Tag: TEQT

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. ↩︎

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 fund’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. ↩︎
  2. No points for originality here ↩︎
  3. In teeny tiny letters at the bottom of page 1 ↩︎
  4. Weighted MER of each of the component ETFs. ↩︎
  5. You can find these on the ETF pages for XEQT and TEQT ↩︎
  6. Subtract 2 previous rows ↩︎
  7. Just multiply. Watch those decimal points, though. ↩︎
  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. ↩︎
  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. ↩︎

TD versus iShares: XEQT/XGRO/XBAL versus TEQT/TGRO/TBAL

RobH3 Comments

My post talking about BMO’s fee reduction for their asset allocation family enticed me to revisit competitive asset allocation funds. TD’s low-low fees (0.17% versus the 0.20% of iShares) are tempting.

So, quick sanity check — what’s the historical performance of XGRO versus TGRO?12

Per https://www.canadastockchannel.com/compound-returns-calculator/ (featured in Tools I Use) I see:

What? The TD fund has returned a full 2 percentage points better? This is a bit hard to believe. They must be rather different somehow?

Ah, yes. Revisiting their respective fund pages reveals that TGRO has a lower allocation for bonds — it’s only 10% versus the 20% for XGRO. More bonds will definitely lower return as a reward for lower volatility (I showed that effect here), so that probably explains the difference.

XGRO versus TGRO: Asset Allocation

So comparing the returns of XGRO versus TGRO wasn’t an apples to apples comparison. I could instead measure the relative returns of XBAL versus TBAL since the equity/bond ratios of these two are equivalent (both at 60% equity, 40% bonds)3. There are, however, some minor differences in the equity side of the equation:

XBAL versus TBAL: Asset Allocation

TBAL has a higher weighting in Canadian equity at the expense of some International equity, let’s see how that translates in the overall return:

That’s a lot closer, but the advantage still tilts TBAL’s way, which is another positive argument for considering it.

I am curious about how different these two are under the hood.

The first obvious difference is that they use different market indexes to build their portfolios, summarized below:

TGRO/TBALXGRO/XBAL
CAD EquitySolactive Canada Broad Market IndexS&P®/TSX® Capped Composite Index
US EquitySolactive US Large Cap CAD IndexS&P Total Market Index
Int’l EquitySolactive GBS Developed Markets ex North America Large & Mid Cap CAD IndexMSCI EAFE® Investable Market Index, MSCI Emerging Markets Investable Market Index
Bonds FTSE Canada Universe Bond IndexFTSE Canada Universe Bond Index and others
Underlying indices tracked by TGRO and XGRO

So sure, the indices are different, but is it really a big deal? Doing a bit of digging I can confidently say that:

  • On the Canadian Equity front, TGRO’s holdings are more broad and include smaller stocks.
  • On the US Equity front, the opposite is true — XGRO holds more smaller US stocks
  • On the International Equity front, XGRO has exposure to Emerging markets that TGRO lacks
  • On the bond front, XGRO includes non-Canadian holdings, so a bit more diversified

Are any of these differences of great significance? No idea. Doubtful. TGRO has a recent small (0.5%) advantage, which is still worth digging in to. I took a look at the underlying assets…It’s easiest to do that by looking at the ETFs that underpin TGRO, one by one (TPU, TTP and TTE). XGRO’s product page shows the underlying assets so you don’t have to do the same (tedious) exercise for it.

Top CAD EquityTop US EquityTop Int’l Equity
TEQT/TGRO/TBALRBC, Shopify, TD, Enbridge, BrookfieldMicrosoft, NVIDIA, Apple, Amazon, MetaSAP, ASML, Nestle, Novo Nordisk, Roche
XEQT/XGRO/XBALRBC, Shopify, TD, Enbridge, BrookfieldMicrosoft, NVIDIA, Apple, Amazon, MetaTaiwan Semi, SAP, ASML, Nestle, Novo Nordisk
Top stock holdings, by asset category, for TGRO and XGRO

Hmph. Almost the same. I guess the difference is really coming down to an advantageous geographic mix for TBAL over XBAL, which may or may not be repeated. As compared to TBAL, XBAL’s greater focus on equities outside North America hurt its performance in the last 5 years.

All this to say that TGRO/TBAL look like fine products, with no real reason not to recommend them. For me, one small complexity with TGRO is its bond allocation, which is lower than XGRO’s, meaning that to keep my usual 20% bond allocation, I would have to either buy a standalone bond fund or buy a TEQT/TBAL combo (a 50/50 ratio works, I did the math).

Perhaps you’ll start to see some of these funds in my monthly update — stay tuned!

  1. I wouldn’t normally do this, especially since the funds don’t have a long history, but in this case I see that the TD funds use obscure (to me) indices so I want to quickly see if there’s a major difference in return. ↩︎
  2. XGRO is the mainstay of the CAD portion of my retirement portfolio and TGRO looks to be the same thing. ↩︎
  3. You may wonder if this is really a valid comparison since what I actually care about is TGRO versus XGRO. I think it is a valid comparison since TBAL and XBAL are still relying on the same underlying indices to build their respective funds, it’s just that the percentages vary. That’s pretty much how most all-in-ones approach the problem of building multiple risk levels: take a set of ingredients (the indicies) and mix them in different ratios to get to the final all-in-one product. It’s really a test to see if TBAL’s indices are somehow “better” than XBAL’s. ↩︎

A “two-fund” method for retirement investing

RobHLeave a comment

I read a lot of different financial blogs from a bunch of different sources. Last week, this article from “boomer&echo” caught my eye.

In it, they propose a “two fund” solution for how to invest in retirement:

They suggest funding your day to day spending needs from the HISA ETFs. Replenishing the HISA ETF comes courtesy dividends from the all-in-one equity ETF, and selling units “during up markets…or on a regular annual schedule”.

There are some things to like about this method, and some things not to like. I’ll break them down for you.

Like: It’s really simple

Two funds, and two percentages to remember. That’s simplicity. In a perfect world, my holdings would look similar, but would instead look something like

  • 75% in XGRO (an 80/20 ETF)
  • 20% in XEQT
  • 5% in ZMMK

This breakdown would give me the 80% equity, 15% bonds, 5% cash that I strive for in my asset allocation targets.

Like: It’s broadly diversified (mostly)

Holding an all-in-one equity fund seems like you’re putting all your eggs in one basket, but as I discussed over here concerning XEQT, it’s actually a great way to make sure you have your investment spread out across many companies in many geographies. My one mild objection to this approach is that there are no bonds5 in the boomer&echo portfolio, but it’s a minor point.

Like: It recommends keeping cash in the retirement holdings

Having cash on hand is a good way to smooth out the gyrations of the market. It’s a fundamental part of my own withdrawal strategy.

Dislike: The approach is likely to get emotional

The approach to refilling the cash portion of the boomer&echo portfolio is left a bit vague in the linked article. “During up markets” is almost guaranteed to encourage daily agonizing over whether it’s really the “right” time to sell. “On a regular annual schedule” is better advice, but that’s a big trade to execute on a single day, and the temptation to delay this trade would be rather large, I expect.

Dislike: It may not be practical

In theory, it’s really nice to have a super-simple portfolio. In practice, it’s much harder to pull off when you have substantial non-registered investments. Making trades in your non-registered accounts to simplify your holdings may attract unwanted capital gains, which of course may attract unwanted taxes. Add to this my dubious practice of holding substantial USD assets, and you quickly go from an ideal to what a real retiree’s portfolio actually looks like. In any case, it’s always good to try to simplify wherever you can, like I did.

My approach: similar, but different

My approach to portfolio maintenance in retirement is similar to the boomer&echo approach, with a few key differences:

  • Withdrawals are done monthly, without fail, and selling parts of my equity portfolio happen every month. No emotion, and I sell in up or down markets, on the same day every month.
  • The 80/15/5 mix between equity, bonds, and cash is maintained at all times, plus or minus a percentage point. My multi-asset tracker spreadsheet helps with that. Extra trades might be needed in a given month to keep the mix correct.
  • The cash portion of my portfolio is divided between a 6 month non-registered cash cushion that is part of the VPW methodology, and everything else. “Everything else” is largely in registered accounts so as to not generate unnecessary (and taxable) interest income.

What do you think about the boomer&echo two-fund approach? Anyone out there using it? Let me know at comments@moneyengineer.ca.

  1. The article in question mentions VEQT, but its MER is 0.24%, and the others are 0.20% or less. I hold XEQT myself. ↩︎
  2. Elsewhere in the article they characterize the HISA bucket as “12 months of withdrawals”, which is not at all the same as “10%”. ↩︎
  3. These kinds of ETFs invest in a variety of HISAs, like the ones I talk about here. ↩︎
  4. I use ZMMK in this role which is a bit riskier but with a bit higher return. Writing this article makes me wonder if I should head back to HISA ETFs instead. ↩︎
  5. Some research indicates that holding no bonds is in fact the best strategy. ↩︎

News: BMO reduces fees on all-in-one ETFs

RobH1 Comment

Summary: BMO has reduced fees on its family of asset-allocation ETFs (ZCON, ZBAL, ZGRO, ZEQT) to put its Management Expense Ratio (MER) in the same realm as competing families from GlobalX, iShares and TD.

If you’re a fan of all-in-one ETFs (as I am)1, then there is a new low-cost competitor2 to consider in BMO. BMO announced a reduction in their fees last week, and per Rob Carrick, it’s a win for everyone concerned. If you’re new to the idea of all-in-one ETFs (aka asset allocation ETFs), here’s a good place to start: https://moneyengineer.ca/2025/01/21/why-you-can-fire-your-advisor-asset-allocation-etfs/.

It’s probably worth taking a quick scan of the four lowest-cost families out there. Here’s the overview.

ProviderFund Symbols
TD3TEQT, TGRO,TBAL,TCON
BMO4ZEQT, ZGRO, ZBAL, ZCON
GlobalX5HEQT, HGRW, HBAL, HCON
iShares6XEQT, XGRO, XBAL, XCNS, XINC
Low-cost all-in-one ETF providers, and the symbols you can use to buy them

In my view, any of these families are worthy of your investment dollars. Which particular fund you pick within a family depends on your tolerance for volatility and/or your timeline for needing the money you’re investing. Each list of fund symbols in the table above is listed in order of amount of equity — so for TD, you can see that TEQT has the most equity (100%) whereas TCON has the least (40%). You might want to give https://moneyengineer.ca/2025/05/06/investment-basics-asset-allocation/ a read to get more familiar with the concepts.

  1. XGRO and XEQT are both members of the coveted “ETF All Stars” slot. ↩︎
  2. There are other all-in-one families (Vanguard, Fidelity, Mackenzie), the ones shown here are the least expensive of the lot at 0.20% MER or less. TD is the current winner of the lot with a rock-bottom 0.17% MER. ↩︎
  3. TEQT launched in April 2025. ↩︎
  4. There’s also an ESG asset allocation fund, ZESG. ↩︎
  5. There’s also a bunch of covered call variations that are of no interest to me. ↩︎
  6. iShares is the family I work within. I started with them over the others because they could be traded for free on my former provider (QTrade). My current provider (Questrade) allows free trading for any ETF. ↩︎