB, XSH
Credit
Y
This is just the corporate bond market with no government. XSH is less risky because its bonds have a shorter duration on average.
CMR
Multi-Sector
Y
“Premium Money Market” sounds like “Cash” to me, and reading the fact sheet4 makes it sound a lot like ZMMK which was my previous winner in this category.
XGB
Gov’t
N
Nothing wrong with it, but I don’t buy “just” government bond ETFs. Without some corporate exposure, they don’t generate enough returns for my liking. I’ll take the risk.
XLB
Multi-Sector
N
This only buys long-duration bonds. This would be ok if you had holdings elsewhere on the shorter side.
Everything else
No idea
N
There are probably funds that I would consider further down the list but there’s only so many hours in the day, ya know?
Assessing the largest iShares Fixed Income ETFs
I do have to break away from the largest list to mention some ETFs on the Fixed Income chart that I didn’t know you could buy on the Canadian Market: XSTH and XSTP, which track the TIPS Bond Index. The TIPS index is well known to US investors5 because it’s a very cheap way to buy an inflationary hedge — it’s in the name, as TIPS stands for “Treasury Inflation-Protected Securities”. Now, of course, this refers to US Inflation, and unless you’re buying XSTH (which is the same as XSTP, except hedged to avoid FX changes) you’re also buying into a security that will vary with the CAD/USD exchange rate. So, not sure it’s of interest to the average Canadian investor, but it’s something I didn’t know about before.
Other classes in the iShares List
We only looked deeply at the Equity and Fixed Income categories, but what about the others?
The Commodity category holds ETFs that trade in one of Gold, Silver or Bitcoin. None of these provide predictable returns and are very narrow bets, so for that reason, I have no interest.
The Multi-Asset category contains funds that are a mix of Equity and Fixed Income, with the exact ratios depending on which specific fund you buy. This category contains funds I invest heavily in, namely XGRO and XEQT. I cover “all-in-one” funds like this in this article. Multi-asset funds basically take all the work of trying to balance your Equity and Bond percentages out of your hands for a very low price.
The Real Estate Category is just another segment of the Equity category and like other sub-segments, I don’t pay any attention to this one either.
A Final Word
Dividing Investments into asset classes (a short example)
It’s easy to slice and dice the three broad asset categories (Equity, Bonds, Cash) many different ways and you can spend many pleasurable6 hours finding the absolute “best” ETF for any subsegment listed above, or you could invent your own (Ultra Short Term Emerging Market High Yield Bonds Canadian Hedged?). It’s easy to go overboard here, and in the course of simplifying my portfolio, I have restricted myself to 5 broad categories when i think about my investments:
Equity: divided into 3 buckets for Canadian, US and International Equity
Bonds: There are no sub-buckets here, but the products I buy have broad geographic, segment, and duration coverage. Are they allocated optimally? No idea.
Cash: Everything in this category is held in either USD or CAD ultra-short term bonds.
You can see the specific holdings in my portfolio by looking at any of the “What’s in my Portfolio” posts (April 2025 is here or a series of 3 videos is found here) or you can just see the 4 ETFs I hold for the long term here.
And in the course of writing this article, I discovered this fun Asset Mixer you can use to experiment with different asset allocations yourself. It’s like making cocktails, except with money 🙂
Full disclosure: I cheated here. I couldn’t figure out why I wasn’t seeing TSX funds under “all Cap” but that’s because the usual TSX 60 fund is listed as a large cap fund. ↩︎
We’ve talked about asset allocation / asset classes before in this space, most recently here. But while watching a recent post1 from one of my favourite experts, The Loonie Doctor2, it occurred to me that it might be helpful to start right from the beginning.
And to me, that beginning is understanding WHAT to invest in. Broadly speaking, you can choose between three categories: “Equity”, “Bonds” and “Cash”.
“Equity” refers to stocks of publicly traded3 companies. Owning stock means you own a piece of the company you invest in. This allows you to collect dividends if and when the company pays them out. If the company fails/goes bankrupt, the stock becomes worthless.
“Bonds” are essentially loans to companies or governments4. When you buy a bond, you’re buying into a stream of interest payments that stop when the bond is paid off. If a company who issued the bond fails/goes bankrupt, bond holders legally get first dibs on whatever assets remain in an effort to get their money back, but it’s possible that there isn’t anything left to fight over. Bonds can be fully paid off in various timeframes, from very short (30 days) to very long (20 years).
“Cash” is the money that’s left. Cash can be invested in things like high interest savings accounts, GICs/Term Deposits, Treasury bills (aka T-Bills), or stuffed under a mattress5. There is definitely a grey area between “Cash” and “Bonds” since both involve lending money to an entity. Shorter duration loans are more cash like. Lending to governments and large corporate entities (like banks, which is what you’re doing when you buy a GIC) is more cash-like. Money under a mattress is absolutely cash, albeit not really an investment at that point.
Using the data tabulated here, you can build a chart like the one below to see how much the $1000 investment you made in each of these categories would be worth 50 years later6.
Historical returns for Canadian equities, bonds, and cash (as of December 2024)
Looking at this chart, it should be reasonably obvious that equities, represented here by Canadian Stocks, over time, generate the best bang for your invested buck. The “over time” phrase is very important, because otherwise, one could rightly ask, “why would anyone ever invest in anything other than stocks?”. The reason is volatility — in any given short time period, your returns could look very, very bad indeed. Just one example (of many) — the TSX has LOST money in 3 of the last 10 calendar years per https://en.wikipedia.org/wiki/S%26P/TSX_Composite_Index.
Bonds, generally speaking7, have a much steadier and predictable return, often uncorrelated with stocks. When stocks go up, bonds often move in the opposite direction. And cash, well, its benchmark is the inflation rate. If cash is returning the inflation rate8, then at least you’re standing still.
In my investment portfolio, my target allocations are 80% Equity, 15% Bonds, 5% Cash. Using products like all-in-one ETFs and my handy-dandy multi-asset tracker spreadsheet make this relatively easy to track. In my next post, I’ll show how to identify ETFs in each of the categories.
Which provides further justification that using all-in-one ETFs is really the best approach. ↩︎
Which, while positioning itself as being for doctors, has a ton of useful information for those of us who are not physicians as well. ↩︎
And of course it is possible to buy stock in private companies (so-called private equity) but since I don’t know very much about that world, I figured I’d keep it simple and just talk about things that are available to the general public. ↩︎
And the financial stability of those companies and governments can vary a lot. That’s where bond rating services can point you to higher quality entities (with a low risk of not paying) or lower quality entities (with a higher risk of not paying, but a better interest rate — the bottom of the barrel here are called “junk bonds”). ↩︎
AKA “the chequing account of most major banks”, which don’t pay any interest ↩︎
For “Canadian Stocks” this is the TSX Composite index (former name: TSE 300). “Canadian Bonds” is 10 year Government Bonds. ↩︎
Let’s forget 2021-2 ever happened to the bond market. ↩︎
As of this morning, this is what the overall portfolio looks like:
Overall retirement portfolio by holding, April 2025
The portfolio, as always, is dominated by AOA and XGRO which are 80/20 asset allocation funds in USD and CAD, respectively. The rest are primarily either cash-like holdings in two ETFs: ZMMK in CAD and ICSH in USD) or residual ETFs held in non-registered accounts for which I don’t want to create unnecessary capital gains just for the sake of holding AOA or XGRO.
The biggest month over month change was a small decline in AOA and a small uptick in XEQT, about a 1% shift overall. This was because I shifted some of my USD assets to CAD assets in the RRIF using Norbert’s Gambit2. I chose XEQT over XGRO because the contribution of bonds in the portfolio was slightly over my asset allocation target3. XEQT is essentially XGRO, minus the bond holdings (it’s a 100% equity fund).
There was also a noticeable reduction in the contribution of ICSH to the portfolio; this was largely due to the unfavourable change in the USD/CAD exchange rate over the course of the month, and not due to any change in the holdings there.
Plan for the next month
The asset-class split looks like this
Overall retirement portfolio by market, April 2025
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)
So, the plan for next month is, do nothing out of the ordinary. Reinvest cash (dividends, TFSA contributions) in one of AOA, XEQT/XGRO, ICSH or ZMMK depending on the asset category most in need on the day of the reinvestment. All these ETFs are covered on my ETF All-Stars page.
Overall
My retirement savings declined 5.75% over the month (down 7% since January) due to the continuing meltdown in the equity markets. It’s not a pretty picture!
Net worth of retirement savings compared to start of retirement
This has not translated to a the same degree of change in my monthly salary. Why? My retirement payouts are calculated by Variable Percentage Withdrawal (VPW), which I cover here. VPW has a built-in cash cushion, which serves to dampen month to month swings in my net worth, either up or down. As you can see in the chart below, my monthly salary has stayed within a 1% band of the first salary I drew in January.
Month over month salary, as compared to start of retirement
Since Questrade combines USD and CAD assets under the same account umbrella, I was able to reduce the number here. ↩︎
I shift funds from the USD to the CAD side of the RRIF more or less quarterly since all RRIF payments are currently coming out of the CAD side of the portfolio. ↩︎
That’s the optimistic point of view; it’s perhaps more accurately stated as “bonds haven’t melted down quite as much as the equity portion of my portfolio”. ↩︎
The Money Engineer 